Management of Nonperforming Assets of Mutual Trust Bank Limited

Abstract

Loans and advances are the main assets of the bank but it can create negative effects on the financial institutions if it turns into NPL. Today’s non performing assets are hard nut to crack for state control banks as well as other commercial banks. If we search the reason behind the problem of non performing loans- we can classify it into three categories. • Unwillingness to repay in spite of ability to repay • Willingness to repay but inability to repay • Unwillingness to repay and inability to repay BASEL Committee through Bangladesh Bank applies some hard and fast rule in the credit policy. Somebody can maintain this policy meanwhile somebody cannot. That’s why the implementation of credit policy is an important part to remove the NPL. Increasing NPL affects the CAMEL rating by diminishing the asset quality as well as decreasing the profit. MTB is a third generation bank which has started its journey on 24 October, 1999. The powerful industrialists namely Late Samson H. Chowdhury and Mr. Syed Manzur Elahi initially founded this bank. The board of Directors of the bank is always careful of non performing loans. At present, the NPL position of MTB is 4.60% to its total loans and advances.

The repayment of loan within the stipulated time is very important for the financial institutes. Government has taken some policies to recover the non performing assets like “Artho Rin Adalat” but this is not sufficient to recover the loan quickly. To compare with the Peer Banks and the state owned banks the NPL position of MTB is highly satisfactory because they confined their NPL below 5%.