Non-Performing Loan and Management Guidelines for Remedies: An Empirical View of Bank Employees

Abstract

Non Performing Loan (NPL) is the most important indicator to identify problems with asset quality in the loan portfolio. In Bangladesh, the empirical view about the ratio of NPL to total loans of all the scheduled banks have been in sliding trend, although the aggregate ratio is still soaring higher than the desired perimeter. The very high NPL ratio, as ascertained from Nationalized Commercial Banks (NCBs) and Development Financial Institutions (DFls), especially for term lending, agricultural and micro lending, necessitates re-examining these activities and establishing a viable rationale for their continuation. From the views of Bank employees, it is clear that steps taken to prevent loan classification and provisioning requirements are not sufficient; and due to lack of persuasion, the rate of willful defaulters is high. Efficient usage of the CIB report, implementation of appropriate legal frameworks and improvement of corporate governance of banking operations have been denoted as management guidelines for enhancing banking sector reform while retaining NPLs within recommendation