Determinants of Non-Performing Loans: Perception of Bankers in Bangladesh

Abstract

This study attempts to explore the determinants of non-performing loans in banking sector of Bangladesh based on the perception of bankers. To represent the bank-specific determinants of non-performing loans, bank profitability, lending rate, bank total assets, transparency in loan authorization, credit assessment, bank age, and corporate governance are considered. On the other hand, gross domestic product, inflation rate, unemployment rate, exchange rate, foreign direct investment, and export growth are used to represent macroeconomic determinants. Bankers working in Dhaka city have been considered as the sample of this study. Opinions of 144 bankers regarding the selected determinants of non-performing loans have been collected through a structured questionnaire. Based on the collected data, descriptive analysis, correlation analysis, and regression analysis have been conducted. In the analysis, bank total assets, transparency in loan authorization, bank age, inflation rate, and unemployment rate have depicted a positive impact on non-performing loans where bank profitability, lending rate, credit assessment, corporate governance, gross domestic product, exchange rate, foreign direct investment, and export growth have shown a negative impact. However, among these, significant impact has been identified only for bank total assets, bank age, corporate governance, gross domestic product, inflation rate, and foreign direct investment.