Defaulted Loan vs Classified Loan – Updated 2025
⟳ UPDATED — March 2026 | BRPD Circular No. 15/2024 (Effective 01 April 2025)
Defaulted Loan vs Classified Loan
⚠ Important Regulatory Update: This post has been fully updated to reflect BRPD Circular No. 15, dated 27 November 2024, issued by Bangladesh Bank — the current Master Circular on Loan Classification and Provisioning. It supersedes BRPD Circular No. 14/2012 and all subsequent modifications. Effective from 01 April 2025.
প্রথমেই বলে নেই খেলাপী ঋণ বিষয়টি কেন গুরুত্ত্বপূর্ণ। ব্যাংক কোম্পানী আইন, ১৯৯১ এর ২৭ ক ক (৩) ধারা অনুযায়ী কোন খেলাপী ঋণ গ্রহীতার অনুকূলে কোন ব্যাংক-কোম্পানী বা আর্থিক প্রতিষ্ঠান কোনরূপ ঋণ সুবিধা প্রদান করিবে না। অর্থাৎ যদি কোন ঋণ খেলাপীকে ঋণ সুবিধা (ফান্ডেড বা নন-ফান্ডেড) প্রদান করা হয়, তাহলে তা সরাসরি আইনের বরখেলাপ হবে। এবং এ বিষয়টি পরবর্তীতে উৎঘাটিত হলে সংশিষ্ট ক্রেডিট অফিসারকে অনেক চড়া মূল্য দিতে হবে।
Legal Definition of a Defaulted Loan Borrower
ব্যাংক কোম্পানী আইন, ১৯৯১ এর ৫ গ গ ধারা অনুযায়ী "খেলাপী ঋণ গ্রহীতা" অর্থ কোন দেনাদার ব্যক্তি বা প্রতিষ্ঠান বা কোম্পানী যাহার নিজের বা স্বার্থ সংশ্লিষ্ট প্রতিষ্ঠানের অনুকূলে প্রদত্ত অগ্রীম, ঋণ বা অন্য কোন আর্থিক সুবিধা বা উহার অংশ বা উহার উপর অর্জিত সুদ বা উহার মুনাফা বাংলাদেশ ব্যাংক কর্তৃক জারীকৃত সংজ্ঞা অনুযায়ী মেয়াদোত্তীর্ণ হওয়ার ৬ (ছয়) মাস অতিবাহিত হইয়াছে।
আইনে খেলাপী ঋণ গ্রহীতার সংজ্ঞায় উল্লেখযোগ্য হলো — "বাংলাদেশ ব্যাংক কর্তৃক জারীকৃত সংজ্ঞা অনুযায়ী মেয়াদোত্তীর্ণ হওয়ার ৬ (ছয়) মাস অতিবাহিত হইয়াছে।" তাই মেয়াদোত্তীর্ণ (Past Due/Overdue) কবে থেকে গণনা হবে সেটি নির্ধারণ করে বাংলাদেশ ব্যাংকের সার্কুলার।
Current Framework: BRPD Circular No. 15/2024
Source: Bangladesh Bank, Banking Regulation & Policy Department | BRPD Circular No. 15 | 27 November 2024 | Effective: 01 April 2025
Categories of Loans and Advances
All loans and advances are grouped into four categories for classification purposes:
| Category | Description | Examples |
|---|
| Continuous Loan | Accounts with transactions within a limit, having an expiry date for full adjustment | Cash Credit (CC), Overdraft (OD) |
| Demand Loan | Loans repayable on demand; also includes forced loans (contingent liabilities turned loan without prior approval) | Post Import Financing (PAD, LIM, LTR), Foreign Bill Purchased, Inland Bill Purchased |
| Fixed Term Loan | Loans repayable within a specific time under a fixed repayment schedule | Term Loans, Project Finance |
| Short-term Agricultural Credit | Short-term agri credits repayable within 12 months as per ACD of Bangladesh Bank | Crop loans, Seasonal agri credit |
Definition of Past Due / Overdue
New Rule (BRPD 15/2024): All loans will be treated as past due/overdue from the following day of the expiry date (or creation of forced loan, or due date if not repaid/renewed).
Exception for Fixed Term Loan: If any installment(s) is not repaid within the fixed expiry/due date, the unpaid amount is treated as past due/overdue from the following day of the expiry/due date itself — not after 6 months. This is a major change from previous circular (BRPD 03/2019).
