This document discusses loan classification, rescheduling, and provisioning policies for non-performing loans in Bangladesh. It covers the key circulars that provide guidelines on classification, rescheduling, interest waiver, and write-offs. It defines categories of loans and the criteria for classifying loans as regular, special mention account, substandard, doubtful, and bad/loss. The steps and timelines for classification of different loan types are explained. It also discusses accounting treatments, calculation of provisions, and key conditions for rescheduling loans.

1. Loan Classification and
Provisioning.
Rescheduling and Written-Off
Prepared by:
Md. Monwar Hossain
Team Member
Special Asset Management Division
Cell: 01715 66 56 96

2. Introduction
An increase in nonperforming loan (NPL) has the
multipronged adverse impacts on bank's balance
sheet having consequential effect of erosion of capital
impairing earning streams, profitability, liquidity and
solvency. Any compromise with the quality of assets at
the sanctioning process will be a contributing factor
towards enhancement of NPLs. The bank
management has no choice but to stay focused on the
issue of keeping credit portfolio performing to the
maximum extent.

3. Circulars to be followed:
 For Classification:
 BRPD Circular – 03/2019
 BRPD Circular – 16/2020
 BRPD Circular – 14/2022
 BRPD Circular letter no. – 51/2022
 BRPD Circular – 14/2012
 For Rescheduling:
 BRPD Circular – 16/2022
 BRPD Circular letter no. – 33/2022
 BRPD Circular letter no. – 52/2022

4. Circulars to be followed:
 For Interest Waiver:
 BRPD Circular – 06/2022
 BRPD Circular letter no. – 18/2022
 BRPD Circular letter no. – 46/2022
 For Written-Off:
 BRPD Circular – 01/2019

5. Categories of Loans and Advances :
1. Continuous Loan
2. Demand Loan
3. Fixed Term Loan
4 Short-term Agricultural &
Micro-Credit

6. Categories of Loans and Advances :
 a) Continuous Loan: The loan accounts in which transactions may be made
within certain limit and have an expiry date for full adjustment will be treated as
Continuous Loan. Examples are: Cash Credit, Overdraft, etc.
 b) Demand Loan: The loans that become repayable on demand by the bank will
be treated as Demand Loan. If any contingent or any other liabilities are turned to
forced loan (i.e. without any prior approval as regular loan) those too will be
treated as Demand Loan. Such as: Forced Loan against Imported Merchandise,
Payment against Document, Foreign Bill Purchased, and Inland Bill Purchased,
etc.
 c) Fixed Term Loan: The loans, which are repayable within a specific time
period under a specific repayment schedule, will be treated as Fixed Term Loan.
 d) Short-term Agricultural & Micro-Credit: Short-term Agricultural Credit will
include the short-term credits as listed under the Annual Credit Program issued by
the Agricultural Credit and Financial Inclusion Department (ACFID) of Bangladesh
Bank. Credits in the agricultural sector repayable within 12 (twelve) months will
also be included herein. Short-term Micro- Credit will include any micro-credits not
exceeding an amount determined by the ACFID of Bangladesh

7. Types of Loan
Classification
Unclassified
Standard (STD)
Special
Mention
Account (SMA)
Classified
Sub Standard
(SS)
Doubtful (DF)
Bad and Loss
(BL)

8. When does a loan turn to be non
performing (as per Objective Criteria)?
1. Overdue loans:
For Continuous and Demand Loan: If not repaid/renewed within the fixed
expiry date for repayment will be treated as past due/overdue from the following
day of the expiry date.
For Fixed Term Loan: In case of any installment(s) or part of installment(s) of a
Fixed Term Loan is not repaid within the fixed expiry date, the amount of unpaid
installment(s) will be treated as past due/overdue after six months of
the expiry date.
2. SMA: If such overdue amount is not adjusted within 60 days the Loan Account
will be treated as Special Mention Account (SMA).
Treatment of SMA Account :
a) The interest charged in SMA shall be credited to Income account.
b) Loans in the SMA will be reported to the Credit Information Bureau (CIB).
c) Such a loan will not be treated as defaulted loan.

