Internship Report on

An analysis of Non-performing loans of Uttara Corporate

Branch of Janata Bank Limited

Exam Roll: 142378

 Internship Report on
An analysis of Non-performing loans of Uttara Corporate
Branch of Janata Bank Limited

Prepared For

Chairman
Internship Placement Committee

Prepared By

Exam Roll Number: 142378

4th year, 8th semester
Batch Number: 24, BBA Program
Academic Session: 2014-15

Institute of Business Administration (IBA-JU)

Jahangirnagar University
Savar, Dhaka-1342

06 July, 2020
 Letter of Transmittal

06 July, 2020

Chairperson
Internship Placement Committee,
Institute of Business Administration,
Jahangirnagar University
Savar, Dhaka- 1342.

Subject: Submission of Internship Report.

Dear Sir,

With due respect and humble submission, I would like to inform you that I have completed my Internship
Program in Uttara Corporate Branch of Janata Bank Limited from December 01, 2019 to March 01, 2020.
It is my pleasure to submit the Internship Report on “An analysis of Non-performing loans of Uttara
Corporate Branch of Janata Bank Limited” as a partial fulfillment of 8th semester of BBA program.

This report comprises of a brief overview of Janata Bank Limited, my internship sponsor organization and
comparative analysis of NPLs of Uttara Corporate Branch of Janata Bank Limited to Janata Bank Limited
and Banking industry. I hope that, the readers of this report can have an idea about how Uttara Corporate
Branch of Janata Bank Limited are performing compared to Janata bank Limited and Banking industry of
Bangladesh. I have tried my level best to prepare the report worthwhile with my limited knowledge.

I therefore, hope that, you will be kind enough to accept this report and make necessary assessment.

Thank You.

Regards,

Exam Roll Number: 142378

4th year, 8th semester
24th Batch, BBA Program
Academic Session: 2014- 2015

i
 Declaration
I do hereby declare that the internship report entitled as “An analysis of Non-performing loans of Uttara
Corporate Branch of Janata Bank Limited” has been prepared on the basis of three months Internship
activities on the titled organization and it is an original work done by me.

The report is a unique one which is not submitted to anywhere for any academic purpose. The data and
information which are mentioned here are also collected and organized by myself. I am solely responsible
for any kind of misleading or manipulation of data or information in this report.

Finally, this report is submitted to the Institute of Business Administration, Jahangirnagar University for
the partial fulfillment of the requirements of the Degree of Bachelor of Business Administration.

Exam Roll Number: 142378

4th year, 8th semester
24th Batch, BBA Program
Academic Session: 2014- 2015
Major: Finance

Institute of Business Administration

Jahangirnagar University

ii
 Certificate of the Supervisor

This is to certify that Exam ID: 142378, Batch: 24th, Academic Session: 2014-2015, a student of BBA
program, Institute of Business Administration, Jahangirnagar University, has completed internship
program on “An analysis of Non-performing loans of Uttara Corporate Branch of Janata Bank Limited”
under my supervision.

I have gone through the report and it seems satisfactory to submit for the award of the Degree of Bachelor
of Business Administration.

I wish his/her success in life.

(Sign of Supervisor)

…………………………………

Name of the Teacher: Ms. Tasnima Aziza

Designation: Associate Professor

Institute of Business Administration

Jahangirnagar University

iii
 Acknowledgement

At first, I must show our gratitude to almighty Allah for giving me energy, strength and capabilities to
prepare this report.

I want to express gratitude to my respected supervisor Ms. Tasnima Aziza, Associate Professor, Institute
of Business Administration, Jahangirnagar University for her inspiring guidelines, valuable suggestion,
constructive criticism and constant help throughout the work and in preparation of this report.

I also express my warm gratitude and cordial thanks to Mr. Mohammad Ali (Principal officer), Janata Bank
Limited, Uttara Corporate Branch for giving me his valuable time and corporation during the internship
period and providing various data, information thus enabling me to prepare the Internship report. Without
his support I would not be able to gain knowledge about Non-performing loans and provide information in
this report.

Finally, I want to convey my gratitude to all of the faculty members of IBA-JU, the writers of many articles
as well as the employees of Uttara Corporate Branch of Janata Bank Limited who helped me reach this
point and make this report.

iv
 Table of Contents

Executive Summary...................................................................................................................................... ix
1.0 Introduction ............................................................................................................................................ 1
1.1 Background of the study ..................................................................................................................... 1
1.2 Origin of the study .............................................................................................................................. 1
1.3 Objectives of the study ....................................................................................................................... 1
1.3.1 Broad objective: ........................................................................................................................... 1
1.3.2 Specific objectives: ....................................................................................................................... 1
1.4 Methodology of the Study .................................................................................................................. 2
1.5 Scope of the study: ............................................................................................................................. 3
1.6 Limitations of the Study: ..................................................................................................................... 3
2.0 Literature Review .................................................................................................................................... 4
3.0 Organizational Overview......................................................................................................................... 5
3.1 History of Janata Bank Limited ........................................................................................................... 5
3.2 Corporate Vision and Mission ............................................................................................................. 6
3.3 Corporate Slogan: ............................................................................................................................... 6
3.4 Contribution of JBL in the Banking sector ........................................................................................... 6
3.5 Organization Organogram .................................................................................................................. 7
3.6 Corporate Information: ....................................................................................................................... 8
3.7 Products and Services offered by Janata Bank Limited ...................................................................... 9
3.8 Awards and Recognition ................................................................................................................... 10
3.9 JBL’s Corporate Social Responsibilities ............................................................................................. 10
3.10 Janata Bank Limited: Uttara Corporate Branch .............................................................................. 11
3.11 Working Segments of Uttara Corporate Branch ............................................................................. 11
4.0 Project Part ........................................................................................................................................... 12
4.1 Non-performing loans ....................................................................................................................... 12
4.1.1 Causes of Non-performing loans ............................................................................................... 12
4.1.2 Effects of Non-performing loans ................................................................................................ 13
4.2 Analysis and Findings ........................................................................................................................ 14
4.2.1 Data Analysis .............................................................................................................................. 14

v
 4.2.1.1 Status of NPLs of Banking industry of Bangladesh.............................................................. 14
4.2.1.1.1 Trend of total amount of NPLs..................................................................................... 14
4.2.1.1.2 Trend of growth of NPLs .............................................................................................. 16
4.2.1.1.3 Trend of NPL ratio ........................................................................................................ 17
4.2.1.1.4 Trend of Provision maintenance ratio ......................................................................... 18
4.2.1.2 Status of NPLs of State-owned banks of Bangladesh ......................................................... 19
4.2.1.2.1 Trend of total amount of NPLs..................................................................................... 19
4.2.1.2.2 Trend of growth of NPLs .............................................................................................. 20
4.2.1.2.3 Trend of NPL ratio ........................................................................................................ 21
4.2.1.2.4 Trend of Provision maintenance ratio ......................................................................... 22
4.2.1.3 Status of NPLs of Janata Bank Limited and Uttara Corporate Branch of Janata bank limited
........................................................................................................................................................ 23
4.2.1.3.1 Trend of total amount of NPLs..................................................................................... 23
4.2.1.3.2 Trend of growth of NPLs .............................................................................................. 24
4.2.1.3.3 Trend of NPL ratio ........................................................................................................ 25
4.2.1.3.4 Trend of Provision maintenance ratio ......................................................................... 26
4.2.2 Summary of Findings.................................................................................................................. 27
5.0 Conclusion & Recommendation ........................................................................................................... 28
5.1 Recommendation:............................................................................................................................. 28
5.2 Conclusion: ........................................................................................................................................ 28
References .................................................................................................................................................. 29
APPENDIX A

vi
 List of Illustrations

Table 1 & Figure 1: Trend of total Amount of NPLs by the categories of banks 15

Table 2 & Figure 2: Trend of the growth of NPLs by the categories of banks 16

Table 3 & Figure 3: Trend of NPL ratio by the categories of banks 17

Table 4 & Figure 4: Trend of Provision maintenance ratio by the categories of banks 18