New 7-Tier Classification System
BRPD Circular No. 15/2024 introduces a 7-tier classification, replacing the old 5-category system. The new categories under Objective Criteria are:
| CL Category | Status | Period of Past Due / Overdue | Provision Rate |
|---|
| STD-0 | Unclassified | No past due | 1% on outstanding |
| STD-1 | Unclassified | ≥ 1 day but < 1 month | 1% on outstanding |
| STD-2 | Unclassified | ≥ 1 month but < 2 months | 1% on outstanding |
| SMA | Unclassified | ≥ 2 months but < 3 months | 5% on outstanding |
| SS (Sub-Standard) | Classified / NPL | ≥ 3 months but < 6 months | 20% of base |
| DF (Doubtful) | Classified / NPL | ≥ 6 months but < 12 months | 50% of base |
| B/L (Bad/Loss) | Classified / NPL | ≥ 12 months | 100% of base |
✔ Key Rule: SS, DF and B/L are classified loans = Non-Performing Loans (NPL). STD-0, STD-1, STD-2 and SMA are unclassified loans.
Classified Loan vs Defaulted Loan — The Critical Distinction
এখানেই মূল পার্থক্য। একটি ঋণ শ্রেণীকৃত (Classified) হওয়া মানেই খেলাপী (Defaulted) নয়।
Continuous Loan & Demand Loan
| Scenario | Position |
|---|
| Expiry Date এর পরের দিন থেকে | Past Due শুরু |
| Past Due ≥ 3 months but < 6 months | SS (Classified, but NOT Defaulted) |
| Past Due ≥ 6 months | Classified + DEFAULTED (Bank Company Act, Section 5GaGa) |
Important: A portion of SS loans will be reported as defaulted loans (per Clause 6(c)(ii) of BRPD 15/2024). For Continuous and Demand Loans: SS loans with 3 months to 5 months 29 days of past due = Classified but NOT Defaulted. Once past due reaches 6 months → Classified AND Defaulted.
Fixed Term Loan (Updated — Major Change)
Under BRPD Circular No. 03/2019 (now superseded), Fixed Term Loans had a 6-month grace before being treated as "overdue." Under BRPD Circular No. 15/2024:
| Scenario | Position (BRPD 15/2024 — from 01 Apr 2025) |
|---|
| Installment due but unpaid | Past due from the following day of installment due date |
| Past Due ≥ 3 months but < 6 months | SS (Classified, but NOT Defaulted) |
| Past Due ≥ 6 months but < 12 months | DF — Classified AND Defaulted |
| Past Due ≥ 12 months | B/L — Classified + Defaulted |
⚠ Key Change for Fixed Term Loan: Under the old BRPD 03/2019, Fixed Term Loans were treated as overdue only after 6 months from the installment due date, meaning default could only occur from 12 months. Under BRPD 15/2024 (effective April 2025), past due starts the very next day of the due date, making the classification and default timelines faster by 6 months. This stricter standard aligns Bangladesh with international best practices (IFRS 9 / Basel III).
Qualitative Judgment — Classification Beyond Numbers
Beyond objective criteria (days past due), banks can also classify loans based on Qualitative Judgment — perceived risk factors even if no past due exists. BRPD 15/2024 provides detailed indicative factors for each tier:
| Classify as | Obligor-Side Triggers (examples) |
|---|
| SMA | Occasional overdrawn, below-average profitability, barely acceptable liquidity |
| SS | Recurrent overdrawn, low turnover, weak management, doubts about management integrity |
| DF | Permanent overdrawn, operational losses, illiquidity, very poor/hostile management |
| B/L | Loans to finance operational losses, money laundering/fraud/embezzlement, no repayment source except liquidation |
Final Classification Rule: Both objective criteria AND qualitative judgment assessments are done. The worse (more severe) result is the final classification.
Interest Accounting of Classified Loans
| Classification | Interest Treatment |
|---|
| SS and DF | Interest credited to Interest Suspense Account (not Income Account) |
| B/L | Interest charging ceases; any interest charged goes to Interest Suspense |
| Rescheduled Loans | Unrealized interest → Interest Suspense Account |
Provision Rates — BRPD Circular No. 15/2024
| Category | Type of Provision | Rate |
|---|
| STD-0, STD-1, STD-2 | General Provision | 1% of loan outstanding |
| SMA | General Provision | 5% of loan outstanding |
| SS | Specific Provision | 20% of base for provision |
| DF | Specific Provision | 50% of base for provision |
| B/L | Specific Provision | 100% of base for provision |
Eligible Collateral for Base Calculation (select examples): 100% of deposit under lien; 100% of government bond/savings certificate under lien; 100% of government/Bangladesh Bank/AAA-rated MDB guarantee; 100% of market value of gold pledged; 50% of marketable commodities under bank's control; up to 50% of land and building; 50% of average 6-month stock market value (for listed shares).
