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Welcome to the Sessionon

Loan Classification and Provisioning-

Write off

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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 CL-2

Demand CL-3Term CL- 4 and 5

STA/MC CL-6

Basis for loan classification

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Loan Classification(Objective Criteria)

Types of loan UC SS DF Bad

Stan

dard

SMA

Continuous O< 3 3

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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

BAD (Time Equivalent of Amount Paid) =

CE = Period since First Repayment Due

Length of Overdue = E - D

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Loan Classification

Accounting of the interest of classified loans

Maintenance of provision

Base for Provision

Eligible Securities

Determination of Market Value of EligibleSecurities

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Eligible Securities Gold/ Gold Ornaments 100%

100 % of deposit under lien against the loan

100 % of the value of government bond/Savingscertificate 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 theshares traded in stock exchange.

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Ratio of Gross NPL* to Total Loans by Type of Banks(percent)

Bank

type2002 2003 2004 2005 2006 2007 2008

SCBs 33.7 29.0 25.30 21.4 22.9 29.87 25.44

DFIs 56.2 47.4 42.86 34.9 33.7 28.58 25.55

PCBs 16.4 12.4 8.53 5.6 5.5 5.01 4.44

FCBs 2.6 2.7 1.50 1.3 0.8 1.43 1.9

Total 28.0 22.1 17.53 13.6 13.2 13.23 10.79

Source: BB Annual Report , 2007-08,BB Quarterly- March,2008

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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

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Write-Off Written off loans to be kept in a separate

ledger

To be reported to the CIB of Bangladesh

Bank

Prior approval of the CB is required for

writing off loans of the directors or former

directors of the banks

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Bank Category Wise Write-off Loan (billion)

Bank

Type

2004 2005 2006 2007 2008

SOCBs 26.3 29.7 35.7 42.8 48.4

DFIs 17.4 27.6 28.6 30.4 31.0

PCBs 21.2 32.9 40.7 45.5 49.4

FCBs 0.9 1.1 1.5 1.6 1.7

Total: 65.8 91.3 106.5 120.3 130.5

Source: BB Annual Report.

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