Non-Performing Loan (NPL) Scenario of Banking Industry in

Bangladesh During Pandemic: Do the Changes Blessing or Curse?

Ishter Mahal Benazir Rahman
Associate Professor Assistant Professor
Department of Accounting and Information Systems Department of Finance and Banking
University of Dhaka Northern University Bangladesh

Arif Ahmed
Assistant Professor
Department of Accounting & Information Systems
Jatiya Kabi Kazi Nazrul Islam University

Abstract
Banking industry mainly deals with other’s money. COVID-19 has spread out all over the world so rapidly and
created pandemic situation which affected all the socio-economic and financial system worldwide. This pandemic
affected the banking industry in both direct and indirect way. Banks faced losses in their field as well as these
banks have to back their clients as well. The study focuses on the impact of pandemic over the non-performing
loans (NPL) in banking industry of Bangladesh. The prime objective of the research is to show the influences
COVID-19 made in NPL trends and the changes faced due to this pandemic. Basically, secondary data have
been used. A comparative analysis has been done to show the situation before and during pandemic. Due to
the limitation of not getting data of the year 2021 data of 2019 and 2020 was used as post-pandemic period
and year 2017 and 2018 has been considered as pre-pandemic scenario. Different statistical tools like regression
analysis, one-way ANOVA and so on has been used to justify the data. The study reveals that NPL trend doesn’t
change chronically but changes are visible. Subsidies given by Govt., amended policies of Bangladesh bank are the
reasons behind it. The paper is useful for the bankers and academia.
Keywords: Classified loan, Pandemic, ROE, Banking Industry, Loan rescheduling.

1.0 Introduction
According to the guidelines of Banking Regulation & Policy Department (BRPD), Bangladesh Bank, a classified loan
means that portion of total loan disbursed by a bank for which the debtor has not made any scheduled payment
at least for 90 days. On the other hand, classified loan is an umbrella term that is categorized into three distinct

29 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
categories namely, substandard, doubtful, and bad knows how much of these have already turned into
loss based on the length of their remaining overdue. default loan, due to the absence of regular default
Loan default in the Banking sectors of Bangladesh policy. In near future, when loan policies will come as
has already become a culture that is a big threat to it was before, loan default situation will exacerbate
the performance and sustenance of a bank, and it is severely, without any doubt.
too dangerous a thing that can lead to a substantial This research is quite unique as it is rare to find research
financial crisis for a country (Ahmad and Bashir, 2013). which explains solely non-performing loans scenario
Curving default loan has become one of the cardinal of banking industry in Bangladesh during COVID-19
issues for the regulators of the banking sector in pandemic. In the following sections, this research
Bangladesh. Though, in a developing country like discusses different related literatures followed by
ours, ensuring a good loan behooves the bank itself, research objectives, sample and data sources, and
often, it doesn’t obtain for various circumstances research methodology. Later, it discusses the general
beyond control. Whereas most of the default loans in scenario of banking industry considering ROE and
Bangladesh are found to occur due to the unscrupulous NPL with one way ANOVA and multiple regression
behavior of the borrowers, regulators and the lenders analysis for both pre pandemic and post pandemic
cannot eschew their respective responsibilities in this scenario. Then, it discusses the findings of statistical
regard. For example, the inefficiency of management models and draws the conclusion mentioning some
in calculating the creditworthiness of a client is one limitations of this paper what can be considered as
of the significant drivers of non-performing loans in future research purposes.
Bangladesh. On the other hand, an unwillingness of the
client or the subsequent failure in business may lead the
borrower to default. There are many more reasons,
2.0 Literature Review
and a lot can be said about what should be done, what Bari (2020) studied financial difficulty of banking
was done and what should have been done. management during pandemic in Bangladesh by
analyzing the financial scenarios of household and
During the pandemic Covid-19, induced by the
businesses and their impact on banking transactions.
rogue virus Corona, starting almost three years back,
Both the metropolitan cities were taken into
businesses all over the world faced an unprecedented
consideration. Savings rating operations and
challenge to survive let alone earning profit. This
performance of private business banks have exceeded
downturn, on the other hand, has significantly added
those of state-owned industrial banks, according to
fuel to the fire of default loan internationally. Amid
findings. Small and large businesses are all shut down
this period, default loan ballooned internationally (Ari
or closed for an undetermined amount of time. As
et. al. 2020).
consumers and businesses grapple with a liquidity
To help the businesses many countries in the world crisis, fears are growing. The primary elements
have issued some lenient policies regarding loan that were causing the credit score issues (i.e., non-
repayment, rescheduling, reclassification, and loan performing loans) were thoroughly examined.
restructuring (Guo et. al 2021). Bangladesh is no Corporate governance, savings management,
exception from that. The highest regulator of the financial savings legislation, and the degree of political
country’s banking sector--Bangladesh Bank in line meddling were all highlighted as contributing factors.
with the recommendations made by the ministry of The best course of action is for Bangladesh Bank to
finance, has issued several circulars (BRPD) to guide orchestrate a healthy economic growth based on a
the financial entities of the country during pandemic. four-percentage-point repo rate and a lending rate of
Most of those are on loan rescheduling, restructuring 5-8 percent.
and classification.
The Bangladeshi banking system is facing massive
To rein the loan default during the pandemic, these financial losses, mounting non-performing loans,
intermittent policies by the Bangladesh Bank are individual investment, and diminishing operating
supposed to backfire in near future. These rescheduled profits during this critical period of lockdown. The
amounts are accumulating significantly, and no one