9. Three steps of classification
(other than - Cottage, Micro and Small Credits under CMSME & Short
Term Agriculture and Micro Credit)
 A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 03 (three) months or beyond but less than 09 (nine) months, the
entire loan will be put into the "Sub-standard (SS)".
 A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 09 (nine) months or beyond but less than 12 (twelve) months, the
entire loan will be put into the “Doubtful (DF)".
 A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 12 (twelve) months or beyond, the entire loan will be put into the
“Bad and Loss (BL)".
3
9
12

10. Three steps of classification for –
Cottage, Micro and Small Credits under CMSME
 A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 06 (six) months or beyond but less than 18 (eighteen) months, the
entire loan will be put into the "Sub-standard (SS)".
 A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 18 (eighteen) months or beyond but less than 30 (thirty) months,
the entire loan will be put into the “Doubtful (DF)".
 A Continuous Loan, Demand Loan, Fixed Term Loan or any installment(s)/part of
installment(s) of a Fixed Term Loan which will remain past due/overdue for a
period of 30 (thirty) months or beyond, the entire loan will be put into the
“Bad and Loss (BL)".
30
6
18

11. The Short-term Agricultural and Micro-Credit will be considered irregular
if not repaid within the due date as stipulated in the loan
agreement.
If the said irregular status continues, the credit will be classified as
'Substandard ' after a period of 12 months,
'Doubtful' after a period of 36 months
'Bad/Loss' after a period of 60 months from the stipulated due date as
per the loan agreement.
Three steps of classification
(For - Short Term Agriculture and Micro Credit)

12. Accounting of the interest of Classified loans:
 i) If any loan or advance is classified as 'Sub-standard' and 'Doubtful',
interest accrued on such loan will be credited to Interest Suspense
Account, instead of crediting the same to Income Account.
 ii) In case of rescheduled loans the unrealized interest, if any, will be
credited to Interest Suspense Account, instead of crediting the
same to Income Account.
 iii) As soon as any loan or advance is classified as 'Bad/Loss', charging
of interest in the same account will cease.
 iv) In case of filing a law-suit for recovery of such loan, interest for the
period till filing of the suit can be charged in the loan account in order to
file the same for the amount of principal plus interest. But interest thus
charged in the loan account has to be preserved in the 'Interest
Suspense' account.

13. Accounting of recovered amount:
If classified loan or part of it is recovered i.e., real deposit is effected
in the loan account, first the interest charged and accrued but
not charged is to be recovered from the said deposit and the
principal to be adjusted afterwards.

14. Maintenance of Provision
(other than - Cottage, Micro and Small Credits under CMSME & Short
Term Agriculture and Micro Credit)
General Provision -
For Standard (STD) and Special Mention Account (SMA), provision
should be maintained on Base for Provision as follows –
• For Small Enterprise Financing (SEF) – 0.25%
• For Consumer Financing (CF) – 2%
• For House Financing (HF) – 1 % (BRPD – 01/2018)
• Loans for Professionals (LP) – 2 %
• For Brokerage House (BH), Merchant Bank, Stock Dealer – 2 %
• Others (other than above) – 1 %

15. Specific Provision-
For Sub Standard (SS), Doubtful (DF) and Bad/Loss (BL) accounts;
provision should be maintained on Base for Provision as follows –
• For Sub Standard (SS) – 20 %
• For Doubtful (DF) – 50 %
• For Bad / Loss (BL) – 100 %
Maintenance of Provision
(other than - Cottage, Micro and Small Credits under CMSME & Short
Term Agriculture and Micro Credit)

16.  For - Cottage, Micro and Small Credits under CMSME:
• All Unclassified Accounts –0.25%
• For Sub Standard (SS) – 05 %
• For Doubtful (DF) – 20 %
• For Bad / Loss (BL) – 100 %
 For – Short Term Agriculture and Micro Credit:
• All Unclassified Accounts – 1%
• For Sub Standard (SS) – 05 %
• For Doubtful (DF) – 05 %
• For Bad / Loss (BL) – 100 %
(provision should be maintained on Base for Provision)
Maintenance of Provision

17. Calculation of Base for Provision
• For Standard and SMA Loan,
Base for Provision = Loan Outstanding Amount
• For Sub Standard (SS), Doubtful (DF) and Bad/Loss (BL)
accounts Loan,
Base for Provision = Loan Outstanding Amount – Interest Suspense –
Eligible Security
Or
15% of Loan Outstanding
(Whichever is Greater)

18. What is Rescheduling?
Rescheduling arrangement is a process through which
a classified loan account becomes declassified and
regularized.

