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Welcome to the presentation onWelcome to the presentation on
Classification of InvestmentClassification of Investment
ProvisioningProvisioning
Rescheduling andRescheduling and
Write-off procedureWrite-off procedure
Presented by:Presented by:
Mohammad Maksudul Huq ChowdhuryMohammad Maksudul Huq Chowdhury
Senior Assistant Vice President & Branch ManagerSenior Assistant Vice President & Branch Manager
Exim Bank, Islampur BranchExim Bank, Islampur Branch
Dhaka, Bangladesh.Dhaka, Bangladesh.
Classification of InvestmentClassification of Investment
[Related Circulars of Bangladesh Bank (BB): BRPD Circular no.14 dated 23.09.2012; BRPD
Circular no. 19 dated 27.12.2012; BRPD Circular no.05 dated 29.05.2013]
What is Classification:
Classification of investment means classify/segregate the same according to
its merit (performing and non-performing) in accordance with Bangladesh
Bank circular. Classified investments are those investments where bank is
unclear whether it will be able to recoup the investment proceeds from the
borrower or not. As per Bangladesh Bank latest circular (BRPD # 14) there
are following types of classification of Investment:
1. Unclassified (Standard)
2. Special Mention Account (SMA)
3. Sub-Standard (SS)
4. Doubtful (DF)
5. Bad Loss (BL)
Why Classification ofWhy Classification of
Investment is importantInvestment is important
Classification of Investment is necessary for the following reasons:Classification of Investment is necessary for the following reasons:
1.1. To assess the quality of Investment of the bank.
2. To establish discipline in banking sector.
3. To calculate specific provision.
4. To determine the upper cap of Large Investment (BRPD Circular no.
02 dated 16.01.2014).
5. To retain defaulter borrowers from further borrowing without
regularizing the classified one.
6. To ascertain the capital requirement.
7. To assess the level of Risk.
Basis of classificationBasis of classification
 There are two bases:There are two bases:
Categories of investmentCategories of investment
a) Continuous investmenta) Continuous investment
The Investment Accounts in which transactions may be allowed
frequently within certain limit and have an expiry date for full
adjustment will be treated as Continuous Investment. Examples are: CC,
OD etc
Two key indicators:
1. Transactions may be allowed frequently within certain limit.
2. Have an expiry date for full adjustment.
b) Demand Investmentb) Demand Investment
The investment which has no specific repayment schedule is known as
demand investment. So the investment that becomes repayable on
demand by the bank will be treated as Demand Investment. If any
contingent or any other liabilities are turned to forced investments (i.e.
without any prior approval as regular investment) those too will be
treated as Demand Investments. Such as: Forced LIM, PAD, FBP, and
IBP etc.
c) Fixed Term Investmentc) Fixed Term Investment
The Investment, which is repayable within a specific time
period under a specific repayment schedule, will be treated
as Fixed Term Investment. Such as: - IBB
d) Short Term Agriculture &d) Short Term Agriculture &
Micro InvestmentMicro Investment
Short-term Agricultural Investment will include the short-
term investments as listed under the Annual Credit
Programme issued by the Agricultural Credit and Financial
Inclusion Department (ACFID) of Bangladesh Bank.
Investment in the agricultural sector repayable within 12
(twelve) months will also be included herein. Short-term
Micro-Investment will include any micro-investment not
exceeding an amount determined by the ACFID of
Bangladesh Bank from time to time and repayable within 12
(twelve) months.
Past due investmentPast due investment
Any investment account or part of investment (installment) after expiry
of the repayment date will fall under past due.
As such:
i.Demand & Continuous Investment: not paid and/or not renewed
within the fixed expiry date,
ii.Fixed Term Investment: installments or part of installment not paid
within schedule time &
iii.Agricultural & Micro Investment: after six months of expiry date will
be treated as pastdue/overdue investment.
