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Non-Performing Loans in Bangladesh: Bank Specific And Macroeconomic Effects Emon Kalyan Chowdhury This study attempts to verify wide range bank-specific determinants namely equity on total assets (ETA), growth of gross loans (GGL), return on assets (ROA), returns on equity (ROE), interest income (II), lending capacity (LC), asset Management quality (AM) and operational efficiency (OE) and macroeconomic variables namely unemployment (UN), GDP growth (GDP), inflation (INF) and consumer price index (CPI) rates on NPLs considering 33 commercial banks in Bangladesh. – Author Key points of the article are : 1) A sound banking sector is a must for any developed nations as it supplies capital. 2) Our banking sector is struggling due to corruption , mismanagement, influence of top management , lack of monitoring , capacity of the central bank and non-compliance of existing legal requirements. 3) Inconsistent policies, decreasing GDP Growth, political unrest, increase in crimes, ownership concentration, and inefficiency of banks play a vital role in increasing NPLs. 4) Both internal and external factors are responsible for the current situation of NPLs in our country. 5) Strict credit policy is a must to tackle NPLs. Lack of strict credit policy is another factor that increases NPLs. 6) NPLs mainly occur due to ineffective monitoring and supervision, poor credit recovery capacity, insufficient legal supports, and political pressures. 7) The Government of Bangladesh has been trying to keep the NPLs in control by framing new policies, reviewing laws, regulations, acts and guidelines for changes which cover Money Loan Court Act, 2003, Bank Company Act, 1991, Bangladesh Bank Order , 1971, and Bankruptcy Act, 1997 so on and so forth. 8) Individuals involved in loan appraisal should be free from political influence. 9) The loan recovery process should be more strict. Support from the Government and the legal authority is necessary to make the recovery process smooth. 10) Politically involved personnel should not be appointed as Chairman or Board of directors for any banks. They should be appointed based on their competencies. This will result in better decision making free from political influences. 11) An Asset Management Company (AMC) is much needed for Bangladesh to resolve NPL related issues. 12) Loss making public banks should be merged or privatized or divested or restructured to improve profitability and sustainability. Author’s findings It is observed that among bank-specific determinants, equity to total assets, interest income, lending capacity, and return on equity have significant impact on the NPLs while unemployment and consumer price index of macroeconomic determinants have significant impact.

Lower interest rates for loans In the context of abundant capital, deposit and lending interest rates decrease, but businesses still have difficulty accessing bank capital, leading to negative credit growth. This issue is being concerned by the society. Only good businesses can borrow at low interest rates According to the State Bank, credit debt in the entire system as of the end of February 2024 decreased by 0.72%. The main reason is the narrow output of many businesses, and people reduce borrowing and spending… although the average lending interest rate is now around 6.4% per year, decreasing by 0.7 percentage points compared to the end of 2023. Survey at some banks in Ho Chi Minh City, the reporter of Bao Người Lao Động recorded short-term (3 to 6 months) lending interest rates ranging from 4.3% – 7% per year; for medium and long-term loans (12 months and above), interest rates are about 6.8% – 10% per year. Banks have excess money, businesses lack capital but difficult to access loan capital. Photo: TẤN THẠNH For example, Vietnam Export Import Commercial Joint Stock Bank (VietinBank) has recently announced a loan package of VND 300,000 billion (USD 13 billion), with the lowest interest rate of 5% per year for short-term loans. Accordingly, this particularly competitive interest rate is prioritized for enterprises engaged in import-export activities using diverse products and services at VietinBank, transferring export revenue to transactions at this bank, customers operating in priority sectors… Maritime Bank (MSB) is also deploying a VND 3,000 billion (USD 130 million) green credit package, with interest rates from 4.3% per year for short-term loans and from 6.8% per year for medium and long-term loans. The lending target is enterprises with investment projects in the areas of energy, water resources, waste, construction, and processing industries, green transformation that meet green project criteria… Enterprises with projects or production-business plans in sustainable development sectors of textiles, aquaculture, and agriculture are also prioritized for credit support by MSB. Meanwhile, at Nam A Bank, the lowest interest rate for loans is 6% per year for good enterprises and enterprises in priority sectors. “In the current context, loans for consumer spending or high-risk loans, the bank will maintain a competitive interest rate compared to other banks. For loans in priority sectors, the bank will continue to reduce interest rates in the coming time,” said a Deputy CEO of Nam A Bank. However, in reality, customers can only enjoy the lowest interest rate when borrowing a large amount, participating in multiple financial services that bring profits… At the same time, borrowers must have feasible production-business plans, ensure income to repay debts, have sufficient collateral assets, and no bad debts… On the other hand, banks will lend at the highest interest rate when customers only meet conditions of sufficie...