30 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
ability of bank workers to carry out their daily tasks is severely harmed. They go about their days in a state
of terror. Research has been carried out to determine the impact of the Covid-19 pandemic on Bangladesh’s
financial industry, as well as the risk involved in the banking sector during the pandemic. To achieve the study’s
objectives, a qualitative research approach was used. The focus group method and observation method were
utilized to obtain data. Twelve Bangladeshi bank employees participated in a focus group discussion. Six of the
12 bank employees worked for state-owned banks, while the other six worked for private banks and following
factors were considered. (Kumar et al. 2021)

Covid-19
Pandemic

Lockdown
Capital
Shortfall

Increase
Risk in Increase
Hamper Banking NPLs
Regular Sector
Banking
Activities

Decrease Decrease
Banks Gross Individual
Profits Investment

Source: Kumar et al., 2021

COVID-19 pandemic, which broke out in the first quarter of 2020, caused a slew of unprecedented emergency
measures, including travel bans, mandatory closure of non-essential businesses, gathering restrictions, and
required home-based labor and Europe is not an exception. But it has started to spread its damages from the
3rd quarter of 2019 worldwide. Due to COVID-19, several borrowers’ revenue flow was drastically reduced
or completely stopped. Borrower relief initiatives have been quickly implemented by policymakers. In Europe
and Central Asia (ECA), these programs have mostly taken the form of temporary payment moratoria, with
banks making the final decisions on which borrowers qualify. To flatten the bankruptcy curve, short-term legal
measures are paired with long-term legal measures. While these measures have kept aggregate non-performing
loan (NPL) ratios stable, policymakers and bankers anticipate that rising levels of borrower distress will inevitably
translate into new pressures on asset quality in the banking sector, which will show up in banks’ earnings, capital,
and financial statements. The following basic models were suggested.

A Schematic overview of loan restructuring measures

Loan restructuring
measures
Borrower is facing short-term Borrower is facing deeper-roated
liquidity stress solvency problems

Short-term, temporary Long-term, temporary

Reduced payments Conditional debt

forgiveness

Interest Only Interest rate

reduction

Moratorium NPV neutral Rescheduling with Material NPV

NPV reduction reduction

Extension
of maturity dates Sle by owner
Possible additional measures
Capitaliztion of -Debt-to-assest swaps
Loan spletting -Debt-to-equity swaps
deferred debt payments
-Debt consolidation
-Other alterations of contracts
Note sale -Additional Security

Source: handbook for MSME NPL Management and Workout.