Rules of ClassificationRules of Classification
Type of Investment Grade of classification
SMA SS DF BL
Continuous &
Demand
2 months or
more but less
than 3
months
3 months or
more but less
than 6 months
6 months or more
but less than 9
months
9 months or
more
Fixed Term
(Above Tk.10 lac)
Fixed Term
(up to Tk.10 lac)
2 months or
more but less
than 6
months
equal to or more
than 6 months
or more but less
than 9 months
equal to or more
than 9 months or
more but less than
12 months
equal to or
more than 12
months
STA & MC 12 months 36 months 60 months
DefaultedDefaulted InvestmentInvestment
According to Section 5 (GaGa) of The Banking Company Act, 1991
“defaulter borrower” means investment which remains overdue for
06 (six) months.
As such investment classified as :-
-DF/BL for all categories and
-SS for Fixed Term Investment up to Tk.10.00 lac & Agricultural
category will be treated as defaulted investment.
Reporting of InvestmentReporting of Investment
 Summary of all CL : CL - 1
 Continuous Investment : CL – 2
 Demand Investment : CL – 3
 Fixed Term Investment : CL – 4
 STAG & Micro Investment : CL – 5
ProvisionProvision
What it is:What it is:
Provision is an expense that is reserved against defaulted
Investment & against regular investment also. Investment
loss reserves are accounting entries banks make to cover
estimated losses on investment due to defaults and
nonpayment.
ProvisionProvision
Types of Provision:Types of Provision:
a)a) General Provision (provision against UC & SMA)
b) Specific provision (provision against SS, DF & BL)
Base for provision (BP):Base for provision (BP):
It implies the base on which provision is calculated:
For Investment facility:-
UC & SMA base for provision is: Outstanding amount.
For Investment facility SS, DF & BL apply the following rules as per nature of
Eligible collateral security:
ProvisionProvision
A. For eligible collaterals of the following types:A. For eligible collaterals of the following types:
1.1. Deposit with the same bank under lien against the investment
2. Government bond/savings certificate under lien
3. Guarantee given by Government or Bangladesh Bank,
BP = Outstanding Balance - Interest Suspense - Value of eligible Securities
B.B. For all other Eligible collaterals:For all other Eligible collaterals:
Base for Provision will be greater of the following two:
1. Outstanding Balance - Interest Suspense - Value of eligible
Securities.
2. 15% of the outstanding balance
ProvisionProvision
'Eligible Collaterals' included in determining base for provision is:
- 100% of deposit under lien against the investment.
- 100% of the value of government bond/savings certificate under lien.
- 100% of the value of guarantee given by Government or Bangladesh Bank
- 100% of the market value of gold or gold ornaments pledged with the bank.
-50% of the market value of easily marketable commodities kept under control
of the bank
- Maximum 50% of the market value of land and building mortgaged with the
bank
- 50% of the average market value for last 06 months or 50% of the face value,
whichever is less, of the shares traded in stock exchange.
Eligible Collateral:Eligible Collateral:
ProvisionProvision
Rate of general provision:Rate of general provision:
General Provision: (Applicable for UC and SMA investments)
SME 0.25%
UC all other credits (other than CF, Brokerage House,
Merchant Banks, Stock dealers) 1%
House Financing/Investments to Professional under
CF/Brokerage House/Merchant Banks/Stock Dealers 2%
Consumer Financing (Except Credit Card)
Consumer Financing (Credit Card)
5%
2%
Agriculture 1%
Off balance sheet items 1%
ProvisionProvision
Specific Provision:Specific Provision:
SS 20% on Base for provision
DF 50% on Base for provision
BL 100% on Base for provision
For STAG and Micro Credit:For STAG and Micro Credit:
SS, DF 5% on Base for provision
BL 100% on Base for provision
Rescheduling of InvestmentRescheduling of Investment
[Related Circulars of Bangladesh Bank (BB):[Related Circulars of Bangladesh Bank (BB): BRPD Circular no.15BRPD Circular no.15 dated 23.09.2012;dated 23.09.2012;
BRPD Circular no.06BRPD Circular no.06 dated 29.05.2013]dated 29.05.2013]
What is Rescheduling:What is Rescheduling:
Rescheduling means fixing up a new repayment schedule for a default
Investment where new Investment replaces the outstanding balance
on an older investment, and is paid over a longer period, usually with a
lower installment amount. Rescheduled Investment also called
Restructured Investment/Replacement Investment.