Micro and Macro Determinants of Non-performing Loans Ahlem Selma Messai High Business School Tunis, Manouba, Tunisia. Email: asm_j@hotmail.fr Fathi Jouini Faculty of Economic and Management Sciences, University of Sousse, Tunisia. Email: fathi_75@hotmail.f The authors of this article tried to find out the relationship among the variables e.g Non Performing Loan (NPL) , Gross Domestic Product (GDP) and Unemployment. For that they had chosen 85 banks from three European countries Italy, Greece and Spain. Here are their findings along with the key points I've found in the article. 1. There is a positive relationship between unemployment and NPL. Meaning , if unemployment increases so increases NPL. 2. There exists an inverse relationship between the GDP of a country and NPL . 3. Here is the interesting part. Reduction in GDP reduces the income of the people thus unemployment increases which in turn reduces their ability to pay off their existing loans. Ultimately resulting in NPL. 4. There is a strong relationship between NPL and many macroeconomic variables such as the real interest rate, the annual GDP growth, the annual inflation rate, loans growth, the real exchange rate, the unemployment rate, Money supply and so on. 5. Interest rate and NPL shares a positive release. Especially loans with floating interest rates. 6. Just like the interest rate and NPL . Size of the banks also shares a positive relationship with NPL. Because big banks can diversify their portfolio allowing them to manage risk effectively. 7. The NPL on mortgages are less sensitive to macroeconomic conditions. 8. Managerial inefficiency is one of the major reasons behind NPL. 9. Banks prioritizing short-term profits may be more likely to have high NPLs. This is because they might loosen lending standards or take on riskier borrowers to generate higher returns. Tushar Das Department of Banking and Insurance University of Chittagong

RBI's new draft rules for project finance loans - How intense can be the impact on banks & NBFCs if passed? In brief, though still in draft stage, the probability of provisioning% for project finance loans (i.e., loans for building infrastructure...roads, bridge, port, dams etc etc.)........going up from the current 0.4% to max. till 5%......can be a pretty huge load... Also with the objective of making India a developed nation by 2047 (budget for the same allocated as 11 lac Crores in the interim budget FY25)....infrastructural development will be a key driver.... And with the above rule if gets passed can pose as a challenge for the same.....as in a way or the other....either it will have an impact on the profitability of the banks/NBFCs or they will pass it on the borrowers (can get expensive by atleast 1-1.5%).. But we are also aware of the bad loan problem that had shaken the industry about a decade back....with 52% of the stressed loans being related to infrastructure..... So, yes, reasons are there for our central bank to be stringent....but will wait to see how it ultimately unfolds... https://bit.ly/3USjFV8

RECOVERY OF BANK’S LOAN AND NPA MANAGEMENT Recovery of bank’s loan has now become a burning problem to Indian banks. The problem is more acute in public sector banks than private banks. During the period from 2004 to 2014, surge in bank's credit was noticed in almost all sectors for economic development. But recovery process of loans had been gradually declining resulting in mounting NPA burden on the banks. Gradually the health of the banks is slowly declining and turn into loss making banks. The small banks were mainly affected due to fall in repayment rate mainly in personal banking segment and corporate loans like steel, mining, cement, oil refinery, infrastructure sectors and micro loans in agricultural sector. The lack of proper credit appraisal and poor loan management and monitoring system are responsible for the rise in NPAs. Natural calamities, high inflation, poor income generation and recently occurred Covid pandemic further aggravated the problem. Mounting NPA has been weakening the financial stability and profitability of banks. It has been creating barriers in recycling of funds, capital adequacy, imposing high interest on loans to compensate loss of assets and squeezing flow of fresh credits to the borrowers. Banks with high NPAs face problems in maintaining statutory BASEL II norms of minimum 9% but Government has fixed it to 12%. In India, Government and RBI have already taken effective measures to reduce the NPA burden of the commercial banks by reforming the monetary policy as well as restructuring the banking management. With the recent initiatives launched in various levels, net NPA levels of majority of commercial banks have been reduced and, in some cases, it has come down to 3% to 4%. Still this area is a cause of concern to the banking management. In order to improve the health of the banking sector, the following steps need to be taken phase by phase: 1.Recovery progress of the banks need to be monitored on daily basis and recovery cells to be opened at the regional levels. 2. Banks should consider restructuring of loans of viable units and rehabilitation package should be offered to the eligible units. 3.Loan monitoring system need to be highly effective with the help of modern technology and efficient officials. 4. Banks should float compromise proposals to speed up the recovery process. 5. Write-off and loan waiver are effective weapons to clean up the balance sheet of banks.   6. Calling up of advances and filing law suits in the civil counts or in Debt Recovery Tribunals need to be examined to protect the bank’s assets. 7. The problem of NPAs can only be tackled with proper credit assessment and risk management mechanism. 8. The merger process of some loss making banks has already been started and this initiative will sure make the health of the small banks strong and more competitive.      

