Abstract:
This paper investigates how non-performing loans (NPLs) exert influence on
the financial out-turns of Bangladesh’s private commercial banks (PCBs). Data from 30
such banks, listed in Dhaka Stock Exchange (DSE) from 2013-17, have been considered
for the same. The study discloses increasing trend in the amount of NPLs of the PCBs
between the chosen time periods under study which is worrying for the entire banking
sector of Bangladesh. It was found that return on asset (ROA) was positively influenced
by capital adequacy ratio (CAR). On the other hand, the ROA of the PCBs under
scrutiny was adversely affected by non-performing loan ratio (NPLR). The study also
suggests that timely recovery of NPLs and appropriate legal measures to address the
NPL issue should be taken into consideration with all seriousness. Proper care should
be taken in granting loan facilities by developing precise tools and techniques, under the
guidance of Bangladesh Bank, to discriminate between the willful defaulters from the
genuine ones. Hence, a fitting implementation of the “Credit Risk Grading (CRG)
System” by an appropriate authority would result in better identification and overseeing
borrower’s risk in Bangladesh’s credit environment.