Guidelines of considering application for Rescheduling:Guidelines of considering application for Rescheduling:
Rescheduling of InvestmentRescheduling of Investment
1. The bank must have a policy approved by its Board of Directors.
2. The bank shall meticulously examine the reason of non-performing
3. For rescheduling, pays the required down payment in cash at a time, the bank must address
the application within 03 (three) months upon receipt. If the borrower gives any cheque, pay
order or any other instrument against down payment, the bank must ensure encashment of
such instrument before processing of the rescheduling case. Any previous payment from
time to time shall not be treated as a down payment
4. 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 FIs.
5. Banks shall review the borrower's cash flow statement, audited balance sheet, income
statement and other financial statements
6. If required, bank officers shall conduct spot inspections of the borrower's business.
7. If a bank is satisfied after due diligence as mentioned above that the borrower will be able to
repay, the loan may be rescheduled
8. Rescheduling of any loan must be justified in written statement by the bank's Credit
Committee
Rescheduling of InvestmentRescheduling of Investment
Time limit for rescheduling:Time limit for rescheduling:
a. Continuous
Investment
Frequency SS DF B/L
First 18 months 12 months 12 months
Second 12 months 09 months 09 months
Third 06 months 06 months 06 months
Condition: Rescheduled amount should be repaid in monthly installments for
Continuous & Demand Investment. If the amount of defaulted installments is
equal to the amount of 3(monthly) installments, the loan will be classified as
Bad/Loss.
Rescheduling of InvestmentRescheduling of Investment
Time limit for rescheduling:Time limit for rescheduling:
b. Demand
Investment
Frequency SS DF B/L
First 12 months 09 months 09 months
Second 09 month 06 months 06 months
Third 06 months 06 months 06 months
Condition: Rescheduled amount should be repaid in monthly installments for
Continuous & Demand Investment. If the amount of defaulted installments is
equal to the amount of 3(monthly) installments, the loan will be classified as
Bad/Loss.
Rescheduling of InvestmentRescheduling of Investment
Time limit for rescheduling:Time limit for rescheduling:
c. Fixed Term
Investment
Frequency SS DF B/L
First 36 months 24 months 24 months
Second 24 months 18 months 18 months
Third 12 months 12 months 12 months
*** If the investment is rescheduled
--Before expiry, the above time will be added with last installment date.
-After expiry, the above time will be applicable from the date of
rescheduling date.
Condition: Rescheduled amount should be repaid in monthly/quarterly
installments. If the amount of defaulted installments is equal to the amount of 6
monthly or 2 quarterly installments, the loan will be classified as Bad/Loss.
Rescheduling of InvestmentRescheduling of Investment
Time limit for rescheduling:Time limit for rescheduling:
d. Short-term
Agricultural
and Micro-
Credit
First
Rescheduling
Repayment time limit for rescheduling
should not exceed 2 (two) years from
the expiry date of loan.
Second
Rescheduling
Maximum 1(one) year from the date of
rescheduling.
Third
Rescheduling
Maximum 6(six) months from the date
of rescheduling.
*** 6 months may be added with above if rescheduled before expiry date.
Rescheduling of InvestmentRescheduling of Investment
 If the investment becomes default after third rescheduling, the
customer will be treated as a habitual defaulter and the bank shall not
consider for further rescheduling.
 Any investment classified during Bangladesh Bank’s on-site inspection
on the basis of Qualitative Judgment cannot be declassified without
the consent of Bangladesh Bank.
 Before rescheduling any Large Investment or Investment Related to
the directors of other Bank, prior approval from Bangladesh Bank to
be obtained.
