Bangladesh Bank has given strict instructions to collect bad debt (right of write-off) outstanding for more than two years. A ‘Debt Recovery Unit’ should be set up at the head office under the direct supervision of the managing director or chief executive officer (CEO) of the bank. In the case of Shariah-based banks, the ‘imposed investment will be the unit of realization.
The ability of the managing director or CEO of the bank to achieve the annual revenue target will be one of the criteria of work excellence in the case of re-appointment. An officer who is not two steps below the Chief Executive Officer should be appointed as the Head of the Subordinated Debt Collection Unit.
5 percent of the recovered foreclosed loans will be distributed as a bonus or incentive to the officers concerned. Bangladesh Bank issued a notification in this regard yesterday.
According to the notification, the disposal unit will consist of skilled and experienced officers in the loan sanctioning process, loan documentation, and loan recovery. Within 30 days after the formation of the unit, the required number of officers should be placed in that unit. The Debt Recovery Unit will hold monthly meetings chaired by the Managing Director of this debt recovery project. The progress report related to loan recovery should also be presented at the board meeting of the bank every quarter.
According to the instructions, 5 percent of the amount recovered against the foreclosed loan or an equivalent amount shall be distributable to the officials involved in the recovery of the foreclosed loan as an incentive. The maximum percentage of the distributable money will be received by the managing director or chief executive officer of the bank. The remaining amount will be due to the head of the foreclosed debt collection unit and other officers of that unit. Besides, the branch or department’s officers directly related to the branch or department in which the foreclosed debt will be recovered will also get incentives at the same proportional rate as the officers of the unit.
The central bank says that loan accounts that have been classified as bad and non-performing for two consecutive years will be written off. Irrespective of the category of loan, the bank can, at its discretion, cancel the loan account taken in the name of a deceased person or in the name of his sole proprietorship. And against the foreclosure loan, the mortgaged property (if any) in favor of the bank will be subject to foreclosure if the sale of the property (if any) is systematically attempted and the bank is unable to collect the amount due from the guarantor. Debt accounts selected for foreclosure must be filed under the Money Debt Courts Act, 2003, before foreclosure, unless legal action has been initiated. However, if the debt is not necessarily actionable under the Court Act, the loan up to 5 lakh rupees and any amount accepted in the name of the deceased person or in the name of his sole proprietorship can be discharged without filing a case.
As per the instructions, a provision equal to the remaining debt balance after deducting only retained deferred interest should be kept from the balance of the respective loan account before disposal. No loan account can be partially waived. No loan account shall be withdrawn without the approval of the Board of Directors. Foreclosed loan accounts cannot be rescheduled or restructured. Loans taken in the name of the person himself or in the name of the institution concerned while he is a director or director of the bank cannot be generally waived.
