Identify the cause and then address it. Problems could be under finance, delay in execution, cost-over-run, change in market dynamics, change in regulation, competition. Solutions, additional funding, loan restructuring, converting loan to debt, partial write-off etc. Several ways are there to address the situation.

Do you know about NPLs securitization? Please share about this. Thank you.

Please refer to the link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2552481 for securirtization of Non Performing Loans.

Thank you very much, Emmanuel Vijayanand Murray and Hemlata Chelawat

Do you know about out-of-court mechanism for NPLs solutions?

The non-performing loans indicates that your organization has  some problem some where. The problem may lies in Organizational Structure, Strategy, System/MIS, Staffing, Skills, Services,  Supervision and Leadership styles.  For me the problem of non-performing loans is symptoms not root causes. You should identify root causes to resolve the problems.

Thank you, Nav Raj Simkhada

A bank loan is considered non-performing when more than 90 days pass without the borrower paying the agreed instalments or interest. Non-performing loans are also called “bad debt”. (https://www.ecb.europa.eu/explainers/tell-me/html/npl.en.html)

Loans and advances are the major components of the asset composition of all commercial banks. The high concentration of loans and advances increases the vulnerability of assets to credit risk.

More than 25 years have passed since the adoption of prudential norms in the banking system of Bangladesh in 1990. Unfortunately, the banking system is still burdened with an alarming amount of NPLs and lags far behind the neighboring countries of India and Sri Lanka.

Although Bangladesh has to a large degree adopted international standards of loan classification and provisioning, the management of NPLs is found ineffective, as the system has failed to arrest fresh NPLs significantly. It needs to be mentioned that management of NPLs must be multi-pronged, with different strategies pursued at the different stages through which a credit facility passes.

Measures should be in place for both prevention and resolution. With regard to preventive measures, emphasis needs to be placed on credit screening, loan surveillance and loan review functionaries both at individual bank levels and in the central bank of the country. Resolution measures must be accompanied by legal measures, i.e. improving the efficiency of the legal and the judicial system and developing other out of the court settlement measures like compromise settlement schemes, incentive packaging, the formation of asset management companies, factoring, asset securitization and so on.

Unfortunately, Bangladesh is found to be very weak from the above point of view, and strictly speaking, it has mainly concentrated on a few legal measures that have also been found to be ineffective.

Therefore, I've highlighted some challenges, shown below, for improving the debt recovery environment and solving the NPL problems of the country as well.

●  To institute sufficient measures to address the flow problem of bad loans effectively.

●  To decide whether to stop operations of the NCBs and DFIs, to privatize them, or to reorient them through financial engineering.

●  To ensure cooperation, sincerity, and accountability of involved parties such as plaintiffs, defendants, lawyers and judges to make the settlement process vibrant and speedy.

●  To institute immediately a concrete NPL management strategy equipped with both preventive and resolution measures.

●  To develop specific tools and techniques to distinguish the willful defaulters from the genuine ones.

●  To pay proper attention to addressing problems relating to the meaningful application of the CRG device in the credit environment of Bangladesh.

●  To establish an asset management company or to institute factoring services as well as asset securitization technique so as to address NPLs effectively without generating moral hazards.

●  To exercise syndicated financing technique for large loans and to minimize unhealthy competition among banks in Bangladesh.

●  To strengthen the supervisory and monitoring functions of Bangladesh Bank so as to discipline banks that engage in malpractice.

●  Finally, to place emphasis on ethical standards in the banking profession from all corners to make the credit environment trustworthy and vibrant.

https://www.academia.edu/29945999/Nonperforming_Loans_Management_in_the_Banking_Sector_of_Bangladesh_Realities_and_Challenges

The problem starts with poor origination standards.

Thank you for all

Please see the attached link which redirect you to a paper of mine. You might find it interesting.

Working Paper Management and Resolution methods of Non-performing loans: A...