Rescheduling of InvestmentRescheduling of Investment
Down Payment:Down Payment:
a. Fixed Term Investmenta. Fixed Term Investment:
1st time: 15% of overdue installment or 10% of total outstanding (which is lower)
2nd time: 30% of overdue installment or 20% of total outstanding (which is lower)
3rd time: 50% of overdue installment or 30% of total outstanding (which is lower)
Amount of Overdue Investment Rate of Down payment
Up to Tk. 1.00 (one) crore 15%
Above Tk.1.00(one) crore and up to
Tk.5.00(five) crore
10% (but not less than Tk. 15.00 lac)
Above Tk. 5.00(five) crore 5% (but not less than Tk.50.00 lac)
**** If any Continuous or Demand Investment is rescheduled for further (first time after
being converted partly or wholly into Term Loan) and the repayment installments are
fixed, the application for rescheduling of such loans shall be like as Fixed Term
Investment.
b. Continuous and Demand Investment:b. Continuous and Demand Investment:
Rescheduling of InvestmentRescheduling of Investment
Exceptions:Exceptions:
 In case of RMG sector, force investments, which are backed up with
stock lot, may avail rescheduling facility without down payment.
However, sales/export proceeds from the stock lot must be used to
repay the investment.
 In case of fertilizer importer, if investment becomes adversely
classified due to delay in receipt/realization of government subsidies,
the investment may be rescheduled without down payment.
However, the receivable government subsidy must be used to repay
the investment.
Rescheduling of InvestmentRescheduling of Investment
Restriction of extending maturity of a term Investment :Restriction of extending maturity of a term Investment :
The term to maturity of a term Investment may be extended subject to the
following conditions and restrictions:
a) The Investment must be performing (Unclassified: Standard or SMA).
b) The decision should be made at the level where the loan was originally
sanctioned.
c) The maturity date may be extended by a period of time not exceeding
25% of the current remaining time to maturity.
Rescheduling of InvestmentRescheduling of Investment
New Investment facility after Rescheduling:New Investment facility after Rescheduling:
1. The customer whose investment facility has been rescheduled may
avail new facility or enhance existing facility subject to the following
conditions:
The customer must pay at least 15% of the outstanding balance
(outstanding amount excluding down payment). If the customer is
exporter, new facility may be availed after paying at least 7.5% of the
outstanding balance (outstanding amount excluding down payment)
New Facility from other bank also subject to the condition (i) and
obtaining NOC from the rescheduling Bank or FI.
Rescheduling of InvestmentRescheduling of Investment
New Investment facility after Rescheduling:New Investment facility after Rescheduling:
2. Prior approval of Bangladesh Bank shall have to be obtained if the
investment is related to the director of any bank.
3. Number of rescheduling should be mentioned in sanction letter.
While reporting to CIB, the rescheduling investment should be shown
as RS-1/RS-2/RS-3 and if there exists any kind of profit waiver,
reporting should be RSIW-1/RSIW-2/RSIW-3.
Write-offWrite-off
Related Circulars of BB: FID Circular no.03 dated 15.03.2007; DFIM Circular letter no.08
dated 26.09.2007; BRPD Circular no.13 dated 07.11.2013; DFIM Circular letter no.11 dated
21.11.2013)
Write-off:Write-off:
The term "write-off" is an accounting term where write-off of
investment means removing the long time outstanding bad
investment from the books of accounts by observing some
regulation.
Write-offWrite-off
Rules of Write-off:Rules of Write-off:
1. Investment classified as BL and 100% provision to be kept there against.
2. Approval from Board of Directors to be obtained before write-off.
3. Suit must have to file before write-off in case of exposure more than BDT 50,000.00
(Taka Fifty Thousand).
4. Separate ledger to be maintained for write-off investment and cumulative balance of
write-off amount to be mentioned in Balance Sheet under the head “notes to the
accounts”.
5. Despite of write-off, respective client will treat as “defaulter borrower” till full
adjustment and reporting to be made to Credit Information Bureau (CIB) accordingly.
6. Prior approval from Bangladesh Bank must have to take in case of write-off of
investment related to Directors of Financial Institutions.
7. Third party may be engaged to recover the write-off investment irrespective of legal
status.