31 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
Žunić et al. (2021) focused on the factors that influence credit boom. However, other factors could make
the movement of non-performing loans in Bosnia NPL resolution more challenging: government debt
and Herzegovina’s banking industry, as well as the is substantially higher, banks are less profitable, and
impact of the COVID-19 pandemic. Non-performing corporate balance sheets are often weak
loans, GDP, loan loss provision, and dummy variable Gourinchas et al. (2020) estimated the impact
COVID-19 were used as variables in the analysis and of COVID-19 on business failures for small and
is found that the variable COVID-19 has a delayed medium-sized enterprises (SMEs) using firm-level
effect on NPLs. data in seventeen countries. They averred that absent
Rachmadi and Suyono (2021) found that credit government support, the failure rate of SMEs would
restructuring plays a significant negative role in NPL of have increased by 9.1 percentage points, representing
Banks along with reducing interest rates due to changes 4.6 percent of private-sector employment. According
in accounting treatment particularly in the recognition to them, resulting non-performing loans are modest,
decreasing the risk-weighted common equity Tier-1
of restructured credit interest income. According
capital ratio from 14.1 to 12 percent. Government
to them, the implementation of credit restructuring
support limited to “at-risk” firms would have low fiscal
is carried out as an effort to face the effects of the
costs (0.8% of GDP). Less targeted policies such as
COVID-19 pandemic, which affected all sectors,
government-guaranteed loans are similarly effective,
especially the economic sector in the MSME business
but substantially more expensive, with disbursed
sector, which resulted in banking performance on
funds representing up to 5.8% of GDP.
several items including profit, credit quality and interest
Haynes et al. (2021) discovered that the COVID-19
income as a source of main income.
crisis is a significant and exogenous shock to the EU
Chen et. al. (2021) in their study titled “The dynamics corporate sector, with implications for the operations
of non-performing loans during banking crises: A new and funding of many businesses. They compared key
database with post-COVID-19 implications” found indicators for the global financial crisis (GFC) and the
that the impact of Covid-19 induced pandemic to the current situation and assess implications for the policy
non-performing loans is very similar to the impact response. They find that while many policy actions are
of other crises like the one of 1990, but the find taken in response to the GFC remain valid, the nature
heterogeneity in the pace of NPLs related resolution of COVID-19 suggests a more tailored response is
during the period. They documented how high and appropriate, with support focused on sectors most
unresolved NPLs deepen post-crisis recessions and directly affected and corporates whose continuation
use a machine learning approach to establish pre-crisis value exceeds their liquidation value.
predictors of NPL problems. According to them,
In similar research but performed in different settings
these predictors—a set of weak macroeconomic,
titled “Nonperforming loans - new risks and policies?
institutional, corporate, and banking sector
NPL resolution after COVID-19: Main differences
conditions—help shed light on post-COVID-19 NPL
to previous crises” Kasinger et. al. (2021) discusses
vulnerabilities.
policy implications of a potential surge in NPLs due
Ari et al. (2021) in their paper titled “COVID-19 and to COVID-19. The study provides an empirical
Non-Performing Loans: Lessons from past Crises” assessment of potential scenarios and draws lessons
found that during the crisis resulting from COVID from previous crises for effective NPL treatment. Their
-19, non-performing loans increased. They asserted paper highlights the importance of early and realistic
on the learning that the banking sector acquired assessment of loan losses to avoid adverse incentives
from the past crises like the ones of 1990 and 2008. for banks. They asserted that secondary loan markets
According to them, dealing with NPLs is critical to would help in this process and further facilitate bank
economic recovery. Compared with the 2008 crisis, resolution as laid down in the BRRD, which should
some factors are conducive to NPL resolution this be upheld even in extreme scenarios. This paper was
time: banks have higher capital, the forward-looking prepared by the Economic Governance Support Unit
IFRS 9 accounting standards can help NPL recognition, (EGOV) at the request of the Committee on Economic
and the COVID-19 crisis was not preceded by a and Monetary Affairs (ECON).

