Abstract:
Credit risk cannot be eliminated completely but this trouble can be minimized or prevented, the banks must take corrective steps to measures to address this problem of non-performing loan. Some incentives can be offered which will motivate the payers to pay the loan and not make it bad loan. Some incentives such as interest exemption, lowering the interest rates and expansion of duration of loan repayment could help to minimize this his problem. The empirical analysis of these research study has asserted that non-performing loan drastically hampers the pace of financial performance or profitability which enables the researcher to suggest that appropriate measures should be taken into consideration. Fixed effect model and pooled OLS model is depicted in this study. From the analysis it is found that for sustaining in the long run, these factors influencing the explained variables, should be the in the focus of the competent authority so that the financial performance or profitability is maintained appropriately. For a developing economy of Bangladesh these troublesome activities should be addressed. Previous researchers have generated several findings and concluded with the suggestion that non-performing loan should be handled appropriately with a view that it would balance the financial performance of the state-owned banks. The study's results have pointed out a number of important interactions for the regulatory and management spheres of the banking sector in Bangladesh. It is also possible that the banks following the Basel III capital and liquidity buffer standards will realize the shocking bad debts less, thereby gradually gaining the confidence of the entire financial system. The results also indicate that, particularly for the large banks, improvements in cost efficiency through technology, digital, and governance changes are going to be the way out. To be on the safe side during interest rate fluctuations, it might be a good idea to have an income mix that includes not only interest but also fintech ventures among others. Finally, the highlighted factor is that the effective credit risk management can help balancing sustainable development and financial indicators such as both the bank specific and macro factors influence the profitability and credit risk of the state-owned banks of banks of Bangladesh.