Table 5 & Figure 5: Trends of total Amount of NPLs by SCBs 19

Table 6 & Figure 6: Trend of the growth of NPLs by SCBs 20

Table 7 & Figure 7: Trend of NPL ratio by SCBs 21

Table 8 & Figure 8: Trend of provision maintenance ratio 22

Table 9 & Figure 9: Trend of total Amount of NPLs by JBL and Uttara Corporate Branch of JBL 23

Table 10 & Figure 10: Trend of the growth of total Amount of NPLs by JBL and Uttara Corporate Branch of JBL 24

Table 11 & Figure 11: Trend of NPL ratio by JBL and Uttara Corporate Branch of JBL 25

Table 12 & Figure 12: Trend of provision maintenance ratio by JBL and Uttara Corporate Branch of JBL 26

vii
 List of Abbreviations

NPLs Non-performing loans

NPL ratio Non-performing loan ratio
PMR Provision maintenance ratio
JBL Janata Bank Limited
ABL Agrani Bank Limited
RBL Rupali Bank Limited
SBL Sonali Bank Limited
SCB State-owned commercial bank
PCB Private commercial bank
FCB Foreign commercial bank
BB Bangladesh Bank
BPRD Banking Regulation & Policy Department
BDBL Bangladesh Development Bank Limited
BBL Basic Bank Limited
DFI Development Financial Institution

viii
Executive Summary

This report aims to provide findings on the position of NPLs of Uttara Corporate Branch of Janata Bank
Limited compared to Janata Bank Limited and Banking industry of Bangladesh. The report is prepared
within the broader framework of the Internship Program as an integral part of the BBA program of Institute
of Business Administration, Jahangirnagar University.
The Introduction part of the report is focused on the background of the study along with relevant
methodology which comprises of mixture of quantitative and qualitative approaches and Judgmental
sampling technique is used in this report for selecting 03 types of banks out of the banking industry and 04
State-owned banks out the entire state-owned banks. Objectives of the study have been categorized into
two sections -Broad and Specific. Furthermore, the introductory part has been concluded by focusing on
Scopes and Limitation of the study to establish the viability of the topic.

To achieve the objectives of the report, ratio analysis technique has been adopted as research methodology.
Based on Non-performing loan ratio and Provision maintenance ratio, Uttara Corporate Branch of Janata
Bank Limited has been evaluated with Janata Bank Limited and Banking industry of Bangladesh.
The next part of the report is Literature review where relevant literature has been discussed in a nutshell.
The third part of the report is Organizational overview that focuses on Janata Bank Limited and its inception
along with specific Mission and Visions. Then a detailed listing of its Products and Services has been given
to focus on its wide range of activities. Moreover, its Performance, Awards and Recognitions and Corporate
Social Responsibilities have been described briefly followed by a detailed Organogram. A brief overview
of Uttara Corporate Branch of Janata Bank Limited has also been discussed.
The latter part of the report is project part where quantitative research methodology approach has been used
towards achieving the objective of the report. The project part starts with introducing some basics regarding
NPLs i.e. its definition, causes and effects. After that, present scenario of NPLs on Different categories of
banks (SCBs, PCBs and FCBs), different SCBs (JBL, ABL, SBL and RBL) and Uttara Corporate Branch
of Janata Bank Limited with Janata Bank Limited has been compared based on trends of total NPLs, its
growth, NPL ratio and Provision Maintenance Ratio.
The final portion of the report emphasized mainly on Findings and Recommendations of the report. It has
been found that Uttara Corporate Branch of Janata Bank Limited is in better position compared to Janata
Bank Limited and slightly behind than the banking industry in terms of NPL ratio while Uttara Corporate
Branch of Janata Bank Limited along with Janata Bank Limited has been able to book the required level of
provisions but our banking industry is struggling to maintain it.
This report can be a potential guide and encourage other researchers to further study on this topic and
provide an insight to the investors and the regulatory body about the existing status of Non-performing
loans in our country.

ix
1.0 Introduction

1.1 Background of the study

A bank is a financial institution whose main objective is the mobilization of fund from surplus unit to deficit
unit. In the process of acceptance & provision of loan, banks create money. This characteristic feature sets
bank apart from other financial institution. A bank can influence the money supply through lending and
investment. A bank is also an economic institution whose objective is to earn profit through exchange of
money & credit instruments. Commercial bank is one which is concerned with accepting deposits of money
from the public, repaying on demand or otherwise and withdrawal on demand or otherwise and employing
the deposits in the form of loan and investment to meet the financial needs of business and individuals of
the society. Loans are treated as assets for banks that earn interest which is considered as profit. A Non-
performing loan (NPL) is a loan that is in default or close to being in default (Wikipedia). NPLs shrink the
profit of banks as the principal amount or interest payments of loan are being delayed or not paid by the
borrowers.

While thousands of studies have been previously conducted to study various aspects of NPLs in Bangladesh
and globally. But no study was found regarding NPLs of Uttara Corporate Branch of Janata Bank Limited.
This report has tried to analyze the position of NPLs of Uttara Corporate Branch of Janata Bank Limited
with Janata Bank Limited and banking industry of Bangladesh.

1.2 Origin of the study

The internship program is a part of the BBA program of Institute of Business Administration, Jahangirnagar
University. As per this requirement, students need to attach themselves in an organization for a period of
three months to earn real life experience of how organization works.

After the three-months program, students need to submit an internship report using their experiences and
knowledge gained during this period. As an intern in Uttara Corporate Branch of Janata Bank Limited, the
writer of this report has gained various insights and knowledge about Non-performing loans which led him
believe that Uttara Corporate Branch of Janata Bank Limited is doing better in terms of Non-performing
loans management. This report will be prepared to understand if his idea has merit.

1.3 Objectives of the study

1.3.1 Broad objective:
The primary objective of this report is to analyze the Non-performing loans of Uttara Corporate Branch of
Janata Bank Limited.
1.3.2 Specific objectives:
To achieve this broad objective, some specific objectives to be fulfilled:
 To analyze the position of NPLs of Uttara Corporate Branch of Janata Bank Limited to Janata
Bank Limited.
 To analyze the position of NPLs of Uttara Corporate Branch of Janata Bank Limited to banking
industry of Bangladesh.