32 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
Bodellini and Lintner (2020) in their research all three dimensions will increase disproportionately
commented that the economic crisis provoked by if NPL shocks become larger. Findings further show
the COVID-19 pandemic is soon expected to also that a 10% NPL shock could force capital adequacy
hit the banking and financial sector, mainly through a of all banks to go below the minimum BASEL-III
massive increase of non-performing loans resulting requirement, while a shock of 13% or more could
from bank borrowers’ inability to repay their debts. turn it to zero or negative at the sectoral level.
Regulators and supervisors have already put in place A similar study conducted by Lalon (2020) suggested
several measures in response to the current situation that the whole globe be going under a devastating
mainly aimed to facilitate banks continued lending. It threat of economic depression amid the impact of
is still difficult to forecast whether bank capital will be the COVID-19 pandemic. Almost no country can
sufficient to absorb the shock if the risk of the non- deny the fact propelling to the economic ramification
performing loan materializes. According to them, of this diseases suggesting a confirmed apropos plan
having effective bank crisis management regimes in to recuperate any unavoidable circumstance in the
place, which may also rely on public intervention, will forthcoming economic arena. Bangladesh with no
be key to limiting spill-over effects that could pave exception also capitulates under a significant threat of
the way to another global financial crisis. The current economic disparity navigating a colossal crisis during
public interest test leads to the application of different and after this epidemic. His study attempts to reveal
conditions for access to resolution financing and the what possible impacts are causing this economic
provision of public support, depending on whether crisis for Bangladesh and how government along with
the BRRD or the banking state aid framework under all other stakeholders will respond to sustain socio-
national insolvency rules is followed. For bank crisis economic developments achieved during the recent
management regimes to work properly, more fiscal years despite being submerged by the depressing
flexibility in financing by deposit guarantee schemes mode of major economic indicators such as inverse
beyond pay-outs or simple loss contributions under trade growth, vigorous revenue deficit, mounting non-
resolution will be required to facilitate transfer tools. performing loan, falling private sector investment,
Barua and Barua (2021) in a study titled “COVID-19 volatility of market interest rate, capital market unrest
implications for banks: evidence from an emerging and imminent horrid of global economic recession.
economy” commented that the COVID-19 pandemic Bari (2020) pointed out that the savings rating
is damaging economies across the world, including operations and performances of private business.
financial markets and institutions in all possible Banks have outperformed these of state-owned
dimensions. For banks the pandemic generates industrial banks during COVID-19. The mortgage
multifaceted crises, mostly through increases in disbursement techniques of state-owned industrial
default rates. This is likely to be worse in developing banks have been now no longer efficient ample
economies with poor financial market architecture. to reap the required recuperation target. Further,
Their paper utilized Bangladesh as a case study of an he found that the state-owned business banks are
emerging economy and examines the possible impacts increased likely to be affected via using each and every
of the pandemic on the country’s banking sector. They one of the contributory factors a long way larger
intimate that Bangladesh’s banking sector already adversely than non-public business banks. Effective
has a high level of non-performing loans (NPLs) and use of company governance, maintaining transparency
the pandemic is likely to worsen the situation. Using and accountability in all respect, environment-
a state-designed stress testing model, their study friendly financial savings risk management, bettering
estimates the impacts of the COVID-19 pandemic managerial efficiency, profitable privatization, lessening
on three dimensions—firm value, capital adequacy, political interference, and adapting contemporary
and interest income—under different NPL shock technological changes, would possibly also enhance
scenarios. They find that all banks are likely to see a fall the well-known personal loan trouble scenario of
in risk-weighted asset values, capital adequacy ratios, state-owned industrial banking region of Bangladesh.
and interest income at the individual bank and sectoral Rahman et al. (2020) commented that the Banking
levels. However, their estimates show that larger sector of Bangladesh had been struggling with
banks are relatively more vulnerable. The decline in poor performance before the COVID-19 situation.

33 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
According to them, the reasons behind it includes non-performing loans, declining margins in a capped interest
rate regime, deteriorations in various efficiency indicators, government-directed restructuring of loans. They
found that social distancing and government economic support significantly affect the bank’s liquidity.

3.0 Research Question

After finding the literature gap the following research questions are derived:
Q1: does pandemic affect the NPL status significantly?
Q2: what are the differences between NPL scenarios before and during pandemic?
Q3: does the impact differs for the different categories of bank?

4.0 Methodology
The study is heavily dependent on secondary data as it dealt with the figures and amounts related to classified
loans to justify the scenario.
4.1 Sample Size And Selection
For the study we covered almost 50% banks of different categories of banking industry in Bangladesh.
Table-01: Number of selected banks
Banking categories Total number of banks in Taken as Percentage of
Bangladesh sample population covered
State-owned Bank (SCB) 6 3 50%
Private owned Islamic (IB) 8 5 62.50%
Private owned Conventional (PCB) 41 (Islamic banks are excluded) 26 63.41%
The following banks have been taken from these three banking sectors.
Table-02: list of selected banks
Bank Category Selected banks
State-Owned • Agrani Bank Limited
• Bangladesh Development Bank Limited
• Janata Bank Ltd.
Private Owned Islamic • Al-Arafah Islami Bank
• EXIM
• SIBL
• First security Islami Bank
• Union Bank
Private Owned Conventional • AB Bank Limited • Pubali Bank
• Bank Asia Limited • Prime Bank
• Brac Bank Limited • Uttara Bank
• City Bank Limited • Standard Bank
• Commerce Bank Limited • DBBL
• Dhaka Bank Limited • Eastern Bank
• NRB Bank Limited • IFIC
• NRBC Bank Limited • Jamuna Bank
• One Bank • Marcantile Bank
• Premier Bank • Mutual Trust bank
• Trust Bank • National bank
• City Bank • Modhumoti bank
• SEBL • NCC
For the study data from year 2017-2020 have been collected to compare the scenario of pre and post pandemic time.

