Topic: Non-performing Loans in Banking Sector of Bangladesh

Why I choose this topic: I choose this topic for many reasons. This topic focuses basically:
1. To assess the present situation of non-performing loans in our banking sector.

2. To show the trend of the “loan default problem’’ in Bangladesh.

3. To identify the causes and remedies of non-performing loans.

Problem Statement: Loan portfolio constitutes the largest operating assets and source of revenue
of most financial institutions‟. Some of the loans given out become non-performing and adversely
affect the profitability and overall financial performance of the lending institutions. So the banks
or financial institutions cannot earn revenue.

Solve the problem:

1) Banks should take high collateral. If a borrower defaults on a loan, the lender can sell the
collateral and use the proceeds to make up for the loss. The security or collateral provided must be
valued by proper agency or put up on a regular ‘mark to market’ valuation process.

2. Action plan for potential NPLs. Banks should have some step to collect the NPLs loan.
3. Identification of highly risk sensitive borrowers in the credit portfolio. Banks should take
information about the clients before giving loans. Banks could go Bangladesh Bank to collect
the information and verify the financial statement carefully from reliable sources to identify the
risky borrowers.
4. Targeting high value end NPL accounts (having exposure of Tk. 5.00 crore and above)
5. Prompt action on credit reports
6. Capacity building of officers and executives in the recovery department. Banks should give
proper training to employee. So they can handle loans properly. If there is short of experience
employee, bank should recruit experience employee for recovery department.

Outcomes: Non-performing loan has a positive association with loan fee. At the point when NPL
expands, credit which is treaded as resource turns out to be more hazardous. With the goal that
the rate of intrigue likewise increments to get adequate retune from the credit to cover the
hazard. NPL can prompt proficiency issue for the saving money part. It is found by various
financial analysts that falling flat banks have a tendency to be situated a long way from the most-
proficient outskirts, since banks don't advance their portfolio choices by loaning not exactly
requested.
Conclusion: If the banking sector or financial sector minimize the loan default then banks or other
institutions willingly give loan to the customers. Then investment will be increased and the
country will economically pleased.