An Analysis of Non-Performing Loan of Janata Bank from the Perspective of Bangladesh

The non-performing loan scenario of Bangladeshi banking industry is above average than the average rate of NPL in the world and the world average rate of NPL is about 3 or 4 per cent where the NPL rate in Bangladesh is about to 12% or which is about more than treble than the world rate. The most amount of nor-performing loan occurs in the state owned commercial bank like the Sonali, Rupali Agrani , Janata and the others specialized and the private commercial bank of Bangladesh. The amount of total NPL in the banking industry is about the 1, 11,347cr and the amount of the rescheduled loan is about to 70400cr which is very big amount comparing the country size and is more enough to make the banking industry more volatile and more risky. This report is all about the non-performing loan of Bangladesh especially the Janata Bank; a state owned commercial bank of Bangladesh. The trend of the last ten years of the NPL of this bank is upward slopping and the loans and the advances of the bank also had increased at a high rate day by day. The unscrupulous lending and the inefficiency of the employees of the board of directors along with the customer’s unwillingness to pay, foster the non-performing loan in the banking industry especially in Janata bank. The amount of the deposits of the bank, though have risen over time the trust of the people on the bank has shrinked at a great extent. From the analysis of the NPL situation, amount, trend, cause and effect, I have learned that the main cause behind this huge NPL is the sanction of loans to such customers who have no creditworthiness to get the loan along with this, the loan is extended to such customers who have large political powers and as such, the miss the installment and give application for rescheduling and by this way, one time this loan turns into a default loan for all banks. By doing the regression analysis on the non-performing loan’s effect on the profitability of Janata bank, I have found that these tow variables are strongly negative relationship and the amount of NPL is also raising nature that I have found from the trend analysis of this bank. The ratio analysis of this bank especially in the case of ROA, and ROE is not satisfactory for the case of NPL’s effects on the assets and the profitability’s of this bank. The trend analysis shows that the NPL was very high in the year of 2012 and by this year, the net profit was also negative for this bank. A few years ago, the retired chairman of this bank named Abul Barakat, sanctioned loan to the Anon Tex group amount to more than 5000cr which is the breach of the lending guidelines of the central bank and the present situation is that the total loan is now going to be default by the customers. In this situation only one remedy is the government willingness to recollect the NPL amount from the defaulters, otherwise the banking sectors will breakdown in near future and the amount of NPL will rise at in an alarming positions