Bangladesh Bank has asked scheduled banks not to show their interest suspense and charged unrealised interest as income after rescheduling the defaulted loans.
Interest suspense is a separate account that every bank has to maintain when the loan turns into a defaulting condition. The BB on Thursday issued a letter to managing directors and chief executive officers of all banks saying that some banks had recently shown their interest suspense as income after rescheduling the defaulted loan violating the banking rules and regulations.
According to the BB letter, the banks will only show the interest suspense and charged unrealised interest which will be recovered.
A BB official told New Age on Sunday that majority number of the banks had shown robust amount of operating profit in the just-concluded year despite a dull business prevailing in the period due to the political unrest.
‘The BB has unearthed that some banks are violating the BB rules by showing the interest suspense as income. Operating profit of a significant number of banks would have declined in 2013 if they did not show the interest suspense as income’, he said.
He said that the central bank had recently relaxed its loan rescheduling policy till June 2014 considering the political unrest.
A number of banks are now rescheduling their defaulted loan without taking any down payment from the clients, the official said.
Besides, they have shown the whole amount of interest suspense and charged unrealised interest as income although they did not recover the interest, he said.
Under the circumstances, the operating profit of some banks increased in 2013.
According to the rules, the banks will deduct the interest suspense when they get down payment from the client to reschedule his or her defaulted loan, the official said.
After rescheduling the loan, the banks will be able to show the interest suspense as their income if they recover the interest, he said.
A bank will not impose interest when the defaulted loan turns into bad or loss category, the official said.
The banks will calculate the charged unrealised interest when the clients reschedule the defaulted loan of bad or loss category after a certain period, he said.
As per the banking rules, the banks are not allowed to show the charged unrealised interest as income after the rescheduling the defaulted loan.
The BB letter asked the banks to follow the central bank direction in their all branches.
-With New Age input
