Credit is the lifeblood of economic development. With only the fingers of our right hand, can we count the number of businesses or even individuals that could survive in the world without any form of credit or loans. However, lending and borrowing doesn’t work when lenders don’t pay back their debt which is simply known as, “Non-Performing Loans”.

Non-Performing Loans or NPLs have become a pandemic in the banking industry in Bangladesh. Lenders have been at a default or at a complete loss to pay back their original loans which is hurting the industry. Experts have compared this practice akin to cancer, slowly spreading and consuming up funds.

While it is a common practice abroad to “write off” loans completely, it still requires that there be efficient funds to provision against those losses, which is becoming harder to do with the overmounting Non-Performing Loans.

And the future does not look good either, volume of classified loans increased by nearly 14 percent, from 1011.50 billion to 887.34billion within a 9-month period from December 31, 2020 to September 30, 2021. Classified loans are those that are at risk of default but have yet not become NPLs, but they are at a very high risk of doing so.

Experts have now suggested to make expedited recovery drives if NPLs cross 2.0 percent of all outstanding loans. Moreover, strict governance needs to be applied across the banks in the country for a more stringent vetting and lending process. As policy-makers have rightly said, the practice of NPL is the cancer that needs to be cured for the economic growth and progress of the country.

Perhaps this can all be reversed, but the policy has to change now to become vigilant and resilient against the trend of unpaid loans.