Determinants of Non-Performing Loans of Commercial Banks in Bangladesh

Abstract

The report is prepared on “Determinants of Non-performing loans of commercial banks in Bangladesh”. The fifteen commercial banks have been selected for the study using the data over the period from 2013 to 2017. Each and every bank in our economy is subject to this problem. This happens because they could not collect the loan in time or sometimes the loan remains uncollected. Both the bank-specific and macro-economic variables are used to study the non-performing loans. In Bangladesh, non-performing loans are becoming a challenge for the success of overall banking sector performances. The bank could not collect the loan in time as they are not well maintained. They need to be more focused on the non-performing loan and all the commercial banks of Bangladesh should increase the loan loss provision. Either it will not be able to solve the problem. So this is the main purpose of this study to find out the influences of non –performing loans on commercial banks of Bangladesh. I applied a panel data regression model to measure the factors that influence the non-performing loans in Bangladesh. Both fixed effects and random effects panel models are used but using the Hausman test it is found that fixed effects regression is appropriate for the dataset. The results reveal that only the total loan to assets ratio and the loan loss provision to the total loan has been found significant. But no other variables are found significant to influence the non-performing loans in Bangladesh.