19. কতিপয় তির্দেশিাবল ীঃ
(Rescheduling Policy of NBL – NBL circular no.4564 dt. 19.09.2022)
(১) এ ি তিমালা ঋণ পুিীঃিফতিতলকরণ ও পুির্ ে
ঠর্ির িযূিিম মািদন্ড
তির্ির্ব তবর্বতিি ির্ব এবং এর িার্ে িামঞ্জিূ ররর্ে বূাংকিমযি ঋণ
পুিীঃিফতিতলকরণ ও পুির্ ে
ঠি িংক্রান্ত তিজস্ব ি তিমালা প্রণয়ি করর্ব
যা িার্দর পতরিালিা পর্ ে
দ কিত েক অিুর্মাতদি ির্ি ির্ব। প্রণ িবূ
ি তিমালায় এ িাক
ু েলার্র বতণ ে
ি শিোতদর রির্য় িমি য় রকাি শিে যুক্ত
করা যার্ব িা। রয িকল গ্রািক আতে ে
কভার্ব দুরবস্থায় রর্য়র্ে অেবা
র্তি ি ঋর্ণর িম্পযণ ে অে ে আদার্য় অতিশ্চয়িা রর্য়র্ে এরূপ রের্ে
যার্ি তিয়মমাতফক পুিীঃিফতিতলকরণ বা পুিীঃপুিীঃ পুিীঃিফতিল
পতরিার করা যায় রি লর্েূ ি তিমালাটির্ি প্রর্য়াজি য় বূবস্থা রাের্ি
ির্ব। তবর্শর্ কর্র, ি তিমালাটির্ি অিুৎপাদিশ ল োর্ির বূবিা
প্রতিষ্ঠাি অেবা উৎপাদিশ ল োর্ির অলাভজিক বূবিা প্রতিষ্ঠার্ির
ঋণ পুিীঃিফতিতলকরর্ণর রের্ে কর্ঠার তবতি-তির্র্ি োকর্ি ির্ব।

20. কতিপয় তির্দেশিাবল ীঃ
(২) ঋণগ্রি িা কিত েক দাতেলক
ত ি পুিীঃিফতিতলকরর্ণর আর্বদিপে
বূাংক কম ে
কিার্ণ অিূন্ত িিকেিার িার্ে পর ো কর্র ঋণ রেতণক
ত ি
িওয়ার কারণ উদ্ঘািি করর্ব। ঋণগ্রি িা কিত েক িিতবল অিূে
স্থািান্তর তকংবা তিতি একজি অভূাির্ি ঋণ রেলাতপ ির্ল িার
পুিীঃিফতিতলকরর্ণর আর্বদিপে তবর্বিিার্যার্ূ ির্ব িা; বরং উক্ত
ঋণ আদার্য় প্রর্য়াজি য় আইি বূবস্থা গ্রিণ করর্ি ির্ব।
(৩) রকাি ঋণগ্রি িা প্রর্য়াজি য় ডাউি রপর্মন্ট ির্র্দ প্রদািপযব ে
ক ঋণ
পুিীঃিফতিতলকরর্ণর আর্বদি করর্ল বূাংক আবতশূকভার্ব
আর্বদিপে গ্রির্ণর ০৩ (তিি) মাি িমর্য়র মর্িূ িা তিষ্পতির বূবস্থা
গ্রিণ করর্ব। রকাি গ্রািক কিত েক রিক, রপ অডোর বা অিূ রকাি
ইিস্ট্রুর্মর্ন্টর মািূর্ম প্রর্য়াজি য় অে ে ডাউি রপর্মন্ট তির্ির্ব
প্রদাি করা ির্ল বূাংক উক্তরূপ ইিস্ট্রুর্মন্ট ির্দায়র্ির পর
পুিীঃিফতিতলকরর্ণর প্রক্রক্রয়া শুু করর্ব ।

