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The Effect of Non-performing Loans on Performance and Profitability: A Comparative Analysis from Banking Sector of Bangladesh Sanjida Afrin

The Effect of Non-performing Loans on Performance and Profitability: A Comparative Analysis from Banking Sector of Bangladesh

Author (s)

Sanjida Afrin

Abstract

The purpose of this paper is to assess the intensity of ‘Non-performing Loan’ and its adverse impact on the performance and profitability of the banking sector of Bangladesh. A comparative scenario of state-owned commercial banks and private commercial banks have also been presented in this study. The foregoing discussion of NPL from the perspective of Bangladesh reveals that the amount of defaulted loans have reached an alarming position which degrades the banking industry and makes the economy stagnant. The comparative analysis showed that SOCBs have a higher amount of total NPL, gross NPL ratio and net NPL ratio than that of PCBs. Share in industry total assets, share in deposit and also change in the contribution of industry assets of SOCBs are very lower in comparison to PCBs. Capital adequacy, capital to risk-weighted assets, ROA, ROE and maintained provision of SOCBs are very poor while PCBs have satisfactory performance. Active implementation of policies, proper and adequate surveillance of SOCBs, qualified and neutral board members and non-executives, improved lending process, enforcement of punishable measures and most importantly strong ethical attitude are some of the possible and effective recommendations that should be implemented to eradicate the root of NPL from this emerging economy.

 Keywords: Non-performing loan, State-owned commercial bank, Private commercial bank, Bangladesh Bank, Provision, loan recovery.

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Title: The Effect of Non-performing Loans on Performance and Profitability: A Comparative Analysis from Banking Sector of Bangladesh
Author: Sanjida Afrin
Journal Name: International Journal of Science and Business
Website: ijsab.com
ISSN: ISSN 2520-4750 (Online), ISSN 2521-3040 (Print)
DOI: https://doi.org/10.5281/zenodo.4019323
Media: Online
Volume: 4
Issue: 10
Acceptance Date: 05/09/2020
Date of Publication: 08/09/2020
PDF URL: https://ijsab.com/wp-content/uploads/597.pdf
Free download: Available
Page: 16-26
First Page: 16
Last Page: 26
Paper Type: Research Paper
Current Status: Published

Cite This Article:

Sanjida Afrin (2020). The Effect of Non-performing Loans on Performance and Profitability: A Comparative Analysis from Banking Sector of Bangladesh. International Journal of Science and Business, 4(10), 16-26. doi: https://doi.org/10.5281/zenodo.4019323

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About Author (s)

Sanjida Afrin, MBA, Department of  Accounting and Information Systems, University of Dhaka, Bangladesh.

 

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DOI: https://doi.org/10.5281/zenodo.4019323