Page 1 of 29
1.4 Methodology of the Study
Methodology describes the manner in which data is collected, analyzed and interpreted. This report is based
on quantitative research methodology, all based on secondary data. I have collected the information/data
from the following sources, which has helped me to make this report. The sources are:

Secondary sources:
The secondary data sources used for this study were annual reports of JBL, SBL, ABL, RBL and BB
retrieved from respective websites, different publications, articles, reports, websites and officials from
Uttara Corporate Branch of Janata Bank Limited.

Time preference:
The time frame of the report is between 2014 to 2018.

Sampling:
The Judgement Sampling is the non-random sampling technique wherein the choice of sample items
depends exclusively on the investigator’s knowledge and professional judgment. Judgmental sampling
technique is used in this report for selecting 03 types of banks out of the banking industry and 04 State-
owned banks out the entire state-owned banks.
Scheduled banking industry of Bangladesh can be segregated into 04 types. They are- SCBs, DFIs, PCBs
and FCBs. As DFIs don’t operate like conventional commercial banks, so the researcher has excluded them
from this research.
There are 06 state-owned banks in Bangladesh. Due to the unavailability of the adequate data, the researcher
has excluded BDBL and BBL from the analysis and JBL, ABL, SBL and RBL have been selected.

Instruments used for analysis:

The report has been prepared predominantly based on ratio analysis technique. Financial ratios can be used
to analyze trends and to compare the firm's financials to those of other firms. Ratio analysis is the calculation
and comparison of ratios which are derived from the information in a company's financial statements.
Financial ratios are usually expressed as a percent or as times per period. Ratio analysis (NPL ratio and
Provision maintenance ratio) is used to analyze the trend of NPLs of Uttara Corporate Branch of Janata
Bank Limited to Janata Bank Limited and Banking industry of Bangladesh. Growth rate technique has also
been used somewhere to further analyze the report. Microsoft Excel 2016 was used as an analysis tool.
NPL ratio:
NPLs ratio is one of the most relevant indicators of the financial soundness of the banking system (IMF,
2006, p. 85), which identifies problems with asset quality in the loan portfolio. The more deteriorated is the
quality of the credit portfolio of the bank the more is that indicator. NPL ratio dictates the amount of Non-
performing loans to Total loans. It represents the percentage of loan of a bank that has become non-
performing that doesn’t earn interest or principal or both. The less the NPL ratio is, the better the bank is
performing efficiently in terms of its credit management. International standard of NPL ratio is ≤ 2%.
NPL ratio=Non-performing loans/ Total outstanding loans and advances
*Gross NPLs ratio as NPL ratio has been used in this study where Gross NPLs ratio is Gross NPLs to Total
loans.

Page 2 of 29
Provision Maintenance Ratio:
Loan loss provisions are used as a cushion to adapt to the expected loss resulted from the missed payment
of installment on a bank’s loan portfolio; it is interchangeably known as provision for bad debts (Ozili &
Outa, 2017).
A loan loss provision is an expense set aside as an allowance for uncollected loans and loan payments. This
provision is used to cover a number of factors associated with potential loan losses, including bad loans,
customer defaults, and renegotiated terms of a loan that incur lower-than-previously-estimated payments.
(Investopedia) According to the instruction of Bangladesh Bank, every bank has to book required level of
provision against non-performing loans. Provision is the specified amount of money that banks have to
keep against Non-performing loans. Provision maintenance ratio (PMR) states whether the bank maintained
to book the required level of provisions or not. If PMR ≥100%, the bank is said to book the required level
of provisions.
Provision Maintenance Ratio= Provision maintained/ Provision required
Growth rate:
Growth rate measures the rate at which something, in particular an economy or business, grows (Increase
or Decrease).
Growth rate= (Xt-Xt-1/ Xt-1)
Where, t= Loan amount of current year and t-1= Loan amount of previous year

1.5 Scope of the study:

As no other study was conducted based on comparative analysis of NPLs of Uttara Corporate Branch of
Janata bank Limited to Janata bank Limited and banking industry of Bangladesh prior to this study, so
this report will serve as a guide for investors and market authorities to understand the position of Uttara
Corporate Branch of Janata Bank limited compared to Janata Bank Limited and banking industry and will
help to make a decision before investing in it.

1.6 Limitations of the Study:

It is obvious that every study has some limitations. On the way of preparing this report, the following
problems are faced that may be termed as limitations of the study:

 Large scale analysis is not possible due to constraints & restrictions posted by the banking
authority.
 This study completely depended on official records and annual reports.
 Duration of the study was too short to have a sound understanding of the Non-performing loan.
 Lack of data on relevant context.
 Due to pandemic situation, adequate communication with the supervisor was hampered.

Page 3 of 29
2.0 Literature Review

Banks that perform poorly in credit risk rating face several challenges. One of these challenges is non-
performing loans or default loans they have to face. According to a study by Brown Bridge (1998), most of
the bank failures were caused by non-performing loans. Many of the bad debts were attributable to moral
hazard; the adverse incentives on bank owners to adopt imprudent lending strategies in particular insider
lending and lending at high interest rates to borrowers in the riskiest segments of the credit markets.
Hennie (2003) defined non-performing loans as those loans which were no longer generating income. It
was further supported by Fofack (2005) who defined NPLs as those loans for which the principal and/or
interest had been left unpaid for at least ninety days. Banks should identify them and take the necessary
steps to eliminate the NPLs from the industry. However empirical studies show that several variables cause
NPLs in banks in all over the world.
In the majority of studies investigated the determinants of NPLs either macroeconomic or bank-specific
determinants. The exception includes Bercoff et al. (2002) who combine bank-specific and macroeconomic
variables to explain the vulnerability of the Argentinean banking system over the 1993-1996 period. They
strongly claim that non-performing loans are affected by both bank-specific factors and macroeconomic
factors.

In some studies, the relationship between NPLs and bank-specific factors has been clearly shown and so it
can be said that the amount of non-performing loans of a specific bank is somewhat dependent on the
effectiveness of the bank's policies, internal culture and efficiency of its employees.

Pullicino (2016) suggests that the dramatic changes in lending interest rates are associated with the level of
NPLs, because high lending interest rates will broaden the debt burden of borrowers eventually causing
loan defaults.

Shinkey (1991) stated that the bank’s lending policy has a significant influence on NPLs. Before the lending
decision banks need to evaluate the probability of default along with cost and benefit analysis.

Adhikary (2007) on his research paper found that the banking sector of our country greatly affected by the
large amount of NPLs which continuously influences the economic development. According to him, the
main factors responsible for the massive growth of NPLs are lack of effective monitoring & supervision,
political pressure, weak legal infrastructure, and ineffective NPLs recovery strategies.