8. A statement of write-off investment to be sent to Bangladesh Bank on monthly basis
as per specified format.
Questions ?????Questions ?????

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Rules of classification provision rescheduling_write-off

  • 1. Welcome to the presentation onWelcome to the presentation on Classification of InvestmentClassification of Investment ProvisioningProvisioning Rescheduling andRescheduling and Write-off procedureWrite-off procedure Presented by:Presented by: Mohammad Maksudul Huq ChowdhuryMohammad Maksudul Huq Chowdhury Senior Assistant Vice President & Branch ManagerSenior Assistant Vice President & Branch Manager Exim Bank, Islampur BranchExim Bank, Islampur Branch Dhaka, Bangladesh.Dhaka, Bangladesh.
  • 2. Classification of InvestmentClassification of Investment [Related Circulars of Bangladesh Bank (BB): BRPD Circular no.14 dated 23.09.2012; BRPD Circular no. 19 dated 27.12.2012; BRPD Circular no.05 dated 29.05.2013] What is Classification: Classification of investment means classify/segregate the same according to its merit (performing and non-performing) in accordance with Bangladesh Bank circular. Classified investments are those investments where bank is unclear whether it will be able to recoup the investment proceeds from the borrower or not. As per Bangladesh Bank latest circular (BRPD # 14) there are following types of classification of Investment: 1. Unclassified (Standard) 2. Special Mention Account (SMA) 3. Sub-Standard (SS) 4. Doubtful (DF) 5. Bad Loss (BL)
  • 3. Why Classification ofWhy Classification of Investment is importantInvestment is important Classification of Investment is necessary for the following reasons:Classification of Investment is necessary for the following reasons: 1.1. To assess the quality of Investment of the bank. 2. To establish discipline in banking sector. 3. To calculate specific provision. 4. To determine the upper cap of Large Investment (BRPD Circular no. 02 dated 16.01.2014). 5. To retain defaulter borrowers from further borrowing without regularizing the classified one. 6. To ascertain the capital requirement. 7. To assess the level of Risk.
  • 4. Basis of classificationBasis of classification  There are two bases:There are two bases:
  • 6. a) Continuous investmenta) Continuous investment The Investment Accounts in which transactions may be allowed frequently within certain limit and have an expiry date for full adjustment will be treated as Continuous Investment. Examples are: CC, OD etc Two key indicators: 1. Transactions may be allowed frequently within certain limit. 2. Have an expiry date for full adjustment.
  • 7. b) Demand Investmentb) Demand Investment The investment which has no specific repayment schedule is known as demand investment. So the investment that becomes repayable on demand by the bank will be treated as Demand Investment. If any contingent or any other liabilities are turned to forced investments (i.e. without any prior approval as regular investment) those too will be treated as Demand Investments. Such as: Forced LIM, PAD, FBP, and IBP etc.
  • 8. c) Fixed Term Investmentc) Fixed Term Investment The Investment, which is repayable within a specific time period under a specific repayment schedule, will be treated as Fixed Term Investment. Such as: - IBB
  • 9. d) Short Term Agriculture &d) Short Term Agriculture & Micro InvestmentMicro Investment Short-term Agricultural Investment will include the short- term investments as listed under the Annual Credit Programme issued by the Agricultural Credit and Financial Inclusion Department (ACFID) of Bangladesh Bank. Investment in the agricultural sector repayable within 12 (twelve) months will also be included herein. Short-term Micro-Investment will include any micro-investment not exceeding an amount determined by the ACFID of Bangladesh Bank from time to time and repayable within 12 (twelve) months.
  • 10. Past due investmentPast due investment Any investment account or part of investment (installment) after expiry of the repayment date will fall under past due. As such: i.Demand & Continuous Investment: not paid and/or not renewed within the fixed expiry date, ii.Fixed Term Investment: installments or part of installment not paid within schedule time & iii.Agricultural & Micro Investment: after six months of expiry date will be treated as pastdue/overdue investment.
