What are the Stimulating Factors Affecting NPL in Banking Sector of Bangladesh Evidence from Econometric Exercises

A well organized, well structured and developed financial sector ensures efficient allocation of financial resources and perks up the competitiveness of the private sector, thereby promoting investment and growth in the real sector. The thrust of the development is to improve the regulatory and governance environment and to enhance the ability of bank owners, management and regulators, and the markets themselves to provide for better governance and regulation to achieve the objectives. In this perspective, improvement of the situation of non performing loan is important. A high volume of non performing loan can never be a boon for the economy. Credit to economy is the main source for financial support of business. On the other side, banks have limited investment tools for their deposits. This study present results from an econometric analysis, favorably Random Effect Model, using pooled panel data collected from the central bank of Bangladesh categorizing four sectors of banking based on the pattern of ownership. Based on the analysis of the bank specific microeconomic factors, which are selected on the availability from reliable sources, used as the regressors, it is observed that the liquidity and the management soundness is more significantly affect the Non performing loan NPL in Bangladesh. Therefore, the recommendation is placed towards formulation policy instruments in favor of solvency rather liquidity. In addition to that, the improvement of managerial efficiency must be sought as well. Ratna Biswas | Mohammed Nazrul Islam | Chanu Gopal Ghosh "What are the Stimulating Factors Affecting NPL in Banking Sector of Bangladesh? Evidence from Econometric Exercises" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-2 , February 2020, URL: https://www.ijtsrd.com/papers/ijtsrd29861.pdf