Messai and Jouini (2013) examine the role of both macroeconomic and bank-specific factors on NPLs in
85 banks in Italy, Greece, and Spain, respectively, for 2004- 2008 and find unemployment rates, real interest
rates, and poor credit quality to positively influence NPLs.

Roy et al. (2014) analyzed the determinants of macro-economic variables on the non-performing loans of
local private commercial banks of Bangladesh. The data range from year 2004 to 2013 covering 18
scheduled banks. Macro-economic variables i.e. GDP growth, inflation and interest spread are selected as
the determinants of non-performing loans.

Page 4 of 29
3.0 Organizational Overview

3.1 History of Janata Bank Limited

Janata Bank Ltd. was born as the first hundred percent Bangladeshi owned Bank in the public sector. From
the very inception it is the firm determination of Janata Bank Ltd. to play a vital role in the national
economy.

After independence in 1971, all banks were nationalized and reorganized into distinct new banks in terms
of Nationalization order 1972 of Bangladesh Bank, which was promulgated on 26 March, 1972. Following
the order, the erstwhile United Bank Limited and Union Bank Limited were merged and renamed as Janata
Bank. Later on, the bank was corporatized and renamed as Janata Bank Limited on 15 May, 2007 with a
mission to be the largest commercial bank in the country. The board of directors is composed of 9 members.
The directors, independent by nature, are representatives from both public and private sectors with high
professional and academic backgrounds. JBL has a large branch network, spreading over both urban and
rural areas. The bank provides quality service, lucrative and innovative products. The bank’s business
activities in general conform to social, ethical and environmental standards as well as norms of corporate
governance.

Subsidiary Organizations of Janata Bank Limited: Janata Bank Limited (JBL) has three Subsidiary
Organizations:

Janata Capital and Investment Limited.

Janata Exchange Company SRL, Italy.

Janata Exchange Company Inc. (JECI), USA.

Janata Capital and Investment Limited.

Following the guidelines of Bangladesh Bank, JBL has converted its merchant Banking unit into a separate
subsidiary company titled Janata Capital and Investment Limited (JCIL) with the objectives to undertake
full-fledged merchant banking operations namely, issue management and underwriting and portfolio
management.
The authorized capital of this subsidiary is BDT 5,000 million and paid-up capital is BDT 2,000 million.
The company started working on 26 September 2010.
Janata Exchange Company SRL, Italy.
Apart from JCIL, Janata Exchange Company SRL, Italy with a paid up capital of 0.06 million Euros was
established on 18 January 2002. It started its journey with a branch only in Rome. Later on, another branch
was set up at Milan.
Janata Exchange Company Inc. (JECI), USA.
Janata Exchange Company Inc. (JECI), USA with a paid up capital of US $1.00 million has been established
in 2014 and functioning with a corporate office-1 in New York, USA.

Page 5 of 29
3.2 Corporate Vision and Mission

VISION
“To become the effective largest commercial bank in Bangladesh to support socio-economic development
of the country and to be a leading bank in South Asia.”

MISSION
“Janata Bank Limited will be an effective commercial bank by maintaining a stable growth strategy,
delivering high quality financial products, providing excellent customer service through an experienced
management team and ensuring good corporate governance in every step of banking network”

3.3 Corporate Slogan:

With the new journey, Janata Bank Limited has started its new slogan to add a new dimension in their
service. The slogan is “Your Committed partner in progress” that indicates its continuous improvement to
create the excellent service condition for the clients so that they can thrive.

3.4 Contribution of JBL in the Banking sector

Banking sector of Bangladesh is being operated by 57 banks having more than 9 thousand branches. Along
with contributing to the socio-economic development of the country, JBL has earned 9,788.96 million
operating profit in 2018.

Contribution of Janata Bank Limited: (BDT in million)

SL. Components Amounts Growth

1 Total Assets 866,046.48 7.45%

2 Deposits 675,548.45 4.02%

3 Loans and Advances 533,707.16 16.13%

4 Import 220,413.70 53.51%

5 Export 114,681.00 (18.04%)

6 Foreign Remittance 76,078.10 5.63%

7 Branches (number) 913 0.10%

8 Manpower (number) 11,849 (4.37%)

Page 6 of 29
3.5 Organization Organogram

Chairman

Managing Director

General Manager

Deputy General Manager

Assistant General Manager

Senior Principal Officer

Principal Officer

Officer

Sub Accountant

Senior Clark

Page 7 of 29
3.6 Corporate Information:

Name of Company Janata Bank Limited.

Registered Office Janata Bhaban, 110, Motijheel C/A Dhaka-1000,
Bangladesh.

Legal Status Public Limited Company.

Date of Incorporation 21 May 2007.
Date of Commencement of Business 31 May 2007
Authorized Capital Tk. 30,000 Million.
Paid up Capital Tk. 23,140 Million.
Face value per share Tk. 100 per share.
Shareholding Pattern 100% Share owned by the Government of the
Peoples Republic of Bangladesh.
Chairman Luna Shamsuddoha
CEO & Managing Director Mr. Md. Abdus Salam Azad (F.F.)
Chief Risk Management Officer Khondker Sabera Islam
Company Secretary Hussain Yeahyea Chowdhury
Total Number of Branches 913
Subsidiaries Dhaka
Janata capital and investment Ltd.
Janata Exchange Company srl. Italy
Janata Exchange Company Inc. New York, United States of America (USA)
Number of Employees 11,849 (As on 01.02.2019)
Number of Exchange House 76
Fax 88-02-9564644, 9560869
E-mail [email protected]
Website https://www.jb.com.bd/
Swift Code JANBBDDH

Page 8 of 29
3.7 Products and Services offered by Janata Bank Limited

Products and services are the core assets of any organization. JBL is playing the most momentous role in
offering particular services to different clients through the country. Their products and services are:

PRODUCTS
Deposit Loans and advance
Current Deposit Agriculture Loans
Savings Deposit Working Capital Loan
Special Notice Deposit Rural Credit
Fixed Deposit Tannery Trading
Schemes JBL Commercial Real Estate Loan
JBL House Construction and Apartment Purchase
Loan
Consumer Financing
Education Loan
Janata Care-Health Care Loan
Janata Support-Special Loan for Pension Holder
Special Loan (Women Entrepreneur, Micro
businesses etc.)

SERVICES
e-Service Modern Banking

ATM Online Banking

Automated Branch Banking JB Remittance

Green Banking JB PIN Cash

e-GP Payment Service House Building/ Flat Loan for Govt. Employee

OMIS (ERP)

PMIS

BEFTN User Manual

Page 9 of 29
3.8 Awards and Recognition

Asian Banking Awards-2004 & 2005

Quality Recognition Award-2009
Best Bank Bangladesh-2006, 2007, 2008 & 2009
Western Union (Worldwide Money Transfer C.) Asia Pacific- Productive Location Champion 2010
The Bank of the Year Awards-2002, 2003, 2004, 2007, 2008 & 2011
ICMAB Best Corporate Award-2011, 2012 & 2014
Performance Excellence Award-2013
Foreign Remittance Award-2014
The Asian Banking and Finance Award-2014
ICAB Nation Award-2016
ICMAB Award-2017

3.9 JBL’s Corporate Social Responsibilities

JBL sees CSR activities as a critical component of continuous improvement, like the overall effort to be a
more socially responsible and sustainable organization.
Being one of the leading state-owned commercial banks in Bangladesh, Janata Bank Limited, with its
branches has also realized its responsibilities to the society and is contributing to the amelioration of the
social life of the destitute people, infra-structure, environment etc.
In the past, JBL contributed in calamity relief operations for the landslide victims in Chattogram, SIDR
affected people of the shoreline areas and for the flood affected people across the country.

