An Examination of Bangladesh’s Current Situation with Regard to Non- Performing Loans (NPLs) and Its Effect on the Banking Sector
Abstract
The purpose of this article is to investigate the extent of non-performing loans (also known as "NPLs") in Bangladesh's banking sector. Non-performing loans (NPLs) with systemic levels require a complex and expensive resolution process. In structurally weak financial systems, bank NPL issues typically appear following credit booms or extended periods of slow growth. New lending is stifled by NPLs, which harms banks' capacity to make money and stay solvent. The financial system ceases to operate regularly when high NPL levels affect a sufficient number of banks, and banks are unable to continue lending to the economy. Market dysfunction and bank coordination issues may prevent a quick recovery. Authorities typically intervene in such situations to take control of the crisis response. They can use a range of resolution tools for this purpose, but they normally demand a lot of resources and take some time to produce results. Non-performing loans are one of the primary issues that commercial banks are currently dealing with. What exactly is a non-performing loan? Financial assets known as nonperforming loans (or "NPLs") are those from which banks no longer receive interest or installment payments on time. Since the loan no longer "performs," or brings in money for the bank, it is known as non-performing (Choudhury at al .2002).
Keywords:Non-Performing Loans (NPLs), Commercial Bank, Financial System, Loan Recovery Measures, Bangladesh.
DOI: 10.7176/EJBM/14-22-01
Publication date: November 30th 2022
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