BRPD Circular No. 11: Policy on Partial Write-off of Loans

Bangladesh Bank Central Office Motijheel, Dhaka-1000 Bangladesh. Ref No: BRPD/Regulatory Policy & Rules/04/2025/11 Banking Regulation and Policy Department 03 December 2025 BRPD Circular No.-11 Date: ------------------ 18 Agrahayan 1432 Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh Dear Sir, Policy on Partial Write-off of Loans (hereinafter referred to as Partial Write-off)

We draw your attention to BRPD Circular No.- 04, dated: 18 February 2024, BRPD Circular No.-08, dated: 19 October 2025, and BRPD Circular No.-09, dated: 19 November 2025 regarding the subject of loan write-off.

2. Through BRPD Circular No.-04/2024 mentioned above, policy guidelines were issued regarding the formation of units and their operational guidelines to strengthen loan write-off and its recovery programs. Paragraph 3(4) of the said circular instructed that no loan account should be partially written off. However, in some cases, although the probability of recovering a portion of the loan is low, the existing policy does not allow for partial write-off, and banks are unable to write off the entire loan because they are not equipped with sufficient provisions for full write-off. Consequently, despite a significant portion of NPLs and loss-making loans remaining unrecovered, the size of the bank's balance sheet is unnecessarily inflated due to its presentation in the balance sheet, and it is not possible to determine the true value of the bank's assets. Therefore, the need for partial write-off of loan accounts has emerged. Furthermore, partial write-off of loans (Partial Write-off) is an accepted method in accordance with Basel guidelines and IFRS standards, and this method is practiced in developed countries around the world, including our neighboring countries (India, Pakistan, and Sri Lanka). Now, in accordance with international best practices, the following instructions regarding partial write-off and recovery of non-performing loan accounts must be followed:

2.1. Partial write-off may be done for loan accounts classified as NPLs and loss-making, and where the probability of future recovery is low. In this regard, the portion of the loan covered by eligible collateral (Eligible Collateral) in accordance with BRPD Circular No.-15/2024 will be considered as the recoverable portion. The remaining portion of the loan may be written off under this policy;

2.2. Banks may, if necessary, determine/re-determine the actual market value of the collateral against the loan account through their own valuation or through a professional collateral valuation institution;

2.3. In the case of partial write-off, the interest component charged between the principal and interest portions of the concerned loan account must be written off first;

2.4. In the case of partial loan write-off, the total unaccrued interest component at the time of write-off must also be separated proportionally and accounted for separately;

2.5. Recovered amounts from the borrower other than through collateral must first be adjusted against the balance due against the written-off loan account shown outside the balance sheet. If the amount recovered is greater than the balance due against the total written-off loan, the surplus amount must be used to adjust the outstanding loan position shown in the balance sheet against the concerned loan account. However, in determining the total outstanding due from the customer, the outstanding loan position shown in the balance sheet and the sum of unaccrued interest against it and the balance due against the non-recovered written-off loan must be considered; and

2.6. For the partially written-off portion of the loan, restructuring or exit facilities may be provided in favor of the concerned loan account with the aim of recovering the portion shown in the subsequent balance sheet as an adjustment.

3. Paragraph 3(4) of BRPD Circular No.- 04/2024 is hereby repealed. In the case of partial write-off of any loan account, the other instructions of the said circular and the instructions issued in continuation of the said circular must be followed.

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

5. These instructions will come into force immediately.

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