Page 10 of 29
Some CSR activities of JBL are given in the followings:

 Education & Research

 Health & Treatment
 Poverty reduction & rehabilitation
 Combat against natural calamity
 Try to bring the marginal farmers and the poor out of the grip of loan
 Preservation of history, tradition, culture and sports
 Preservation of environment
 Expansion of technology
 Invention

 Others.

3.10 Janata Bank Limited: Uttara Corporate Branch

Name Janata Bank Limited
Branch Name Uttara Corporate Branch
Address Sector-06, Road-12, House-05, NZ Center (1st
& 2nd Floor), Dhaka-1230.
Number of Employees 42
Deposit (2019) 575 crore
Profit( 2019) 9.08 crore
Total Loans and Advances (2019) 40.25 crore
AD ratio 7%

3.11 Working Segments of Uttara Corporate Branch

Working segments of the Uttara Corporate Branch are given below:

General Customer
Cash Credit Remittance
Banking Service

Page 11 of 29
4.0 Project Part

4.1 Non-performing loans

A Non-performing loan (NPL) is a loan that is in default or close to being in default. Many loans become
non-performing after being in default for 90 days, but this can depend on the contract terms. (Wikipedia)
The definition of Non-performing loans (NPLs) followed by IMF (International Monetary Fund) is:
“A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or
at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or
payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be
made in full.” (Wikipedia)
The definition of NPL was changed twice in last 10 years in Bangladesh. Initially, the general definition of
NPL was that when an account becomes 6 months past due, it becomes a diligent loan. In accordance with
the definition of Bangladesh Bank (BB) a “Defaulting debtor” means:
“Any person or institution served with advance, loan granted in favor of him or an institution involving
interest or any portion thereof, or any interest which has been overdue for six months”. (As per Section
5 (cc) of Bank Company Act 1991)
In 2012, Bangladesh Bank changed this definition in line with BASEL II and defined a loan to be default
or non-performing when it becomes 3 months or 90 days past due (Source: BB: BPRD circular 14 dated
September 23, 2012). NPLs in Bangladesh are classified as substandard, doubtful, and bad or loss, which
are calculated based on uniform criteria. A loan is substandard if it is overdue for 3 months or more but less
than 9 months, doubtful if overdue for 9 months or more but less than 12 months, and bad or a loss if it is
overdue for 12 months or more. (Source: BB: BPRD circular No. 03 dated April 21, 2019)

4.1.1 Causes of Non-performing loans

Non-performing loans has turned out to be the soft spot for the banking industry of Bangladesh these days.
“Recent bankruptcy, successive loss of SCBs and banking scamps have arisen from the adverse impact of
NPLs”-according to many economists and analysts.
Some of the principal causes of NPLs in the banking industry are presented below:
Bank-specific factors:
From the study of Patwary & Tasneem (2019) and Field Survey Report on “Study on credit risk arising in
the Banks from loans sanctioned against inadequate collateral’’ conducted by Bangladesh Bank (2017),
common bank-specific factors behind NPLs in Bangladesh were revealed as follows:
Corruption: One of the major building blocks of NPLs in our banking industry is corruption. Corruption
along with nepotism exhibited by top level management in sanctioning and disbursing loans in favour of
corrupted individuals and politically exposed person (PEPs) makes the loan vulnerable. Sometimes
managers fall prey to PEPs disburse loans without proper or adequate credit assessment without assessing
the viability of the project or the proper valuation of collateral which ultimately becomes defaulted.

Page 12 of 29
Bank lending policy: Bank lending policy plays an important role in NPLs. Few banks especially SCBs
often cross lending exposure above the prescribed limit by Bangladesh Bank to single borrowers that ruins
the loan portfolio of the banks. Again sometimes banks select wrong borrowers who grant loan from banks
by using false documents. Again banks in practice don’t follow entirely and efficiently prescribed
guidelines for managing NPLs i.e. The Bankruptcy Act, Money Loan Court Act etc.
Inefficiency of employees: In our banking industry, many bankers don’t have adequate knowledge about
the risk assessment factors of loans thus can’t diversify the risk of loan.
High interest rate: Higher interest rate accompanied by various other service charges and also some hidden
charges increase the amount of installments of borrowers that serves as one of the prime factors to loan
default.
Ineffective monitoring and supervision: In many instances, performing loans becomes defaulted due to
lack of proper monitoring. Some clients divert their funds for other activities rather than serving their sole
concern. If the monitoring system was good and proper action was taken from the beginning period when
the bank comes to know about the loan to be defaulted, the NPLs amount wouldn’t be as large as it is now.
Even ineffective NPLs recovery strategies have made the situation worsened.

Macroeconomic-specific factors:
From various studies, dominant macroeconomic-specific factors behind NPLs are revealed such as-
Gross Domestic Product (GDP): GDP growth rate is one of the most important factors which influences
the ratio of NPL in Bangladeshi banking sector. Low NPL ratio is associated with an economy which is
expansionary (Carey,1998). Increasing number of GDP growth rate indicates the economic growth in the
country. Positive economic growth indicates people have more income that helps them to pay the loan as a
consequence the ratio of NPL decreases and vice-versa.

Inflation rate: The rate at which the level of prices for goods and services is increasing and the purchasing
power is decreasing, is called Inflation rate. The impact of inflation rate on NPL basically depend on the
economic condition of a country. It can be negative or positive. The impact of inflation on the change of
NPL can be either positive or negative depending on the economic condition and some other firm-specific
factors (Rajha,2016). When inflation rate increase, the real value of income decrease. Low level of income
effects on repaying ability of loans. There borrowers unable to pay loan when inflation rate rises. So, there
are positive relation between inflation rate an NPL.
Unemployment rate: When unemployment rate rises in a country, it influences the cash flow of people.
Unemployment leads to low level of income or zero income. Low level of income is one of the cause of not
repaying loan which is borrowed. So, it does influence NPL ratio positively. (Louzis et al., 2012)

4.1.2 Effects of Non-performing loans

From the study of Deep Majumder (2014) some adverse effects of Non-performing loans are observed as
follows:
We all know that the primary mechanism of banks is providing loans and receiving deposits. Loans
and advances tend to be the income generating assets for banks. The interest rate spread between

