The cumulative written-off loans in Bangladesh's banking sector rose to over Tk 818.63 billion until March 2025, according to the Bangladesh Bank (BB) data.

State-owned commercial banks accounted for a major share of such loans, amounting to over Tk 258.39 billion.

Private commercial banks followed with Tk 530.28 billion, while foreign banks wrote off over Tk 23.81 billion.

Besides, specialised banks, which mostly cater to rural and agricultural financing, wrote off over Tk 6.13 billion during the period.

The net outstanding balance of written-off loans till March 2025 stood at over Tk 634.71 billion, with the individual amount at state-owned commercial banks, private commercial banks, foreign commercial banks, and specialised banks standing at over Tk 183.08 billion, over Tk 428.75 billion, over Tk 19.48 billion, and over Tk 3.39 billion, respectively.

During the normal course of business, some portions of loans/investments of banks may become non-performing and remain unadjusted for a long period owing to various plausible risks.

The loans may overstate the balance sheets by accumulating bad assets for years. Such exposures of banks are often required to be written off.

Banks have to maintain a separate ledger for the written-off loan accounts and make a footnote in their balance sheets.

According to the Bangladesh Bank directives, when banks write off bad loans, they are required to maintain a 100 per cent provisioning against those.

It is the responsibility of the Bangladesh Bank to monitor whether banks are maintaining the required provisioning.

Bankers and economists have long expressed concern over the growing trend of loan write-offs, warning that it may mask the true extent of non-performing loans (NPLs) and weaken credit discipline in the financial system.

The Bangladesh Bank has allowed loan write-offs as a regulatory tool since 2003, but experts argue that this measure should not be used as a substitute for strong recovery efforts and loan monitoring.

M Masrur Reaz, chairman of Policy Exchange Bangladesh, said loan write-offs are expected to grow in the coming days as NPLs continue to rise.

He noted that strict and proper reporting requirements are one of the reasons behind the rising volume of written-off loans.

The trend is likely to persist in the coming days, especially when asset management companies step in to restructure banks with high NPL levels, he said.

He also said proper risk management, effective monitoring by the Bangladesh Bank, and ensuring good governance and sound corporate practices can help curb both NPLs and loan write-offs.

According to stakeholders, loans extended through frauds or major irregularities that have no chance of recovery are usually written off.

However, this sometimes allows defaulters to evade accountability.

Had these loans been issued through transparent and accountable processes, some of them could have been recovered.