Debt cancellation unit mandatory to recover write-off loans: Bangladesh Bank

All scheduled banks in the country have to create a separate debt cancellation unit to recover write-off loans.

Bangladesh Bank has issued the instruction today (Wednesday) in its latest circular on loan or investment write-off policy.

The latest instruction also bars banks to reschedule or restructure loans already written-off by the banks.

Loan write-off is an accounting practice to remove bad loans from banks’ balance sheets and reduce their overall tax liabilities.

But claim on these loans are not scrapped and banks have to keep adequate provision against the amount written-off.

The central bank first issued loan write-off policy in 2003. Two revised instructions were also issued in 2004 and 2013 through official circulars.

With the latest circular comes into effect, all the previous instructions become null and void, according to the BB’s latest circular.