Page 13 of 29
 loans and deposits is the amount that banks account as profit. In case of defaulted loans, banks lose
either interest or principal or both amount which ceases its profit. So, NPL ceases banks’ profit.
Sound banking industry is one of the preconditions of economic development of a country. Growth
of industries and businesses to escalate the economic development of a country largely depends on
its banking sector. Poor banking sector is the hindrance to rapid and sustainable development of a
country. If a country’s banking sector collapses, eventually the entire economy collapses. Due to
NPL, banking sector becomes unprofitable. Banks maintain strict rules and regulations to disburse
loans. As a consequence, many SME founders become deprived of getting the loan that badly
impacts the economic growth.
NPL can lead to efficiency problem for the banking sector. It is found by a number of economists
that failing banks tend to be located far from the most-efficient frontiers, because banks do not
optimize their portfolio decisions by lending less than demanded.
If loanable funds are blocked as NPL, banks will not have enough reserve for issuing future loans,
which will affect the economy in multiple ways. For example, it will hinder employment
generation. The scarcity of loanable funds for private sector will widen the rich-poor gap in society.
The rising trend of NPL will also have a negative impact on the banks’ profitability.
Provisioning against defaulted loans will also jeopardize the financial health of many institutions.
Banks have to keep provisions against their non-performing loans as per the central bank’s
guidelines. The provision amounts are kept aside from the banks’ profits. When provisioning
amounts become higher than the profits of a bank, it has to keep provision amounts from its capital,
which can result in capital shortfalls. Capital shortfalls in turn hamper trade activities with overseas
banks.
NPL affects opening of LC (Letter of Credit). International importers always choose healthy
condition of the exporter's bank. Worse health condition of the bank affects the opening of new
LCs. Low rate of LCs makes low bank earning.

4.2 Analysis and Findings

4.2.1 Data Analysis
4.2.1.1 Status of NPLs of Banking industry of Bangladesh
4.2.1.1.1 Trend of total amount of NPLs
Scheduled banks of Bangladesh are categorized into 04 types and they are- SCBs, PCBs, FCBs and DFIs.
As DFIs don’t operate like conventional commercial banks, so the researcher has excluded them from this
research.

Page 14 of 29
Table 1: Trend of total Amount of NPLs by the categories of banks (In Million Taka)

Bank Categories Years

2018 2017 2016 2015 2014
SCBs 486,960 373,300 310,300 272,800 227,600
PCBs 381,400 294,000 230,600 253,300 184,300
FCBs 22,870 21,500 24,100 18,200 17,100
Total 939,110 743,030 621,720 594,000 501,600
Source: Annual Reports of Bangladesh Bank (2014-18)

Figure-1
Trend of total Amount of NPLs by the categories of banks (In Million Taka)

1000000
800000
In Million Taka

600000
400000
200000
0
2018 2017 2016 2015 2014
Years
SCBs PCBs FCBs Total

Source: Annual report of Bangladesh Bank (2014-18)

Table 1 and Figure 1 show the fluctuation in the total amount of NPLs (In million taka) by the categories
of banks (SCBs, PCBs and FCBs) to banking industry of Bangladesh at 1-year interval from 2014 to
2018.Looking from an overall perspective, it is readily apparent from table 1 and graph 1 that, with the
exception of FCBs where increase was slow and steady, SCBs and PCBs experienced a considerable jump.
In addition to that, NPLs went up sharply in overall banking industry. SCBs had the highest amount of
NPLs throughout, while PCBs overtook FCBs and FCBs was generally lowest.
Looking first of all at the overall leader, SCBs, the total amount of NPLs was 227,600 million in 2014 and
rocketed in 2018 amounting 486,960 million. In contrast, FCBs had far lower amount 17,100 million in
2014 and 22,870 million in 2018.
PCBs had 184,300 million NPLs at the beginning of the period and ended up having a considerable jump
of 381,400 million. However, banking industry went up sharply from 501,600 million to 939,110 million
from 2014 to 2018.

Page 15 of 29
4.2.1.1.2 Trend of growth of NPLs
Growth rate measures the rate at which something, in particular an economy or business, grows or shrinks.
Growth rate of Non-performing loans = (Xt-Xt-1/ Xt-1)
Where, t= NPLs amount of current year and t-1= NPLs amount of previous year
Average growth rate= (a1 + a2 + …. + an) / n where, where ai = ith observation, n = Number of observations

Table 2: Trend of growth of NPLs by the categories of banks (In Percent)

Bank 2018 2017 2016 2015 2014 Average

Categories Growth
Rate
SCBs 30.45 20.30 13.75 19.86 37.03 24.28
PCBs 29.37 27.49 -8.96 37.44 28.79 22.83
FCBs 6.37 -10.79 32.42 6.43 31.54 13.19
Source: Author’s calculation from annual report of Bangladesh Bank (2014-18)

Figure-2
Average Growth Rate of NPLs by the categories of banks (in percent)

30
25
20
Percent

15
10 Average Growth Rate

5
0
SCBs PCBs FCBs
Categories of Banks

Source: Author’s calculation from annual report of Bangladesh Bank (2014-18)

Table 2 and Figure 2 present the average growth rate of NPLs (In percent) by the categories of banks (SCBs,
PCBs and FCBs) of Bangladesh at 1-year interval from 2014 to 2018. According to the table 2 and graph
2, it is clearly apparent that SCBs had the highest average growth rate while FCBs experienced considerably
lowest average growth rate and PCBs were close to SCBs.
Looking first of all the overall leader, SCBs had an average growth rate of NPLs of 24.28%. In contrast,
FCBs had readily the lowest average growth rate of NPLs of 13.19%. However, PCBs average growth rate
stagnated at 22.83% close to that of SCBs. (Please see screenshot A01, Appendix A)

Page 16 of 29
4.2.1.1.3 Trend of NPL ratio
NPL ratio represents the percentage of loan of a bank that has become non-performing that doesn’t earn
interest or principal or both. The less the NPL ratio is, the better the bank is performing efficiently in terms
of its credit management. International standard of NPL ratio is ≤ 2%.
NPL ratio=Non-performing loans/ Total outstanding loans and advances
Table 3: Trend of NPL ratio by the categories of banks (In Percent)

Bank 2018 2017 2016 2015 2014

Categories
SCBs 30 26.5 25.1 21.5 22.23
PCBs 5.5 4.9 4.6 4.9 4.98
FCBs 6.5 7 7.8 7.8 7.3
Total 10.3 9.3 9.2 8.8 9.7
Source: Annual report of Bangladesh Bank (2014-18)

Figure-3
Trend of NPL ratio by the categories of banks (In Percent)

2014
2015
Year

2016
2017
2018
0 5 10 15 20 25 30
Percent

Total FCBs PCBs SCBs

Source: Annual report of Bangladesh Bank (2014-18)

Table 3 and Figure 3 detail changes in the NPL ratio (In percent) by the categories of banks (SCBs, PCBs
and FCBs) to banking industry of Bangladesh at 1-year interval from 2014 to 2018. From the table 3 and
graph 3, it is pretty perceptible that, PCBs experienced almost flat growth, FCBs and banking industry
experienced slight growth and SCBs experienced rapid increase of NPL ratio. SCBs had the highest overall
NPL ratio throughout the study period, while FCBs crossed PCBs and PCBs were lowest.
Looking first of all at the overall leader, SCBs had NPL ratio of 22.83% in 2014 and jumped considerably
to 30% in 2018.In contrast, PCBs had far lower levels of NPL ratio at 4.98% in 2014 and 5.5% in 2018.
FCBs maintained decent NPL ratio throughout the study period (2014-2018). At the beginning of the period
it was 7.3% and experienced a gentle decrease at 6.5% at the end of the study period. While banking
industry experienced a slow and steady rise from 9.7% to 10.3% in 2014 and 2018.

