Delinquency Management in Private Commercial Banks: The Case of Bangladesh

Abstract

This study examines delinquency management practices, causes of delinquency, and find out the ways of improving loan delinquency in private commercial banks in the context of Bangladesh. A sample of 250 primary observations has been collected through a self-administered questionnaire using a simple random sampling method from the target population during 2017-2018. The target population includes credit and recovery officers, individual and institutional borrowers from 30 private commercial banks in Bangladesh. To analyze the findings, the descriptive statistics of the variables are used and the results are presented in the frequency tables. This paper exposes that, loan client assessment, collateralized lending, sending reminder messages to the borrowers, credit monitoring, setting realistic terms of credit, and insurance of loans are the delinquency management practices in private commercial banks. This research also reveals that improper selection of a loan client, lack of follow up, unhealthy competition among banks, lack of proper analysis of project viability, higher interest rate, under financing/over financing, poor economic conditions, and information asymmetry are main causes of loan delinquency. This study also discloses that, strict adherence to credit policy, visiting client after loan disbursement, proper valuation of security, regular/timely release of funds, training and advice given to loan clients, loan given to business not against collateral, post loan services, fixation of lower interest rates, and proper documentation before disbursement can be main strategies of improving loan delinquency in private commercial banks. The findings of this research would help private commercial banks to reduce non-performing loans and improve delinquency management.

Key Words: Delinquency management, non-performing loans, commercial banks, Bangladesh