  • 11. Rules of ClassificationRules of Classification Type of Investment Grade of classification SMA SS DF BL Continuous & Demand 2 months or more but less than 3 months 3 months or more but less than 6 months 6 months or more but less than 9 months 9 months or more Fixed Term (Above Tk.10 lac) Fixed Term (up to Tk.10 lac) 2 months or more but less than 6 months equal to or more than 6 months or more but less than 9 months equal to or more than 9 months or more but less than 12 months equal to or more than 12 months STA & MC 12 months 36 months 60 months
  • 12. DefaultedDefaulted InvestmentInvestment According to Section 5 (GaGa) of The Banking Company Act, 1991 “defaulter borrower” means investment which remains overdue for 06 (six) months. As such investment classified as :- -DF/BL for all categories and -SS for Fixed Term Investment up to Tk.10.00 lac & Agricultural category will be treated as defaulted investment.
  • 13. Reporting of InvestmentReporting of Investment  Summary of all CL : CL - 1  Continuous Investment : CL – 2  Demand Investment : CL – 3  Fixed Term Investment : CL – 4  STAG & Micro Investment : CL – 5
  • 14. ProvisionProvision What it is:What it is: Provision is an expense that is reserved against defaulted Investment & against regular investment also. Investment loss reserves are accounting entries banks make to cover estimated losses on investment due to defaults and nonpayment.
  • 15. ProvisionProvision Types of Provision:Types of Provision: a)a) General Provision (provision against UC & SMA) b) Specific provision (provision against SS, DF & BL) Base for provision (BP):Base for provision (BP): It implies the base on which provision is calculated: For Investment facility:- UC & SMA base for provision is: Outstanding amount. For Investment facility SS, DF & BL apply the following rules as per nature of Eligible collateral security:
  • 16. ProvisionProvision A. For eligible collaterals of the following types:A. For eligible collaterals of the following types: 1.1. Deposit with the same bank under lien against the investment 2. Government bond/savings certificate under lien 3. Guarantee given by Government or Bangladesh Bank, BP = Outstanding Balance - Interest Suspense - Value of eligible Securities B.B. For all other Eligible collaterals:For all other Eligible collaterals: Base for Provision will be greater of the following two: 1. Outstanding Balance - Interest Suspense - Value of eligible Securities. 2. 15% of the outstanding balance
  • 17. ProvisionProvision 'Eligible Collaterals' included in determining base for provision is: - 100% of deposit under lien against the investment. - 100% of the value of government bond/savings certificate under lien. - 100% of the value of guarantee given by Government or Bangladesh Bank - 100% of the market value of gold or gold ornaments pledged with the bank. -50% of the market value of easily marketable commodities kept under control of the bank - Maximum 50% of the market value of land and building mortgaged with the bank - 50% of the average market value for last 06 months or 50% of the face value, whichever is less, of the shares traded in stock exchange. Eligible Collateral:Eligible Collateral:
  • 18. ProvisionProvision Rate of general provision:Rate of general provision: General Provision: (Applicable for UC and SMA investments) SME 0.25% UC all other credits (other than CF, Brokerage House, Merchant Banks, Stock dealers) 1% House Financing/Investments to Professional under CF/Brokerage House/Merchant Banks/Stock Dealers 2% Consumer Financing (Except Credit Card) Consumer Financing (Credit Card) 5% 2% Agriculture 1% Off balance sheet items 1%
  • 19. ProvisionProvision Specific Provision:Specific Provision: SS 20% on Base for provision DF 50% on Base for provision BL 100% on Base for provision For STAG and Micro Credit:For STAG and Micro Credit: SS, DF 5% on Base for provision BL 100% on Base for provision
  • 20. Rescheduling of InvestmentRescheduling of Investment [Related Circulars of Bangladesh Bank (BB):[Related Circulars of Bangladesh Bank (BB): BRPD Circular no.15BRPD Circular no.15 dated 23.09.2012;dated 23.09.2012; BRPD Circular no.06BRPD Circular no.06 dated 29.05.2013]dated 29.05.2013] What is Rescheduling:What is Rescheduling: Rescheduling means fixing up a new repayment schedule for a default Investment where new Investment replaces the outstanding balance on an older investment, and is paid over a longer period, usually with a lower installment amount. Rescheduled Investment also called Restructured Investment/Replacement Investment.