34 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
4.2 Data Collection
The research is based on secondary data as ratios and figures from banking industry had been used to prove the
impact of COVID 19 over the classified loans of the industry. Secondary data have been collected from annual
reports and websites of selected banks. Different websites were also used to justify the research.
4.3 Data Instrumentation
Comparison of pre and post pandemic impact on non-performing loan scenario has done by different graphs and
One-way ANOVA. MS Excel and SPSS 16.0 software was used to compute these statistical values
For the one-way ANOVA categories of banks has considered as factor and NPL ratio has considered as
dependent variable.
For the data analysis average data of each bank for the year 2017 and 2018 has considered as pre-pandemic
Pre Post
situation and average data of each bank for the yearPandemic
pandemic 2019 and 2020 has considered as post-pandemic situation.
2017 2019
Pre Post
pandemic 2 0 1 7 pandemic 2 0 1 9
2018 2020
2018 2020
Regression analysis for Return on Equity (ROE) (dependent Variable), total loans and advances
(independent
Regression analysis variable)
for Returnand
on Non-performing loan ratioVariable),
Equity (ROE) (dependent (NPLR) total
(independent
loans and variable)
advances were
(independent
done for both periods to compare the scenario.
variable) and Non-performing loan ratio (NPLR) (independent variable) were done for both periods to compare
the scenario.
For multiple regression analysis:
For multiple regression analysis:
H1.1: The impact of NPLR and total loans and advances are strong over ROE before
H1.1: Thepandemic.
impact of NPLR and total loans and advances are strong over ROE before pandemic.
H1.2: TheHimpact
1.2: The
of impact
NPLR andof total
NPLR andand
loans total loans are
advances andstrong
advances
overare
ROEstrong
duringover ROE during
pandemic.
pandemic.
For one-way Anova:
H2.1: TheFor one-way
impact Anova:
of NPLR is same for all categories of banks over ROE before pandemic.
H2.2: The impact of NPLR is same for all categories of banks over ROE during pandemic.
H2.1: The impact of NPLR is same for all categories of banks over ROE before pandemic.
H2.2: The impact of NPLR is same for all categories of banks over ROE during pandemic.
5.0 Analysis And Findings:
5. ANALYSIS AND FINDINGS:
General scenario of SCENARIO
5.1. GENERAL Bangladesh OF BANGLADESH
Banking industry
Banking is one is
industry of one
the prime
of the industries of Bangladesh.
prime industries Like otherLike
of Bangladesh. industries this industry
other industries also faced
this
industry
difficulties also
during faced difficulties
pandemic. during deals
Banking industry pandemic. Banking
with other’s industry
money deals pandemic
and when with other’s moneythe many
disrupted
and when
industries pandemic
it’s directly disruptedaffected
and indirectly the many industries
banking it’s as
industry directly
well. and indirectly affected banking
industry as well.

Fig. 01: ROE for different types of banks

30.00
20.00
10.00
0.00
-10.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 End June
-20.00 2020
-30.00 ROE
-40.00

SCBs SBs PCBs FCBs Total

Source: BRPD, BB
Source: BRPD, BB

35 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
The overall scenario showed that Due to the downward trend of state-owned and special banks the banking
industry faced lower and sometimes inverse industry average. But during pandemic the ROE of SCB has increased.

Table-03: Ratio of gross NPLs to Total Loans by Type of Banks

(In percent)
Bank types 2011 2012 2013 2014 2015 2016 2017 2018 2019 End
June
2020
State-owned Commercial Banks 11.3 23.9 19.8 22.2 21.5 25.0 26.5 30.0 23.9 22.7
Specialized Banks 24.6 26.8 26.8 32.8 23.2 26.0 23.4 19.5 15.1 15.9
Private Commercial Banks 2.9 4.6 4.5 4.9 4.9 4.6 4.9 5.5 5.8 5.9
Foreign Commercial Banks 3.0 3.5 5.5 7.3 7.8 9.6 7.0 6.5 5.7 5.5
Total 6.1 10.0 8.9 9.7 8.8 9.2 9.3 10.3 9.3 9.2
The industry average for gross NPL to total loans shows that it has increasing trend since 2012 but the changes

Fig.-02:Amount of NPLs by Fig.-03: Requred Provision and

Type of Bank Provivon Mantained-all Banks
600.0 1200.0
1000.0
500.0 800.0
600.0
400.0 400.0
200.0
300.0 0.0
-200.0
2011
2012
2013
2014
2015
2016
2017
2018
2019
End june 2020
200.0

100.0

0.0
End june 2020
2011
2012
2013
2014
2015
2016
2017
2018
2019

Amount of NPLs
Required Provision
Provision maintained
Excess(+)/ Shortfall(-)
SCB s SBs PCBs FCBs Provision maintenance ration (%)

