Non-Performing Loans and Its Impact on the Banking Sector: An Investigation on the Current Status of Bangladesh

Abstract

Non-performing loans (NPLs) have become a frustrating issue for the financial institutions in Bangladesh. Our banking industry and the economy in general have taken a negative turn due to the increasing volume of NPLs. This paper aims to investigate the current status of NPLs in the banking industry of Bangladesh. The analysis uses the published data which have been congregated from the annual reports of Bangladesh Bank, websites of the scheduled banks of Bangladesh and the World Bank observed from 2008 to 2019. The study identified that for the last two decades, NPLs are the burning problems for the banks in Bangladesh. Worldwide the standard of NPLs is 2% or less but in our country, it is much intricate. The NPLs percentages in Bangladesh are 4 to 5 times higher than the standard which is disquieting for the entire banking industry. Based on the current investigation, it has been observed that the NPLs ratio is increasing unremittingly with the advancement of time. So, as a financial regulator, the central bank of the country (Bangladesh Bank) must give more emphasize to compactly control the NPLs of the country. This paper contributes by employing new dataset from Bangladesh.