While real estate business loans have witnessed a surge in Vietnam, banks are also diversifying their credit allocation to other sectors. This shift is evident in the financial statements of several major banks, which indicate a broader distribution of loans across various industries. In line with the government's directives, banks are prioritizing productive sectors that contribute to economic growth. Wholesale, retail, and manufacturing continue to be significant recipients of credit, reflecting their importance in driving economic activity. Additionally, sectors such as agriculture, healthcare, and education are also receiving increased attention from banks. This diversification strategy aims to mitigate risks associated with concentrated lending and promote balanced economic development. By spreading their loan portfolios across multiple sectors, banks can enhance their resilience and weather economic fluctuations more effectively. Furthermore, banks are also focusing on small and medium-sized enterprises (SMEs), recognizing their potential for job creation and economic growth. SME lending has become a key area of focus, with banks offering tailored financial solutions and support services to cater to the unique needs of these businesses. As Vietnam's banking sector continues to evolve, the diversification of credit allocation will play a vital role in ensuring sustainable economic growth and stability. By balancing their loan portfolios and supporting a wide range of industries, banks can contribute to the nation's overall economic prosperity.

A province near Hanoi has an incredibly low non-performing loan ratio of only 5 million VND for every 1 billion VND loaned by banks. On February 22, at the headquarters of the Provincial Party Committee of Hoa Binh, Governor of the State Bank Nguyen Thi Hong had a meeting and working session with the Provincial Party Committee, People’s Council, and People’s Committee of Hoa Binh province. During the working session, Mr. Nguyen Phi Long, Secretary of the Provincial Party Committee of Hoa Binh province, discussed some information about the economic, political, cultural, and social situation in the province. He informed that in the banking sector, the banking industry has created favorable conditions for the development of the province’s rural economy, with the non-performing loan ratio accounting for only 0.49% of the total outstanding loans. This is a favorable condition for the province to achieve its growth targets as well as an encouragement for credit institutions in the province to continue contributing to the province’s overall results in the near future. According to the report at the working session, the total loan outstanding balance of credit institutions in Hoa Binh province as of December 31, 2023 reached 40,061 billion VND, an increase of 5,710 billion VND (16.6%) compared to the same period last year. Of which, short-term debt accounted for 45.2%; long-term debt accounted for 54.8%. In the first 2 months of 2024, the total loan outstanding balance and total capital of banks and credit institutions in the area tended to decrease slightly by 1-2%. Loans for credit programs for policy beneficiaries, ethnic minorities, and priority sectors continue to be implemented… In general, the credit growth of credit institutions in the province is higher than the general credit growth of the whole economy in 2023 (13.5%). The non-performing loan ratio of credit institutions in Hoa Binh province is also much lower than the national average. Updating the non-performing loan situation at the “Implementation of the banking tasks in 2024” press conference earlier this year, leaders of the State Bank of Vietnam (SBV) said that due to the difficult economic conditions, the non-performing loan ratio in the banking system increased to 4.95%… In order to support businesses in overcoming difficulties in production and business, improving access to loans with reasonable interest rates, commercial banks in Hoa Binh province have implemented a policy of supporting an interest rate of 2% per year for loans with a loan amount of 475.4 billion VND/20 customers, with a total support amount above 2 billion VND; restructuring debt for 80 customers (including 51 business customers and 29 individual customers); implementing the 120,000 billion VND loan program according to Resolution 33/NQ-CP… In addition, the Hoa Binh Social Policy Bank (SPB) has supplemented capital, disbursed timely capital for policy credit programs; creating favorable conditi...