The trend of NPL amount and provision requirement tell the similar story. But the prime
during pandemic
concern was notstudy
of the very is
chronic.
the changes before and during pandemic is not so significant in case
The trendofofNPL
NPLscenario.
amount and provision requirement tell the similar story. But the prime concern of the study is
the changes before and during pandemic is not so significant in case of NPL scenario.
5.2. ONE-WAY ANOVA
5.2 One-Way Anova
5.2.2. PRE-PANDEMIC:
5.2.2. Pre-Pandemic:
Table-04: ANOVA for Pre-pandemic
Table-04: scenario
ANOVA for Pre-pandemic scenario
NPLR
NPLR Sum of df Mean F Sig.
Squares
Sum of Squares df Square
Mean Square F Sig.
Between 1126.152 1126.152 2
Between Groups 2 563.076
563.076 9.203 9.203 .001 .001
Groups
Within Groups 2019.165 33 61.187
Within Groups 2019.165 33 61.187
Total Total 3145.318 3145.318 35 35
p-value or significance level is almost 0 here, which means that the standard deviations of the populations are
different p-value or significance
and before level is almost
pandemic different 0 here,
categories whichachieved
of banks means that the standard
different returnsdeviations of performance
and banks’ the
level has populations are different and before pandemic different categories of banks achieved different
also different.
returns and banks’ performance level has also different.

5.2.3. POST-PANDEMIC:
Table-05: ANOVA for post pandemic scenario
36 THE COST
NPLR
ISSN 1817-5090,
AND MANAGEMENT
VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021

Sum of df Mean F Sig.

Squares Square
5.2.3. Post-Pandemic:
Table-05: ANOVA for post pandemic scenario
NPLR
Sum of Squares df Mean Square F Sig.
Between Groups 1221.108 2 610.554 4.470 .019
Within Groups 4507.918 33 136.604
Total 5729.026 35
Here p-value or significance level is almost 0.019, which means that the standard deviations of the populations
are different, but differences are not highly significant. It shows due the pandemic some changes occurred, and
the density of deviation changed. pandemic different categories of banks achieved different returns and banks’
performance level has also insignificantly different. Govt. banks got the back up in some extent as well.
5.3 Multiple Regression Analysis
Table-06: Multiple-regression analysis for pre and post pandemic scenario
Pre-pandemic
Independent variables Dependent variable N R2 F-test sig D-test beta Sig.
NPLR ROE 36 26.5% 11.287 0.004 2.25 -1.24 .006
Total loans and advances 9.87 .000
Post-Pandemic
NPLR ROE 36 28% 0.166 0.753 2.061 -0.17 .322
Total loans and advances 8.56 .004
The regression analysis shows that before pandemic the relation was significantly strong but during pandemic the
relationship becomes insignificant. The reason behind the fact is Govt. has changed or amended different policies
to help banking industry like decreasing cash reserve ratio, changes in rescheduling policies on default loans and
reporting of classified loans and so on.

6.0 Discussions
The pandemic has changed many things. The COVID 19 has affected the economic and financial systems all
over the world. Banking industry is not an exception. During this pandemic many businesses got shut and
big companies faced financial distress as well. Fortunately, Bangladesh bank has amended some features and
conditions of loan restructuring and in case of classifying loans. According to the BRPD no. 5(May. 2019) some
clauses have been amended like as borrowers who have overdue during the whole 2020, they got the privileged
of not being considered as defaulters and banks got relaxation of not counting those loans as classified loans.
Also, banks need to rethink on classified loans of some specific sectors more precisely productive sectors like
trading, shipping, steel and iron and the borrowers of the following sectors will be favored by giving opportunity
to submit Rescheduling loan Exit under Special RSDL under BRPD Circular No.-05/2019 and one time Exit
Special Exit under BRPD Circular No.-05/2019 and report under CL-4(Term loan). Different stimulus packages
are provided by the banks as per the instructions of Bangladesh Bank like banks paid salaries to the employees
on behalf of their regular clients from garments and export industry in 0% interest rate and clients got chance to
pay it later. Borrowers are allowed to pay only 4% of interest whereas Bangladesh bank subsidized 5% interest
expenses in case of some industries.
The results of this research also revealed that despite having so many crisis NPL ratio of banks have not changed
significantly. The reason is the backup and relaxation given by the Bangladesh bank. But the reality is banks are
facing huge financial issues as they are even backing up some of their clients during this pandemic and collection
of loan payment is poor. Yet due to the new circular NPL ratios didn’t hamper drastically. But their return on
equity got affected.

