What are the rules for Declassification of loan classified by Bangladesh Bank Inspection Team under qualitative judgement?

Answer:

Any loan classified during Bangladesh Bank’s on-site inspection on the basis of qualitative judgement cannot be declassified without the consent of Bangladesh Bank. However, Bank may consider the declassification of the loan addressing the following issues and procedures:

a) The decision to move a loan to a more favorable classification category must be accompanied by analysis showing that there has been improvement in the payment performance of the loan and/or in the financial condition of the borrower.

b)The decision to move a loan from Bad/Loss to Doubtful or Substandard, or from Doubtful to Substandard, may, with appropriate justification, be taken by the Chief Credit Officer, with the concurrence of the Chief Financial Officer.

c) The decision to move a loan from Substandard, Doubtful, or Bad/Loss to Special Mention Account or to declassify it completely must be taken by the Board of Directors, with appropriate justification presented by the branch manager who originated the loan in question and the Managing Director.