Management of Non- Performing Loans(NPLs) of Banks in Bangladesh-An Evaluative study
Keywords:
Non performing loans, Bank specific factors, Client specific factor, external factorsAbstract
This paper discusses the magnitude of Non-performing Loans (NPLs) in the banking sector of Bangladesh. The paper reveals that the presence of an alarming amount of NPLs both in Nationalized Commercial Banks (NCBs) and in the development Financial Institutions (DFIs), along with maintenance of inadequate loan loss provisions , diminishes the overall credit quality of Bangladesh. The study investigated the different causes of Non- performing loans. Using a sample of 30 managers selected from the ten largest banks, the study found that influence of politicians was perceived as the most important external factors. Diversion of fund by customer, failure to disclose vital information during the loan application process were considered to be the main customer specific factor. The study further found that lack of aggressive credit collection policy was perceived as the main bank specific factor, contributing to the nonperforming loan problem in Bangladesh. The study reveals that some actions that are taken by the managers for reducing NPLs.
