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Welcome to the Session on

Loan Classification and ProvisioningRescheduling, and Write-off of loans

Ratio of Gross NPL* to Total Loans by Type of Banks


(percent)

Bank type SCBs

2004

2005

2006 22.9

2007 29.87

2008 25.44

2009 21.38

2010(Q1) 21.69

25.30 21.4

DFIs
PCBs FCBs

42.86 34.9
8.53 1.50 5.6 1.3

33.7
5.5 0.8

28.58
5.01 1.43

25.55
4.44 1.9

25.91
3.92 2.27

26.33
4.15 2.4

Total

17.53 13.6

13.2

13.23

10.79

9.21

9.41

Source: BB Quarterly , Jan-March,2010

Ratio of Net NPL* to Total Loans by Type of Banks


(percent)

Bank type SCBs

2004

2005

2006 14.45

2007 12.92

2008 5.92

2009 1.92

2010(Q1) 3.72

17.56 13.23

DFIs
PCBs

22.97 22.61
3.35 1.75 -2.16

23.62
1.8 -2.57

18.96
1.37 -1.93

16.96
0.82 -2.04

18.3
0.45 -2.31

18.69
0.46 -2.29

FCBs -1.47

Total

9.79

7.15

7.13

5.13

2.79

1.73

2.09

Source: BB Annual Report , Jan-March,2010

Loan Classification

Objectives of loan classification Frequency and parties related with loan classification Categories of loans Types of Loan Required Form Summary of all forms CL-1 Continuous Demand Term STA/MC CL-2 CL-3 CL- 4 and 5 CL-6

Basis for loan classification

Loan Classification(Objective Criteria)


Types of loan UC Stan SMA dard O< 3 3<0<6 Continuous SS DF Bad

6< O<9

9<O< 12

O>12

Demand
Term (<5 yrs) Term (>5 yrs) SAC/MC

O< 3
O< 3 O< 3

3<0<6
3<0<6 3<0<12

6< O<9
6< O<12

9<O< 12
12<O< 18

O>12
O>18 O>24 O>60

12< O<18 18<O<24 12< O<36 36<O< 60

O< 12

Loan Classification

Calculation of Overdue Period of Term Loan

A = Frequency of Installments in Months B = Amount Paid Since Sanctioning/ Last Rescheduling C = Size of the Installment

BA
D (Time Equivalent of Amount Paid) =
E = Period since First Repayment Due

Length of Overdue = E - D

Loan Classification

Accounting of the interest of classified loans

Maintenance of provision
Base for Provision Eligible Securities Determination of Market Value of Eligible Securities

Eligible Securities

Gold/ Gold Ornaments 100% 100 % of deposit under lien against the loan 100 % of the value of government bond/Savings certificate under lien Unexpired Guarantees( Govt, BB) 100% Readily salable Goods under control of Bank 50% Market Value of mortgaged property 50% 50% of the average market value for last 6 months or 50% of the face value , whichever is less, of the shares traded in stock exchange.

Rescheduling of Loans
Guidelines for Rescheduling Causes of loan default Ability of the borrower to repay the loan Spot inspection of the company Rescheduling for a minimum period To be approved by the board of directors

Rescheduling of Term Loan

Down payment of 15 % of the overdue or 10% of the total outstanding whichever is lower for first time rescheduling Down payment of 30 % of the overdue or 20% of the total outstanding whichever is lower for second time rescheduling Down payment of 50 % of the overdue or 30% of the total outstanding whichever is lower for more than second time rescheduling

Rescheduling of CL/DL
Overdue Amount
Up to Tk. 1 crore Tk.. 1 crore to 5 crore Tk. 5 crore and above

Rate of DP
15% 10% (minimum 15 lakh) 5% (minimum 50 lakh)

Other Conditions for Rescheduling

The defaulting borrower who has availed interest waiver must settle at least 15% of the compromise amount to avail any further credit facility from the bank In case of borrowing from other banks, the same rule will be applicable. Export borrowers may be granted further credit facility (Not being a willful defaulter) , if required, subject to settle at least 7.5 % of the compromise amount.

Other Conditions for Rescheduling

Prior approval of BB shall have to be obtained if the loan is relayed to the director/ex-directors of a Bank Company Information on the loan accounts rescheduled shall be reported to the Credit Information Bureau (CIB) of BB.

Write-Off

International practice to give a fair face to the balance sheet Loans classified as bad or loss for five years or more Process of write off will be chronological Cases are to be filled before write-off Debt Collection Unit Outside agency

Write-Off

Written off loans to be ledger To be reported to the Bank Prior approval of the writing off loans of the directors of the banks

kept in a separate CIB of Bangladesh

CB is required for directors or former

Bank Category Wise Write-off Loan


Bank Type 2004 2005 2006 2007

(billion )

30/06/09

SCBs DFIs
PCBs FCBs Total:

26.3 17.4
21.2 0.9 65.8

29.7 27.6
32.9 1.1 91.3

35.7 28.6
40.7 1.5 106.5

42.8 30.4
45.5 1.6 120.3

64.5 31.8
54.7 2.0 153.0

Source; BB Annual Report. 2008-09.

THANK YOU

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