Page 17 of 29
4.2.1.1.4 Trend of Provision maintenance ratio
A provision is usually an amount that is set aside from a company’s profits, usually to cover an expected liability
or a decrease in the value of an asset, even though the specific amount of the same might be unknown. Banks
maintain provisions against expected losses that may arise against default loans from their operating profit.
Provision maintenance ratio (PMR) states whether the bank maintained to book the required level of
provisions or not. If PMR ≥100%, the bank is said to book the required level of provisions.
Provision Maintenance Ratio= Provision maintained/ Provision required
Table 4: Trend of Provision maintenance ratio by the categories of banks (In Percent)

Bank 2018 2017 2016 2015 2014

Categories
SCBs 72.8 61.9 65.1 67.5 105.2
PCBs 103.8 107.5 103.6 100.5 106.1
FCBs 106 105.8 102.5 102.5 105.9
Total 88.4 84.7 84.9 86.1 97.2
Source: Annual report of Bangladesh Bank (2014-18)

Figure-4:
Trends of Provision maintenance ratio by the categories of banks (In Percent)
120
100
80
Percent

60
40
20
0
2018 2017 2016 2015 2014
Year

SCBs PCBs FCBs Total

Source: Annual report of Bangladesh Bank (2014-18)

Table 4 and Figure 4 are the tabular and graphical representation of Provision maintenance ratio (In Percent)
by the categories of banks (SCBs, PCBs and FCBs) to banking industry of Bangladesh at 1-year interval
from 2014 to 2018.
From the table 4 and figure 4, it is clearly evident that PCBs and FCBs maintained requisite provisions
while SCBs failed to maintain the standard during the study period. However, Provision maintenance ratio
of SCBs plummeted from 2014 to 2015, remained stagnated from 2015 to 2017 then rose gradually from
2017 to 2018. While, PMR of banking industry of Bangladesh stayed almost stable from 2014 to 2018.

Page 18 of 29
4.2.1.2 Status of NPLs of State-owned banks of Bangladesh
4.2.1.2.1 Trend of total amount of NPLs
There are 06 state-owned banks in Bangladesh. Due to the unavailability of the adequate data, the
researcher has excluded BDBL and BBL from the analysis.
Table 5: Trends of total Amount of NPLs by SCBs (In Million Taka)

Name of SCB Years

2018 2017 2016 2015 2014
JBL 179,984.5 75,995.5 59,359.8 43,181.7 37,375.67
ABL 69,930 55,700 68,040 46,400 39,660
SBL 121,883 149,302 109,115 86,849 86,437
RBL 41,400.7 45,820.6 34,848.5 23,417.6 15,194.2
Source: Annual reports of JBL, ABL, SBL and RBL banks (2014-18)

Figure-5
Trends of total Amount of NPLs by SCBs (In Million Taka)
In Million Taka

200000
150000
100000
50000
0
2018 2017 2016 2015 2014
Year

JBL ABL SBL RBL

Source: Annual reports of JBL, ABL, SBL and RBL (2014-18)

Table 5 and Figure 5 are the tabular and graphical representation of the trends of the total amount of NPLs
(In million taka) by State-owned banks (JBL, ABL, SBL and RBL) of Bangladesh at 1-year interval from
2014 to 2018. From the table 5 and figure 5, we can see that, except JBL, other SCBs experienced
fluctuation during the study period. Overall, SBL had the highest amount of NPLs except year 2018 when
NPLs of JBL rocketed, while JBL overtook ABL and RBL succeeded to keep its NPLs lowest during the
study period.
From 2014 to 2017, total amount of NPLs climbed significantly among all SCBs except ABL. In 2018, the
total amount of NPLs of JBL rocket from 75,995.5 million to 179,984.5 million. Total amount of NPLs of
JBL, ABL, SBL and RBL subsequently was 37,375.67, 39,660, 86,437 and 15,194.2 in 2014 and 179,984.5,
69,930, 121,883 and 41,400.7 in 2018.
So, overall SBL had the highest and RBL had the lowest amount of total NPLs during the study period but
there was a rapid and rocketing trend experienced by JBL during the study period.

Page 19 of 29
4.2.1.2.2 Trend of growth of NPLs
Growth rate measures the rate at which something, in particular an economy or business, grows or shrinks.
Growth rate of Non-performing loans = (Xt-Xt-1/ Xt-1)
Where, t= NPLs amount of current year and t-1= NPLs amount of previous year
Table 6: Trend of the growth of NPLs by SCBs (In Percent)

Name of SCB 2018 2017 2016 2015 2014

JBL 136.84 28.03 37.47 15.53 17.64
ABL 25.55 36.83 46.64 16.99 10.78
SBL -18.36 -18.14 25.64 0.48 -16.70
RBL -9.65 31.49 48.81 54.12 -15.55
Source: Author’s calculation from the annual reports of JBL, ABL, SBL and RBL (2014-18)

Figure-6
Trend of the growth rate of NPLs by SCBs (In percent)
150

100
Percent

50

0
JBL ABL SBL RBL
-50
Name of SCBs

2018 2017 2016 2015 2014

Source: Author’s calculation from the annual reports of JBL, ABL, SBL and RBL (2014-18)
Table 6 and Figure 6 are the tabular and graphical representation of the trend of the growth of NPLs (In
percent) by State-owned banks (JBL, ABL, SBL and RBL) of Bangladesh at 1-year interval from 2014 to
2018.From table 6 and graph 6 we can conclude that JBL and ABL always had the positive growth rate
while SBL and RBL experienced both positive and negative growth rate of NPLs from 2014 to 2018. Except
JBL, rest of the SCBs’ growth was fluctuating; there was a steep rise in NPLs of JBL in year 2018.
Let’s have a look at the overall leader, JBL, had a growth rate at 17.64% in 2014 but it climbed rapidly in
2018 amounting 136.84%. Contrarily, SBL had far lower levels at -16.70% in 2014 and -18.36% in 2018.
ABL had 10.78% growth of NPLs at the beginning of the period and 25.55% in 2018 while RBL had -
15.55% growth in 2014 and -9.65% at the end of the period but RBL had more positive growth of NPLs
compared to SBL from 2015 to 2017. (Please see screenshot A02, Appendix A)

