Empirical Investigation on Loan Repayment Performance Evidence from Nationalized Commercial Banks in Bangladesh

This study focuses on the determinants of loan repayment performance in nationalized commercial banks in Bangladesh. Lending situation in four NCBs over the last ten years (from 1992 to 2003) show that there is a large amount of nonperforming loans in NCBs. A number of empirical studies have been conducted in various countries on loan repayment problems. The studies have indicated that a number of factors affect loan repayment performance. However, most of the studies have been done in the context of the developed economies. Bangladesh, being an under-developed country has situation different from that of developed countries. Accordingly, a model focusing Bangladesh situation has been developed considering the variables to address the country specific situation. The suggested model is capable of capturing the situation prevailing in nationalized commercial banks. Factors such as promoters' characteristics, company profile, lenders loan processing and monitoring systems, measures taken for recovery of loan, macro-environmental factors have been explicitly included in the model as the major determinants having significant effect on the loan repayment performance of borrowers. The results of the empirical model also suggest that modifications of lending procedures such as shorter loan processing and disbursement lagging time could enhance loan recovery performance. I