37 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
7.0 Conclusion
The study concluded that though the NPL ratios didn’t change chronically but the banking industry faced a lot
of crises during this COVID-19 period and it influenced their profitability and work efficiency as well. The study
has some limitations like data of the year 2021 is not available which creates a new room for further research.
Due to pandemic face-to face interviews were avoided. In a nutshell, it can be said that COVID-19 drew a line
in every industry and banks are not exception. But due to Central bank’s backup and amended loan rescheduling
policies NPL ratios are not affected so badly but the overall financial health of banks in Bangladesh have adversely
influenced by this pandemic.

Reference
Ari, A., Chen, S. and Ratnovski, L., 2021. The dynamics of non-performing loans during banking crises: A new database with post-COVID-19
implications. Journal of Banking & Finance, pp. 106-140.
Ari, A., Chen, S. and Ratnovski, L., 2020. COVID-19 and non-performing loans: lessons from past crises. Available at SSRN 3632272.
Bari, M.S., 2020. Financial difficulty of Banking management during COVID 19 in Bangladesh. International Journal of Finance Research, 1(2), pp.
93-102.
Barua, B. and Barua, S., 2021. COVID-19 implications for banks: evidence from an emerging economy. SN Business & Economics, 1(1), pp.1-28.
Bodellini, M. and Lintner, P., 2020. The impact of the COVID-19 pandemic on credit institutions and the importance of effective bank crisis
management regimes. Law and Economics Yearly Review, pp. 182-218.
Gourinchas, P.O., Kalemli-Özcan, Ṣ., Penciakova, V. and Sander, N., 2020. Covid-19 and SME failures. National Bureau of Economic Research,
Cambridge, Working Paper no. 27877.
Guo, X., Guo, C., Zhou, J., Wang, G. and Yang, H., “Research on Early Warning of Non-performing Loans of Small and Medium-sized Micro-
enterprises Under the Background of COVID-19 -- Taking XX Branch of N Bank as an Example” (2021). WHICEB 2021 Proceedings. 52.
Haynes, J., Hope, P. and Talbot, H., 2021. Non-performing Loans–New Risks and Policies. NPL Resolution after COVID-19: Main Differences to
Previous Crises. Study Prepared by the Economic Governance Support Unit (EGOV) at the Request of the Committee on Economic and
Monetary Affairs (ECON)(March).
Kasinger, J., Krahnen, J.P., Ongena, S., Pelizzon, L., Schmeling, M. and Wahrenburg, M., 2021. Non-performing loans-new risks and policies? NPL
resolution after COVID-19: Main differences to previous crises (No. 84). SAFE White Paper.
Kumar, D., Bagchi, S. and Ray, S. (2021). Covid-19 And Risk Involvement In The Banking Sector Of Bangladesh: A Study. International Journal of
Research -GRANTHAALAYAH, 9(6), pp.158–167.
Lalon, R.M., 2020. COVID-19 vs Bangladesh: Is it Possible to Recover the Impending Economic Distress Amid this Pandemic? Journal of Economics
and Business, 3(2). pp. 1-18.
Rachmadi, F. and Suyono, E., 2021. The Credit Restructuring Phenomenon of The MSMEs and its Effect on Banking Financial Performance During
the Pandemic of Covid-19. Agregat: Jurnal Ekonomi dan Bisnis, 5(1), pp.37-55.
Rahman, M.M., Zaman, R. and Begum, M., 2020. Bank Liquidity during COVID-19 Pandemic: Evidence from Bangladesh. Available at SSRN 3778056.
Žunić, A., Kozarić, K. and Dželihodžić, E.Ž. (2021). Non-Performing Loan Determinants and Impact of COVID-19: Case of Bosnia and Herzegovina.
Journal of Central Banking Theory and Practice, 10(3), pp.5–22.
Financial Sector Advisory Center (FinSac) (2020). COVID-19 and Non-Performing Loan Resolution in the Europe and Central Asia region, Available
at: www.worlsbank.org/finsac.
Banksbd.org (2021). All bank listing in Bangladesh, Available at: https://www.banksbd.org/banks/.
Bangladesh Bank (2021). Rescheduling regulations. Available at: https://www.bb.org.bd/en/index.php.