21. কতিপয় তির্দেশিাবল ীঃ
(৪) ঋণগ্রি িা কিত েক ঋণ পুিীঃিফতিতলকরর্ণর আর্বদিপে দাতের্লর
পযব ে
বিী িমর্য় তিয়তমি তকক্রি তির্ির্ব প্রদি রকাি অে েডাউি রপর্মন্ট
তির্ির্ব তবর্বিিা করা যার্ব িা। ির্ব, পুিীঃিফতিতলকরর্ণর উর্ের্শূ
ঋণগ্রি িা কিত েক বূাংকর্ক আর্াম অবতিিকরণপযব ে
ক এর অবূবতিি
৩ (তিি) মাি িো ৯০ (িব্বই) তদি পয ে
ন্ত িমর্য় জমাক
ত ি এক ভযি
অে েডাউি রপর্মন্ট তির্ির্ব র্ণূ করা যার্ব।
(৫) বূাংতকং তিয়মািারিমযি যোযেভার্ব পতরপালিপযব ে
ক রকাি গ্রািক
বূাংর্কর পাওিা পতরর্শার্ি িেম ির্ব মর্ম ে তিক্রশ্চি িওয়ার পর
িংতিষ্ট বূাংক ঋণ তিিাব পুিীঃিফতিল করর্ব। অিূোয়, পাওিা
আদার্য় বূাংক িম্ভাবূ িকল আইি বূবস্থা গ্রিণ করর্ব এবং যোযে
প্রতভশি িংরেণ করর্ব।

22. Important Guidelines for considering application for
Loan Rescheduling:
 Banks while considering loan rescheduling, must consider overall
repayment capability of the borrower taking into account the
borrower's liability position with other banks and financial institutions.
 Banks shall review the borrower's cash flow statement, audited
balance sheet, income statement and other financial statements in order
to ensure whether the borrower would be able to repay the rescheduled
installments/existing liability or not.
 If required, bank officers shall conduct spot inspections of the
borrower's company/business place to ensure that the concerned
company/business enterprise would be able to generate a surplus to
repay the liability of rescheduling. Banks shall preserve such reports in
their branches for Bangladesh Bank’s inspection.

23. Required amount of down payment
 For Continuous Loan and Demand Loan:
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than 50.00
crore
4.00% 5.00% 6.00%
50.00 crore and
above but less
than 300.00
crore
3.00%
(not less than
Tk.2.00 cr)
4.00% 5.00%
300.00 crore and
above
2.50%
(not less than
Tk.9.00 cr)
3.50% 4.50%

24. Required amount of down payment
 For Term Loan:
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than 100.00
crore
4.50% on total
loan or 7.00% on
overdue
installment
amount
5.50% on total
loan or 8.00% on
overdue
installment
amount
6.50% on total
loan or 9.00% on
overdue
installment
amount
100.00 crore and
above but less
than 500.00 crore
3.50% on total
loan or 6.00% on
overdue
installment
amount
4.50% on total
loan or 7.00% on
overdue
installment
amount
5.50% on total
loan or 8.00% on
overdue
installment
amount
500.00 crore and
above
2.50% on total
loan or 5.00% on
overdue
installment
amount
3.50% on total
loan or 6.00% on
overdue
installment
amount
4.50% on total
loan or 7.00% on
overdue
installment
amount
(Which ever is less)

25. TIME LIMIT FOR RESCHEDULING
 For Continuous Loan and Demand Loan:
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than 50.00
crore
05 years 04 years 03 years
50.00 crore and
above but less
than 300.00
crore
06 years 05 years 04 years
300.00 crore and
above
07 years 06 years 05 years

26. TIME LIMIT FOR RESCHEDULING
 For Term Loan (other than Short Term Agri, Mirco and Cottage):
Loan
Outstanding
Amount
1st and 2nd
time
3rd time 4th time
Less than
100.00 crore
06 years 05 years 04 years
100.00 crore and
above but less
than 500.00
crore
07 years 06 years 05 years
500.00 crore and
above
08 years 07 years 06 years

27. TIME LIMIT FOR RESCHEDULING
Loan Outstanding
Amount
1st time 2nd, 3rd and 4th time
Any 03 years 2 years & 06 months
 For Short Term Agri, Mirco and Cottage:

