Policy framed for banks' unspent assets

Bangladesh Bank today drew up a classification and provisioning policy for a group of financial items of banks excluding loans and advances, terming it "other assets", with a view to ensuring discipline in the banking sector.

Many banks frequently do not spend money they keep allocated for different sectors, such as business development, advertisements, travels, entertainment allowance and so on, said a BB official.

But the lenders in many cases do not make adjustments afterwards by cancelling the allocation, resulting in the funds remaining unspent for years. Those are then intentionally shown as "other assets" in their financial balance sheets.

If such types of funds are not adjusted within six months to less than one year, the amount will have to be considered as "doubtful assets".

In addition, banks have to keep provisioning of 50 per cent against the funds.

If the allocation is not adjusted within one year and above, the funds will then have to be treated as "bad debt". And provisioning of 100 per cent will have to be maintained as well.

The same rule will be applicable for funds allocated for the procurement of computers, automated teller machines, software and hardware and for infrastructural projects.

Similar rules will come into force for a number of other assets.