Written-off loans grew 6.26 percent in the first six months of 2013, as banks sought to straighten out their balance sheets saddled with default loans.
On June 30, the banks’ total written-off loans stood at Tk 25,327 crore, up from Tk 23,835 crore recorded on December 31, 2012. The amount is 5.69 percent of the total outstanding loans (Tk 439,212 crore) and almost half of the classified loans (Tk 52,309 crore).
As is practice around the world, when bad debts become non-collectable banks remove them from their balance sheets. In Bangladesh, the practice started in 2003, with the central bank setting a guideline for the banks to write off loans.
On some instances, the banks afterwards manage to recover part of the written-off loans, Helal Ahmed Chowdhury, managing director of Pubali Bank, told The Daily Star.
“Writing-off does not mean a waiver—a big portion of it is recovered later on.”
Pubali Bank has so far removed Tk 633 crore from its balance sheet: around Tk 239 crore, however, was recovered, Chowdhury said.
“The process does not mean that depositors’ money is at risk,” said a high official of Janata Bank, which wrote off Tk 2,340 crore to date.
To even things out, banks take off a sum equal to the amount being written off from their income as provisioning. “When the money is recovered, it goes straight to our incomes, which, in turn, can be used for provisioning or increasing the capital base.”
Janata Bank has so far retrieved around Tk 699 crore, of which Tk 53 crore came in the first six months of the year.
“Although the bad loans get written-off, our efforts to recover them never stop,” Pradip Kumar Dutta, managing director of Sonali Bank, told The Daily Star.
As of June 30, Sonali Bank has written off loans worth Tk 3,650 crore and recovered Tk 629 crore.
Around Tk 102 crore was realised last year and Tk 29 crore in the first six months of this year, Dutta said. “Our officials themselves managed to recover the amounts—we did not appoint any private agents.”
Source: The Daily Star