28. Special Conditions for Loan Rescheduling
a) Demand loans, continuous loans or term loans being of different nature,
such loans cannot be aggregated and rescheduled as a single loan.
However, multiple loan accounts of the same nature (subject to the same
order of rescheduling) can be consolidated and rescheduled as a single
loan.
b) If any classified loan is rescheduled 4 (four) or more times prior to
issuance of this circular, the loan account may be rescheduled at last
once under special consideration and which will be treated as the 4th
time rescheduling. Such rescheduling shall remain open till 31 December
2023.
c) If a loan defaults even after the 4th time rescheduling, the bank will
necessarily take appropriate legal measures including filing a case in a
Artha Rin Adalat, Alternative Dispute Resolution, Arbitration, Bankruptcy
Court or any other similar court for the purpose of recovery. However,
there is no bar in taking any of the prescribed legal measures without
rescheduling any classified debt or at any stage of rescheduling.

29. Special Conditions for Loan Rescheduling
d) No demand loan created through agreement for opening of letter of
credit for import of capital equipment/as applicable shall not be
rescheduling without prior approval from the Board of Directors/Executive
Committee of the Bank. Such debts should be recovered/settled
immediately.
e) The benefits mentioned in this circular cannot be provided in case of
loans created through fraud-forgery or any other form of
fraud/irregularity.
f) For rescheduling/restructuring under this circular, along with the notes
presented to the higher authority, the memorandum and minutes of the
meeting to be presented in the board/executive committee meeting of
the bank, the need for providing the facility, the financial capacity of the
customer, the projection of sufficient liquidity flow to repay the loan after
providing the facility should be properly presented and Due diligence
should be duly ensured by the bank.

30. Instructions for classifications and interest
suspense of rescheduling loans
 Rescheduling shall thereafter be recoverable in equal installments of
principal and interest on monthly/quarterly basis. If six monthly or two
quarterly installments are unpaid, the rescheduled loan will be
categorized as bad & loss directly.
 The interest retained in suspense account against the rescheduled loan
and the interest charged after the reschedule cannot be transferred to
the income account of the bank without actual recovery. Even the
provision retained against 3rd and 4th time rescheduled bad & loss
account cannot be transferred to the bank's income account without
actual realization.

31. ন্যাশন্াল বযাাংক এর সুদ মওক
ু ফ সাংক্রান্ত
ন্ীতিমালা - ২০২২
NBL circular letter no.4549 dated 24.07.2022

32. (ক) মযল ঋণ (আিল) মওক
ু ফ করা যার্ব িা।
(ে) জাল-জাতলয়াতির মািূর্ম িতষ্ট ঋণ এবং ইচ্ছাক
ত ি রেলাতপ ঋণগ্রি িার ঋণ এর
িুদ মওক
ু ফ করা যার্ব িা।
(র্) ঋর্ণর িুদ মওক
ু ফ িুতবিা বূাংর্কর পতরিালক পর্ ে
দ কিত েক অিুর্মাতদি ির্ি
ির্ব। ির্ব, ১০ (দশ) লে িাকা পয ে
ন্ত মযল ঋর্ণর িুদ মওক
ু ফ িংক্রান্ত তিদ্ধান্ত
গ্রির্ণর েমিা বূাংর্কর বূবস্থাপিা কিত েপর্ের উপর অপ ে
ণ করা যার্ব।
(ঘ) িুদ মওক
ু র্ফর রের্ে বূাংর্কর িিতবল বূয় আদায় তিক্রশ্চি করর্ি ির্ব।
সুদ মওক
ু ফ সাংক্রান্ত কতিপয় তন্র্দেশন্াবলীীঃ

