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Guidelines on Loan Classification and Provisioning
Updated criteria for classifying loans as sub-standard, doubtful and bad/loss, with revised provisioning rates.
Read the original notice →Easy Understanding
In simple terms: when a borrower stops repaying on time, the bank cannot just leave the loan on its books at full value forever — it must downgrade it through defined stages (Standard to Special Mention, then Sub-standard, Doubtful and finally Bad/Loss) and set aside provisions (a cushion of money) against likely losses. Example: if a BDT 1 crore loan becomes 'Doubtful', the bank may need to provision 50% (BDT 50 lakh) against it, reducing reported profit until the loan is recovered or written off.