  • 21. Guidelines of considering application for Rescheduling:Guidelines of considering application for Rescheduling: Rescheduling of InvestmentRescheduling of Investment 1. The bank must have a policy approved by its Board of Directors. 2. The bank shall meticulously examine the reason of non-performing 3. For rescheduling, pays the required down payment in cash at a time, the bank must address the application within 03 (three) months upon receipt. If the borrower gives any cheque, pay order or any other instrument against down payment, the bank must ensure encashment of such instrument before processing of the rescheduling case. Any previous payment from time to time shall not be treated as a down payment 4. 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 FIs. 5. Banks shall review the borrower's cash flow statement, audited balance sheet, income statement and other financial statements 6. If required, bank officers shall conduct spot inspections of the borrower's business. 7. If a bank is satisfied after due diligence as mentioned above that the borrower will be able to repay, the loan may be rescheduled 8. Rescheduling of any loan must be justified in written statement by the bank's Credit Committee
  • 22. Rescheduling of InvestmentRescheduling of Investment Time limit for rescheduling:Time limit for rescheduling: a. Continuous Investment Frequency SS DF B/L First 18 months 12 months 12 months Second 12 months 09 months 09 months Third 06 months 06 months 06 months Condition: Rescheduled amount should be repaid in monthly installments for Continuous & Demand Investment. If the amount of defaulted installments is equal to the amount of 3(monthly) installments, the loan will be classified as Bad/Loss.
  • 23. Rescheduling of InvestmentRescheduling of Investment Time limit for rescheduling:Time limit for rescheduling: b. Demand Investment Frequency SS DF B/L First 12 months 09 months 09 months Second 09 month 06 months 06 months Third 06 months 06 months 06 months Condition: Rescheduled amount should be repaid in monthly installments for Continuous & Demand Investment. If the amount of defaulted installments is equal to the amount of 3(monthly) installments, the loan will be classified as Bad/Loss.
  • 24. Rescheduling of InvestmentRescheduling of Investment Time limit for rescheduling:Time limit for rescheduling: c. Fixed Term Investment Frequency SS DF B/L First 36 months 24 months 24 months Second 24 months 18 months 18 months Third 12 months 12 months 12 months *** If the investment is rescheduled --Before expiry, the above time will be added with last installment date. -After expiry, the above time will be applicable from the date of rescheduling date. Condition: Rescheduled amount should be repaid in monthly/quarterly installments. If the amount of defaulted installments is equal to the amount of 6 monthly or 2 quarterly installments, the loan will be classified as Bad/Loss.
  • 25. Rescheduling of InvestmentRescheduling of Investment Time limit for rescheduling:Time limit for rescheduling: d. Short-term Agricultural and Micro- Credit First Rescheduling Repayment time limit for rescheduling should not exceed 2 (two) years from the expiry date of loan. Second Rescheduling Maximum 1(one) year from the date of rescheduling. Third Rescheduling Maximum 6(six) months from the date of rescheduling. *** 6 months may be added with above if rescheduled before expiry date.
  • 26. Rescheduling of InvestmentRescheduling of Investment  If the investment becomes default after third rescheduling, the customer will be treated as a habitual defaulter and the bank shall not consider for further rescheduling.  Any investment classified during Bangladesh Bank’s on-site inspection on the basis of Qualitative Judgment cannot be declassified without the consent of Bangladesh Bank.  Before rescheduling any Large Investment or Investment Related to the directors of other Bank, prior approval from Bangladesh Bank to be obtained.