33.  রয িকল ঋর্ণর রের্ে আতে ে
ক তববরণ (Financial Statements) প্রণয়র্ির
আবশূকিা রর্য়র্ে, রি িকল ঋর্ণর িুদ মওক
ু র্ফর রের্ে বূাংক
আবতশূকভার্ব ঋণগ্রি িার তবর্ি ৩ (তিি) বের্রর আতে ে
ক তববরণ পয ে
ার্লািিা
করর্ব। আতে ে
ক তববরণ পয ে
ার্লািিায় তবর্বিিাি ি িমর্য়র িামটষ্টক কর
পরবিী তন্ট মুন্াফা অথবা সব ে
র্শষ তন্রীতিি আতথ ে
ক তববরণী অন্ুযায়ী
Owners' Equity ইতিবাচক পতরলতিি হর্ল সুদ মওক
ু ফ করা যার্ব ন্া।
 িুদ মওক
ু ফ করা ির্ল বূাংর্কর তন্জস্ব আতথ ে
ক অবস্থার উপর তকরূপ প্রভাব
পড়র্ব িা পয ে
ার্লাচন্া করর্ি হর্ব। রি লর্েূ বূাংকিমযি তিজস্ব মযলিি
পয ে
ািিা, Profitability িি অিূািূ গুুত্বপযণ ে আতে ে
ক িযিক তবর্বিিায় তির্য়
অতিক মাোয় Due Diligence প্রর্য়ার্ করর্ব।
সুদ মওক
ু ফ সাংক্রান্ত কতিপয় তন্র্দেশন্াবলীীঃ

34. তন্র্নাক্ত ক্ষির্ে িিতবল বূয় আদায় িংক্রান্ত শিে তশতেল করা রযর্ি পার্রীঃ
(১) ৩ (তিি) বের যাবৎ বন্ধ রর্য়র্ে এরূপ প্রকর্ের রের্ে:
(২) ঋর্ণর জামািি, িিজামািি, প্রকে িম্পতি এবং প্রকে উর্দূাক্তার্র্ণর
বূক্রক্তর্ি িম্পদ তবক্রয় ির্িও িিতবল বূয় আদায় করা িম্ভবপর িা ির্ল;
(৩) পাওিা আদার্য়র লর্েূ আইির্ি বূবস্থািি অিূািূ প্রর্য়াজি য় বূবস্থা
গ্রির্ণর পরও পাওিা আদায় করা িা রর্র্ল
(৪) ঋণগ্রি িার মতিযূ অেবা প্রাক
ত তিক দুর্য ে
ার্, মিামার , মড়ক, িদ ভাঙ্গি বা
দুদেশাজতিি কারর্ণ েতিগ্রি িাণগ্রি িা রযৌক্রক্তক কারর্ণ ঋণ পতরর্শার্ি
অপারর্ ির্ল।
িহতবল বযয় আদায় শিে তশতথল সাংক্রান্ত

35. িিতবল বূয় আদার্য়র শিে তশতেল করার রযৌক্রক্তকিা
তিক্রশ্চিকরর্ণ বূাংর্কর অভূন্তর ণ তির ো তবভার্র্র মািূর্ম
তির ো করি রিড অব ইন্টারিাল কর্রাল অূান্ড
কমপ্লার্য়ন্স (এইিআইতিতি) এর মিামি গ্রিণ করর্ি ির্ব।
িহতবল বযয় আদায় শিে তশতথল সাংক্রান্ত

36. Written Off Process
Writing off is a process by which ledger outstanding of a classified liability is reduced
or shown nil without absolving the borrower from paying off the entire bank’s dues.
Which a/c can be written off: The account which is to be written off must fulfill
the following criterion:
i) The account must be classified as Bad & loss.
ii) Suit must be filed against the a/c
Priority to be written off:
 The account which has been classified as Bad & Loss for 3 years.
 The Bad & Loss account against which 100% provision has been built up.

37. Writing off Process
Action to be taken after writing off :
After writing off, the written off account will not be shown in the ledger
balance of the liability. On the other hand, related parties are not
absolved from paying off the liability. Therefore, the accounting of the
written off liability shall be maintained in a separate ledger.
While preparing annual report or annual statement of the Bank, the written
off liability shall be shown separately.
The borrower of the written off liability shall be treated as defaulted
borrower as usual and his/her name shall not be deleted from the Credit
Information Bureau (CIB) of Bangladesh

38. Strategies for Recovery of Non-performing Loans
No compromise with due diligence in the sanctioning process. Keeping in
mind "prevention is better than cure."
 Action plan for potential NPLs.
 Identification of highly risk sensitive borrowers in the credit portfolio.
 Identification of Sector - wise risk sensitivity.
 Targeting high value end NPL accounts
 Prompt action on credit reports
 Capacity building of officers and executives in the recovery department.
Preventive measures:
 Understand client's business
 Analyze client's financials
 Frequent visits to client
 Ensuring perfection of legal documentation
 Investigation on market rumors
 Use Credit Bureau checking