President Tinubu Government Borrowed $6.45bn From World Bank The Federal Government, under the leadership of President Bola Tinubu, has secured loans worth $6.45bn from the World Bank in just 16 months. The amount increased to the new figure following the recent approval of three new loans totalling $1.57bn from the World Bank for various projects in Nigeria and is expected to increase further in the coming months. This was as the international lender approved no fewer than 36 loan requests to the Federal Government, amounting to a substantial total of $24.088bn within five years. These approvals, aimed at financing various development projects nationwide, arrive alongside increasing concerns about the country’s escalating debt profile, prompting questions about the sustainability of these financial commitments and their potential long-term effects on the economy. Some of the projects under Tinubu include loans for power ($750 million), women empowerment ($500 million), girl’s education ($700 million), renewable energy ($750 million), economic stabilization reforms ($1.5 billion) and resource mobilization reforms ($750 million), For many Nigerians, long years of infrastructure decay and increased unemployment have triggered an increased feeling of bitterness whenever they hear the government’s intention to borrow. Although some of them realistically agree that resources are thin, considering an outsized population; however, they believe the past borrowings have not been justified. However, according to an analysis of documents obtained from the international lender website on Tuesday, the international lender has maintained an annual credit approval to the nation since 2020. A cursory look showed that the lender approved 15 loan requests worth $6.36bn in 2020. Some of these projects include the Nigeria Rural Access and Agricultural Marketing Project with an approved project commitment of $510m, The Nigeria Digital Identification for Development project ($430m), and $750m for the Nigeria SATAN additional financing for COVID-19 response, amongst others. In 2021, the loan requests were reduced to six projects worth $3.2bn while the nation, under the administration of former president Mohammadu Buhari, secured loans worth $1.26bn in 2022 for six projects. For instance, a $500m loan request was approved for a livestock productivity and resilience support project on March 18, 2022. Another loan of $750m was approved under the Nigeria: State Action on Business Enabling Reforms Program in the same year. Also, $3.9m was secured for the Umbrella organisation to support Nigeria for women’s projects. However, in 2023, the loan request increased to $2.7bn to implement four projects, namely $750m for Nigeria- AF power sector recovery performance-based operation, $500m for Nigeria for Women Program Scale-up projects and $750m for the Nigeria Distributed Access through Renewable Energy scale-up project. Similarly, the bank has...

The Reserve Bank of India's new lending rules for projects under construction can change how banks finance projects! Let me simplify this for you. So currently, when banks lend money to these types of projects, they only need to set aside a small portion i.e. 0.4% of the loan amount as a provision, which is a kind of safety buffer in case the project faces difficulties in repaying the loan. However, the RBI had noticed that in the past, many project loans have become stressed, which means the borrowers have struggled to repay the loans. This caused problems for the banks. To address this issue, the RBI has proposed that banks and financial institutions should set aside a much larger portion i.e. 5% of the loan amount as a general provision for all new and existing project loans that are still under construction. This means that for every ₹100 lent to a project under construction, the lender must set aside ₹5 as a provision, which is significantly higher than the current requirement of ₹0.40. The RBI believes that this higher provision will help lenders better manage the risks associated with project loans and protect them from potential losses if the projects face difficulties in the future. However, once the projects become operational and start generating revenue, the lenders can gradually reduce the provision amount to 2.5% and eventually to 1%, provided the projects meet certain performance criteria. The RBI has proposed a phased implementation of these new rules, with the 5% provision requirement coming into full effect by March 2027. The draft regulations also include guidelines for stress resolution, criteria for upgrading loan accounts, and requirements for lenders to maintain project-specific data in an easily accessible format. The public has been given time until June 15 to provide their feedback and comments on these proposed regulations. The RBI aims to ensure that banks and financial institutions are better equipped to handle the risks associated with project loans and to prevent a build-up of stress on their loan books, which can have broader implications for the financial system. Like and share it if you found it insightful :) #RBI #Banks #Newrule

🚀 UCO Bank Targets Rs 25,000 Crore in Corporate Loans 🚀 UCO Bank's MD ASHWANI KUMAR reveals a robust Rs 20,000-25,000 crore corporate loan pipeline, with a strong focus on sectors like steel, renewable energy, and textiles. The bank's advances surged 18% YoY, hitting Rs 1.93 trillion in June 2024. Key Highlights: 1. Stable Asset Quality: Gross NPA at 2.88%, net NPA at 0.69%. 2. Credit Cost: Reduced to 0.47%. 3. Liquidity Coverage Ratio: 138%, expected to moderate by 12-15% due to RBI guidelines. 5. Capital Adequacy: 16.82%, planning to raise Rs 7,500 crore via debt. 6. Growth: Advances up 8%, deposits up 9%. 7. New Initiatives: Expanding tap banking and launching new branches. RBI’s draft guidelines might impact UCO Bank’s liquidity coverage ratio by 5-10%, currently at 130%. The bank aims to sustain a strong CASA ratio and lower NPA ratios by FY25. #UCOBank #CorporateLoans #BankingNews #FinancialGrowth #LoanPipeline #RBI #LiquidityCoverage #BankingSector #DigitalBanking #FinancialStability #BankingUpdates #PSUBanks #BFSI #ModernBFSI #FEBFSI #InvestmentOpportunities #FinancialInclusion #BusinessGrowth https://lnkd.in/gwPgYBNk