APPENDIX:
Appendix-01: Pre-pandemic data
SOB Before pandemic scenario (2017 & 2018)
Bank's name ROE NPL Ratio Total loans and advances
Agrani Bank Limited 9.54% 17.56% 357435
BDBL 3.51% 46.30% 18,627
Janata bank 2.85% 25.13% 493707.160
Basic bank 3.16% 4.13% 598632.809

38 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
Isl. Bank Before pandemic scenario (2017 & 2018)
Bank's name ROE NPL Ratio Total loans and advances
Al Arafah 12.27% 4.45% 248889.5
EXIM 10.27% 5.22% 279419.75
SIBL 10.16% 0.03% 285036.075
FSIBL 19.92% 3.11% 214042.576
UNION BANK 2.45% 0.77% 2910869.64
IBBL 10.51% 3.85% 115934.115

Conventional Bank Before pandemic scenario (2017 & 2018)

Bank's name ROE NPL Ratio Total loans and advances
AB BANK 0.11% 20.11% 235358.5
Bank Asia 7.99% 3.93% 206,061
Brac Bank 20.70% 3.33% 220283.5
City bank 12.05% 5.35% 213993.5
Bangladesh Commerce Bank limited -0.46% 33.89% 20,716
Dhaka Bank 8.70% 5.49% 167321.5
NRB Bank 3.60% 3.09% 27,697
ONE bank 12.57% 6.18% 184,651,109,591
Prime bank 6.42% 5.81% 202,066,123,754
Trust bank 15.00% 5.63% 191,019,380
SEBL 6.815 5.93% 250,994,175
Premier bank 15.155 4.34% 155,065,125,242
Pubali Bank 5.68 7.07% 255,225,000
Uttara Bank 11.43% 6.54% 112,025,344,055
standard bank 8.86% 7.93% 137,144,500,000
DBBL 7.02% 4.39% 219405660723.50
Eastern bank 1.80% 2.43% 196666775789.00
IFIC 9.88% 6.28% 189746925000.00
Jamuna bank 7.84% 3.90% 153827890352.50
Mercantile bank 17.05% 4.31% 211945665000.00
Mutual Trust 16.09% 4.85% 155876056455.50
National bank 10.95% 10.07% 284898017290.50
Modhumoti Bank 14.87% 1.06% 32878474260
NCC 10.47% 5.80% 160250315336.00
NRBC 14.60% 2.70% 45539148136
United commerce 8.85% 6.79% 277,837,410,000.00

Appendix-02: Post-pandemic data

SOB After pandemic scenario (2019 & 2020)
Bank's name ROE NPL Ratio Total Loans and Advances
Agrani Bank Limited 2.78% 13.36% 489440.838
BDBL 0.40% 33.17% 20,984
Janata bank 0.43% 24.63% 607113.27
Basic bank 4.77% 28.25% 757378.37

39 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021
Isl. Bank after pandemic scenario (2019 & 2020)
Bank's name ROE NPL Ratio Total Loans and Advances
Al Arafah 10.08% 4.31% 298553.5
EXIM 8.86% 4.08% 392919.662
SIBL 9% 4.16% 304213.741
FSIBL 26.84% 57.60% 176276.654
UNION BANK 4.26% 2.31% 129459.574
IBBL 8.37% 3.62% 10352878.822

Conventional Bank after pandemic scenario (2019 & 2020)

Bank's name ROE NPL Ratio Total Loans and Advances
AB bank 1.20% 17.54% 265671
Bank Asia 10.21% 4.24% 235,971
Brac Bank 13.09% 3.46% 268577
City bank 12.35% 4.90% 257573
Bangladesh Commerce Bank limited -2.83% 46.36% 22,778
Dhaka Bank 10.28% 3.94% 197147.5
NRB Bank 0.73% 3.93% 38890.5
One bank 9.04% 6.66% 217,784,685,811
Prime Bank 6.12 0.0406 223,177,500
Trust bank 12.89 0.05 2,118,054,621
SEBL 7.85 3.99% 309,502,210
Premier bank 15.155 4.64% 225,649,965,242
Pubali bank 8.485 3.56% 301,307,000
Uttara Bank 12.11% 7.08% 129,262,335,449
standard bank 7.85% 5.11% 161511147248.00
DBBL 6.27% 3.27% 264811308117.50
Eastern bank 15.78% 3.04% 230497500000.00
IFIC 6.40% 4.66% 244619394881.00
Jamuna bank 8.28% 3.33% 169968605000.00
Mercantile bank 10.52% 4.79% 242942420000.00
Mutual Trust 7.43% 5.00% 196808518965.50
National bank 7.92% 10.15% 387326582121.50
Modhumoti Bank 17.01% 1.88% 1924742725873.00
NCC 11.31% 4.90% 178597994724.00
NRBC 14.99% 3.07% 68473494284
United commerce 8.63% 3.09% 337205850000.00

40 THE COST AND MANAGEMENT

ISSN 1817-5090, VOLUME-49, NUMBER-05, SEPTEMBER-OCTOBER 2021