Minimum 15% Rule: For most collateral types, specific provision must be maintained on the greater of: (i) outstanding minus interest suspense minus collateral value, OR (ii) 15% of the outstanding balance. This floor protects against over-reliance on collateral.
NPL Situation in Bangladesh — 2025 Update
Understanding the context is important for any banking professional:
| Period | NPL Amount (Tk Lakh Crore) | % of Total Loans |
|---|
| December 2023 | 1.45 | ~9.0% |
| June 2024 | 2.11 | 12.56% |
| December 2024 | 3.46 | 20.20% |
| March 2025 | 4.20 | 24.13% |
| June 2025 | 6.08 | ~34.6% |
| September 2025 | 6.44 | 35.73% |
Context: Bangladesh now ranks highest in Asia in terms of NPL ratio (ADB Report 2023 data; situation worsened in 2025). Key causes: stricter classification post-BRPD 15/2024, uncovering of previously concealed bad loans from the Awami League era, defaults by large conglomerates (S Alam Group, Beximco Group), and alignment with international standards. By September 2025, state-owned banks had an NPL rate of ~44%, private banks ~32.9%.
Reporting Requirements
- Classification on quarterly basis (CL-1 to CL-5 forms)
- CL-1 summary to be uploaded in Bangladesh Bank's Enterprise Data Warehouse (EDW)
- CL-1 submitted within 15th of the next month after quarter-end
- Classification status of each loan reported to CIB (Credit Information Bureau)
- Non-compliance may attract penalty
- Islamic banks must also follow BRPD 15/2024 for their investments
- Off-Balance Sheet provisioning: follow BRPD Circular No. 06/2023
Declassification (Improvement in CL)
- Objective basis: Move to better category upon payment of past due amount
- Qualitative basis (bank classified): MD/CEO can move from B/L → DF or DF → SS with justification; Board of Directors must approve SS → SMA/STD
- Bangladesh Bank inspection classified: Cannot be declassified without BB's consent
📋 Quick Summary Table — Exam Ready
| Concept | Key Fact |
|---|
| Governing Circular | BRPD Circular No. 15/2024 (dated 27 Nov 2024, effective 01 Apr 2025) |
| Supersedes | BRPD Circular No. 14/2012 and all its modifications |
| Loan Categories | 4: Continuous, Demand, Fixed Term, Short-term Agricultural Credit |
| CL Tiers | 7: STD-0, STD-1, STD-2, SMA, SS, DF, B/L |
| NPL = Classified | SS + DF + B/L |
| Unclassified | STD-0 + STD-1 + STD-2 + SMA |
| Defaulted Loan (Law) | Past Due ≥ 6 months (Bank Company Act, Sec. 5GaGa) |
| Past Due starts for Continuous/Demand | Next day after Expiry Date |
| Past Due starts for Fixed Term | Next day after installment due date (changed — no 6-month grace) |
| SS but NOT Defaulted | Past Due 3 months to 5 months 29 days (Continuous/Demand/FTL) |
| SMA Provision | 5% (new — was no separate provision under old circular) |
| SS Provision | 20% of base |
| DF Provision | 50% of base |
| B/L Provision | 100% of base |
| Minimum base for provision | Greater of: (outstanding − IS − collateral) OR 15% of outstanding |
| Interest (SS & DF) | → Interest Suspense Account |
| Interest (B/L) | Charging ceases |
| Classification frequency | Quarterly |
| CL-1 submission deadline | 15th of month after quarter-end |
| IFRS 9 / ECL target | Bangladesh Bank plans full IFRS 9 ECL methodology by 2027 |
| Bangladesh NPL (Sep 2025) | Tk 6.44 lakh crore = 35.73% of total loans (highest in 25 years) |
🧠 Mnemonic to Remember the 7 CL Tiers: "S1 S2 SMA — SS DF BL"
Small problem? → STD-0 (Clean)
Slight slip (1 day–1 month) → STD-1
Same slip (1–2 months) → STD-2
Mind the warning (2–3 months) → SMA — 5% provision kicks in here!
━━━━━━━━━━━━ NPL Zone ━━━━━━━━━━━━
Seriously behind (3–6 months) → SS — 20%
Doubtful recovery (6–12 months) → DF — 50% + Defaulted!
Bad, write it off (12+ months) → B/L — 100%
📌 Remember: Defaulted = Past Due ≥ 6 months (Bank Company Act). SS (3-6 months) is Classified but NOT Defaulted!