39. Strategies for Recovery of Non-performing Loans
 Monitoring and follow up:
 To ensure that funds are utilized for the purpose for which they were
sanctioned. To see that the terms and conditions are complied with.
 To monitor the project implementation for avoiding time lag and
consequential cost over runs.
 To evaluate the performance in terms of production, sales, profits on a
periodic basis for ensuring that the borrower is keeping to the original plan
and is having sufficient profits to service the debts as well as for the sake
of maintaining normal business momentum.
 To assess the impact of negative externalities on the performance of the
company.
 To detect the symptom of sickness at the early stage for initiating
measures at the opportune moment.
 To keep check on the movement of financial position.

40. Strategies for Recovery of Non-performing Loans
 Monitoring and follow up:
 To ensure that funds are utilized for the purpose for which they were
sanctioned. To see that the terms and conditions are complied with.
 To monitor the project implementation for avoiding time lag and
consequential cost over runs.
 To evaluate the performance in terms of production, sales, profits on a
periodic basis for ensuring that the borrower is keeping to the original plan
and is having sufficient profits to service the debts as well as for the sake
of maintaining normal business momentum.
 To assess the impact of negative externalities on the performance of the
company.
 To detect the symptom of sickness at the early stage for initiating
measures at the opportune moment.
 To keep check on the movement of financial position.

41. Strategies for Recovery of Non-performing Loans
◦ No compromise with due diligence in the sanctioning process. Keeping
in mind "prevention is better than cure."
◦ Banks should take high collateral while considering credit proposal(s).
If a borrower defaults on a loan, Bank can sell the collateral and use the
proceeds to make up for the loss. The security or collateral provided must be
valued by proper agency and branch officials. Personal Net worth statement of
the borrower/guarantor shall be obtained properly with details of properties.
◦ Action plan shall be made for potential NPLs (SMA accounts). Branch
should have some strategies to ensure regular repayment (installments) by the
borrower and to collect the Non-performing loans.
◦ Frequent communication must be made with each client. Branch shall
make borrower(s) alert that if he/she failed to repay bank’s dues, Bank will go
for appropriate legal actions.

42. Strategies for Recovery of Non-performing Loans
◦ Identification of highly risk sensitive borrowers in the credit portfolio. Banks
should take information about the clients before giving loans. Bank could
go Bangladesh Bank to collect the credit information and verify the financial
statement carefully from reliable sources to identify the risky borrowers.
◦ Identification of geographical area-wise risk sensitivity. Bank should
identify the clients according to area wise in Bangladesh, because there are some
places where growth rate is low or rate of repayment is also low.
◦ Capacity building of officers and executives in the credit disbursement
and recovery process. Bank should give proper training to employees. So they
can handle loans properly. If there is short of experienced employees, arrange to
provide extensive training for smooth running of credit and recovery process.
◦ A robust risk management culture, with a ‘well articulated’ risk management
and recovery policy can help the institutions to avoid such loan default.

43. Concluding Remarks
The professional management team of the Banks should hold high in their
most priority policy agenda to ensure that their risk asset portfolio
(RAP) is performing to the maximum extent by exercising professional
due diligence from the beginning process of the borrower selection all
along to the ultimate end of recovery.
At present there is the dire need of good corporate governance in the
Banking sector which is considered to be the necessary condition for the
Banks and financial institutions to function with efficacy by neutralizing
the adverse effect of unhealthy intervention/ interference from the
vested quarters.
In this direction the role of the Central Bank as an apex regulatory body is
critically important to promote good risk management culture of the
Banks through infusion of values of good corporate governance by
initiating appropriate measures and it is the demand of the time to
address.

44. Concluding Remarks
Under the present overall socio economic dynamics the banks should
prioritize to extend purpose oriented credit facilities with required
security/collateral support as their policy priority since diversion of fund
is one of the identified causes of loan default. So it becomes of
imperative need to keep a close watch on the borrower's business
operations and the movement of its financial indicators in an empirical
manner.
 Banks have to play the role of business partner rather than a
conventional lender. It is an admitted fact that a bank's financial health is
largely dependent upon the extent and size of performing assets. Credit
losses are equivalent to capital losses.
Thank You 