BRPD Circular No. 08: Policy on Loan/Investment Write-off and Formation of Written-off Loan Recovery Unit and its Functions

Bangladesh Bank
Chief Office
Motijheel, Dhaka-1000
Bangladesh.
Ref No: BRPD-Reg.Policy.08
Banking Regulation and Policy Department
19 October 2025
BRPD Circular No.-08 Date: ------------------- 03 Kartik 1432 Managing Director/Chief Executive Officer All Scheduled Banks Operating in Bangladesh Dear Sir, Policy on Loan/Investment Write-off and Formation of Unit to Strengthen Recovery of Written-off Loans and its Functions

1. Reference is invited to your attention to BRPD Circular No.-04 dated 18 February 2024 issued on the relevant subject matter.

2. Due to long-standing non-performing loans being shown in the balance sheet, the size of the bank's balance sheet becomes unnecessarily inflated. In this context, loans classified as bad and loss under a specific procedure are written off, which is an internationally accepted practice. According to clause 2(1) of the aforementioned circular, loans that have been classified as bad and loss for two (2) consecutive years are eligible for write-off, and clause 4(12) provides instructions regarding the provision of cash incentives to staff concerned with the recovery of written-off loans. It has been observed that it is necessary to amend the aforementioned clauses to align with international best practices. Furthermore, according to prevailing regulations, a borrower is identified as a defaulter after the write-off decision is taken until they fully repay their loan liability. Therefore, it is necessary to notify the borrower prior to taking the write-off decision.

3. Now, with the aim of properly implementing the aforementioned instructions in line with international best practices, clauses 2(1) and 4(12) of the aforementioned circular are hereby replaced as follows:

2(1) Loans that are classified as bad and loss and have low prospects of future recovery may be written off. However, older loans classified as bad and loss chronologically shall be written off on a priority basis. In this regard, it must be ensured that the borrower is informed about the loan write-off by issuing a notice at least 30 (thirty) days prior to the write-off of any loan account;

4(12) Cash incentives may be provided to staff concerned with the recovery of written-off loans in exchange for the recovery of such loans, in accordance with the bank's own policy. If a bank does not have a policy regarding the provision of cash incentives for the recovery of written-off loans, it must be formulated with the approval of the Board of Directors.

4. These instructions are issued under the powers conferred by Section 45 of the Companies Act, 1991.

5. These instructions shall come into force immediately.

Yours faithfully,
(Md. Bazlur Rahman Sarkar)
Director (BRPD)
Phone: 9530252