  • 27. Rescheduling of InvestmentRescheduling of Investment Down Payment:Down Payment: a. Fixed Term Investmenta. Fixed Term Investment: 1st time: 15% of overdue installment or 10% of total outstanding (which is lower) 2nd time: 30% of overdue installment or 20% of total outstanding (which is lower) 3rd time: 50% of overdue installment or 30% of total outstanding (which is lower) Amount of Overdue Investment Rate of Down payment Up to Tk. 1.00 (one) crore 15% Above Tk.1.00(one) crore and up to Tk.5.00(five) crore 10% (but not less than Tk. 15.00 lac) Above Tk. 5.00(five) crore 5% (but not less than Tk.50.00 lac) **** If any Continuous or Demand Investment is rescheduled for further (first time after being converted partly or wholly into Term Loan) and the repayment installments are fixed, the application for rescheduling of such loans shall be like as Fixed Term Investment. b. Continuous and Demand Investment:b. Continuous and Demand Investment:
  • 28. Rescheduling of InvestmentRescheduling of Investment Exceptions:Exceptions:  In case of RMG sector, force investments, which are backed up with stock lot, may avail rescheduling facility without down payment. However, sales/export proceeds from the stock lot must be used to repay the investment.  In case of fertilizer importer, if investment becomes adversely classified due to delay in receipt/realization of government subsidies, the investment may be rescheduled without down payment. However, the receivable government subsidy must be used to repay the investment.
  • 29. Rescheduling of InvestmentRescheduling of Investment Restriction of extending maturity of a term Investment :Restriction of extending maturity of a term Investment : The term to maturity of a term Investment may be extended subject to the following conditions and restrictions: a) The Investment must be performing (Unclassified: Standard or SMA). b) The decision should be made at the level where the loan was originally sanctioned. c) The maturity date may be extended by a period of time not exceeding 25% of the current remaining time to maturity.
  • 30. Rescheduling of InvestmentRescheduling of Investment New Investment facility after Rescheduling:New Investment facility after Rescheduling: 1. The customer whose investment facility has been rescheduled may avail new facility or enhance existing facility subject to the following conditions: The customer must pay at least 15% of the outstanding balance (outstanding amount excluding down payment). If the customer is exporter, new facility may be availed after paying at least 7.5% of the outstanding balance (outstanding amount excluding down payment) New Facility from other bank also subject to the condition (i) and obtaining NOC from the rescheduling Bank or FI.
  • 31. Rescheduling of InvestmentRescheduling of Investment New Investment facility after Rescheduling:New Investment facility after Rescheduling: 2. Prior approval of Bangladesh Bank shall have to be obtained if the investment is related to the director of any bank. 3. Number of rescheduling should be mentioned in sanction letter. While reporting to CIB, the rescheduling investment should be shown as RS-1/RS-2/RS-3 and if there exists any kind of profit waiver, reporting should be RSIW-1/RSIW-2/RSIW-3.
  • 32. Write-offWrite-off Related Circulars of BB: FID Circular no.03 dated 15.03.2007; DFIM Circular letter no.08 dated 26.09.2007; BRPD Circular no.13 dated 07.11.2013; DFIM Circular letter no.11 dated 21.11.2013) Write-off:Write-off: The term "write-off" is an accounting term where write-off of investment means removing the long time outstanding bad investment from the books of accounts by observing some regulation.
  • 33. Write-offWrite-off Rules of Write-off:Rules of Write-off: 1. Investment classified as BL and 100% provision to be kept there against. 2. Approval from Board of Directors to be obtained before write-off. 3. Suit must have to file before write-off in case of exposure more than BDT 50,000.00 (Taka Fifty Thousand). 4. Separate ledger to be maintained for write-off investment and cumulative balance of write-off amount to be mentioned in Balance Sheet under the head “notes to the accounts”. 5. Despite of write-off, respective client will treat as “defaulter borrower” till full adjustment and reporting to be made to Credit Information Bureau (CIB) accordingly. 6. Prior approval from Bangladesh Bank must have to take in case of write-off of investment related to Directors of Financial Institutions. 7. Third party may be engaged to recover the write-off investment irrespective of legal status. 8. A statement of write-off investment to be sent to Bangladesh Bank on monthly basis as per specified format.