Non-performing loan of Southeast Bank Limited

Abstract

The heart of bank is decollated into two parts namely deposits and loans. The main objectives of a bank are to gather deposit from overplus portion and issue the gathered fund to the shortage portion. Debt or usury is the lifeblood of a bank. But this lifeblood or vital force of bank is often contaminated by a microbe which is accepted as bad loan or non-performing loan. Non-performing loan is that fixation of loan which has already become non-existence or close to being non-existence. When a bank falls to gather the interest payments or the principal amount of a loan then that loan is considered as non-performing loan. Non-performing loan is one of the furious problems of the banking sector in Bangladesh for last few decades. The non-performing loan percentages in Bangladesh are 5 to 6 times higher than the standard which is burning issue for the sector. Non-performing loans induced at the beginning stage of liberation. During 1980s and 1990s, privatization and liberalization of banking sector could not grab non-performing loans. Rate of non-performing loans was 41.1% in 1999. Now it is 11.90%. The amount of non-performing loans tumid to taka 73.3 billion in 2012 from taka 47.3 billion in 2003. There are many causes of non-performing loans such as- entrepreneurs related, business related, leading related and macroeconomic related. For these causes loan become default loan. Outcomes of non-performing loans are such as Stopping Money Cycling, Earning Reduction, Capital Erosion, Increase in Loan Pricing, Frustration etc. As a result, the esteems of security are increased and the risks of financial recession also see a rise.