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Why are financial intermediaries opting to write-off bad debts from their books due to non-payment of...

Why are financial intermediaries opting to write-off bad debts from their books due to non-payment of borrowers? (20 points)

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Financial intermediaries are financial institution that are provides few of the financial services same as bank and other major financial firms. Financial intermediaries generally won't provide deposit facilities but it will provide financial loan and other similar kind of funding alternative.

While providing loans there are few chances that the borrowers will not able to pay back the loan amount which create bad debts in the financial intermediaries book. To reduce this bad debts banks generally write off bad debts which is one of the method to reduce the non performing asset. Main reason to write off the bad debts to be in line with regulatory requirements of the regulatory bodies. If the loan is not write off then there will be huge amount of the money will be as a bad debt which lead to crisis for the intermediaries.

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