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Welcome to the Sessionon

Loan Classification and Provisioning-Rescheduling, and Write-off of loans

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

Bank type

2004 2005 2006 2007 2008 2009 2010(Q1)

SCBs 25.30 21.4 22.9 29.87 25.44 21.38 21.69

DFIs 42.86 34.9 33.7 28.58 25.55 25.91 26.33

PCBs 8.53 5.6 5.5 5.01 4.44 3.92 4.15

FCBs 1.50 1.3 0.8 1.43 1.9 2.27 2.4

Total 17.53 13.6 13.2 13.23 10.79 9.21 9.41

Source: BB Quarterly , Jan-March,2010

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

Bank type

2004 2005 2006 2007 2008 2009 2010(Q1)

SCBs 17.56 13.23 14.45 12.92 5.92 1.92 3.72

DFIs 22.97 22.61 23.62 18.96 16.96 18.3 18.69

PCBs 3.35 1.75 1.8 1.37 0.82 0.45 0.46

FCBs -1.47 -2.16 -2.57 -1.93 -2.04 -2.31 -2.29

Total 9.79 7.15 7.13 5.13 2.79 1.73 2.09

Source: BB Annual Report , Jan-March,2010

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Loan Classification

Objectives of loan classification

Frequency and parties related with loan classificationCategories 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

Standard

SMA

Continuous O< 3 3

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Loan ClassificationCalculation of Overdue Period of Term Loan

A = Frequency of Installments in MonthsB = Amount Paid Since Sanctioning/ Last ReschedulingC = Size of the Installment

BA D (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 loan100 % of the value of government bond/Savingscertificate under lienUnexpired 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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Rescheduling of Loans

Guidelines for ReschedulingCauses of loan defaultAbility of the borrower to repay the loan

Spot inspection of the companyRescheduling for a minimum periodTo be approved by the board of directors

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Rescheduling of Term Loan

Down payment of 15 % of the overdue or 10%of the total outstanding whichever is lower forfirst time rescheduling

Down payment of 30 % of the overdue or20% of the total outstanding whichever islower for second time reschedulingDown payment of 50 % of the overdue or30% of the total outstanding whichever islower for more than second time rescheduling

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Rescheduling of CL/DL

Overdue Amount

Rate of DP

Up to Tk. 1 crore 15%

Tk. . 1 crore to 5 crore 10% (minimum 15 lakh)

Tk. 5 crore and above 5% (minimum 50 lakh)

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Other Conditions for Rescheduling

The defaulting borrower who has availedinterest waiver must settle at least 15% of thecompromise amount to avail any furthercredit facility from the bankIn case of borrowing from other banks, thesame 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.

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Other Conditions for Rescheduling

Prior approval of BB shall have to beobtained if the loan is relayed to thedirector/ex-directors of a Bank Company

Information on the loan accountsrescheduled shall be reported to the CreditInformation Bureau (CIB) of BB.

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Write-Off

International practice to give a fair face to thebalance sheet

Loans classified as bad or loss for five years ormoreProcess 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 separateledger

To be reported to the CIB of BangladeshBankPrior approval of the CB is required forwriting 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 30/06/09

SCBs 26.3 29.7 35.7 42.8 64.5

DFIs 17.4 27.6 28.6 30.4 31.8

PCBs 21.2 32.9 40.7 45.5 54.7

FCBs 0.9 1.1 1.5 1.6 2.0

Total: 65.8 91.3 106.5 120.3 153.0

Source; BB Annual Report. 2008-09.

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THANK YOU