Page 20 of 29
4.2.1.2.3 Trend of NPL ratio
NPL ratio represents the percentage of loan of a bank that has become non-performing that doesn’t earn
interest or principal or both. The less the NPL ratio is, the better the bank is performing efficiently in terms
of its credit management. International standard of NPL ratio is ≤ 2%.
NPL ratio=Non-performing loans/ Total outstanding loans and advances
Table 7: Trend of NPL ratio by SCBs (In Percent)

Name of SCB 2018 2017 2016 2015 2014

JBL 33.72 16.54 14.73 12.34 11.69
ABL 17.67 17.45 25.59 18.95 16.87
SBL 26.26 35.28 28.38 25.08 25.61
RBL 16.73 22.17 19.90 16.43 12.15
Source: Annual reports of JBL, ABL, SBL and RBL (2014-18)

Figure-7
Trend of NPL ratio by SCBs (In Percent)

2014
2015
Year

2016
2017
2018
0 5 10 15 20 25 30 35 40
Percent

RBL SBL ABL JBL

Source: Annual Reports of JBL, ABL, SBL and RBL (2014-18)

Table 7 and Figure 7 detail changes in the NPL ratio (In percent) by state-owned banks (JBL, ABL, SBL
and RBL) of Bangladesh at 1-year interval from 2014 to 2018.
From table 7 and figure 7 we can conclude that the SBL had the highest and JBL had the lowest NPL ratio
to total loans except for the year 2018. NPL ratio to total loans of JBL, ABL, SBL and RBL was 11.69,
16.87, 25.61 and 12.15 percent respectively at the end of 2014. The NPLs ratio to total loans of JBL, ABL,
SBL and RBL was 33.72, 17.67, 26.26 and 16.73 percent respectively at the end December, 2018. If we
look at the gross NPL ratio in SCBs we can see an upward trend for JBL and fluctuating trend for ABL,
SBL and RBL.

Page 21 of 29
4.2.1.2.4 Trend of Provision maintenance ratio
Provision is the specified amount of money that banks have to keep against Non-performing loans.
Provision maintenance ratio (PMR) states whether the bank maintained to book the required level of
provisions or not. If PMR ≥100%, the bank is said to book the required level of provisions.
Provision Maintenance Ratio= Provision maintained/ Provision required
Table 8: Trend of provision maintenance ratio by SCBs (In Percent)

Name of SCB Years

2018 2017 2016 2015 2014
JBL 100 100.21 101.07 100.41 101.73
ABL 79.24 84.98 80.09 93.95 86.13
SBL 100 101.51 100 100 100.03
RBL 56.19 50.88 37.29 100 100
Source: Author’s calculation from the annual reports of JBL, ABL, SBL and RBL (2014-18)

Figure-8
Trend of provision maintenance ratio by SCBs (In Percent)

2014
2015
Year

2016
2017
2018

0 20 40 60 80 100 120
Percent

RBL SBL ABL JBL

Source: Author’s calculation from the annual reports of JBL, ABL, SBL and RBL (2014-18)
Table 8 and Figure 8 are the tabular and graphical representation of changes of provision maintenance ratio
(In percent) by state-owned banks (JBL, ABL, SBL and RBL) of Bangladesh at 1-year interval from 2014
to 2018.

From the table 8 and figure 8 it can be seen that JBL and SBL maintained requisite provisions having
PMR>100% while ABL completely failed to keep the required provision having PMR<100% and RBL has
done it twice for the year 2014 and 2015 between the years 2014 and 2018. (Please see screenshot A03,
Appendix A)

Page 22 of 29
4.2.1.3 Status of NPLs of Janata Bank Limited and Uttara Corporate Branch of Janata bank
limited
4.2.1.3.1 Trend of total amount of NPLs
For the simplicity of the analysis, percent of NPLs has been used to carry out the analysis instead of the
amount of NPLs of JBL and Uttara Corporate Branch of JBL
Table 9: Trend of total Amount of NPLs by JBL and Uttara Corporate Branch of JBL (In Million Taka)
Bank Years
Categories 2018 2017 2016 2015 2014
Amount % Amount % Amount % Amount % Amount %
JBL 179984.5 33.72 75995.5 16.54 59359.8 14.73 43181.7 12.34 37375.67 11.69
Uttara 61.1 14.38 49.2 12.88 45.5 10.73 36.6 9.03 31.9 8.16
Corporate
Branch of
JBL
Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)

Figure-9
Trend of NPLs by JBL and Uttara Corporate Branch of JBL (In percent )
40 33.72
35
30
25
Percent

20 16.54
14.73
12.34 11.69
15
10 14.38 12.88 10.73 9.03 8.16
5
0
2018 2017 2016 2015 2014

Year
JBL Uttara Corporate Branch of JBL

Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)
Table 9 and Figure 9 detail changes in the amount (In million Taka) and percent of NPLs between JBL and
Uttara Corporate Branch of JBL at 1-year interval from 2014 to 2018. If we look at the trends over time,
we can see that NPLs in both JBL and Uttara Corporate Branch of JBL increased moderately from 2014 to
2017 and the lines were almost parallel during that time. Percent of NPLs between JBL and Uttara Corporate
Branch of JBL was 11.69% and 8.16% in 2014 and 16.54% and 12.88% in 2017.
In 2018, the NPLs of JBL increased dramatically by 33.72% while Uttara Corporate Branch of JBL
experienced steady growth of NPLs by 14.38%.
JBL had a more upward trend than Uttara Corporate Branch of JBL during the study period. (Please see
screenshot A04, Appendix A)

Page 23 of 29
4.2.1.3.2 Trend of growth of NPLs
Growth rate measures the rate at which something, in particular an economy or business, grows or shrinks.
Growth rate of Non-performing loans = (Xt-Xt-1/ Xt-1)
Where, t= NPLs amount of current year and t-1= NPLs amount of previous year
Table 10: Trend of the growth of total Amount of NPLs by JBL and Uttara Corporate Branch of JBL (In
Percent)

Bank Categories 2018 2017 2016 2015 2014

JBL 136.84 28.03 37.47 15.53 17.67
Uttara Corporate Branch of JBL 24.19 8.13 24.32 14.73 4.59
Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)

Figure-10:
Trend of the growth rate of total amount of NPLs by JBL and Uttara Corporate Branch of
JBL (In percent)
160
140
120
100
Percent

80
60
40
20
0
2018 2017 2016 2015 2014
Year

JBL Uttara Corporate Branch of JBL

Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)
Table 10 and Figure 10 present changes in the growth (In percent) of NPLs between JBL and Uttara
Corporate Branch of JBL at 1-year interval from 2014 to 2018.From the table 10 and figure 10 we can say
that both JBL and Uttara Corporate Branch of JBL experienced growth in NPLs but the growth rate was
erratic during the study period. JBL had always higher growth rate of NPLs than its branch except the year
2015 when the growth rate of NPLs of JBL and its branch was subsequently 15.53% and 14.73%.
Growth rate of JBL and Uttara Corporate Branch of JBL was 17.67% and 4.59% in 2014 and 28.03% and
8.13% in 2017.
In 2018, the growth rate of NPLs of JBL rocketed by 136.84% from 24.19%. In contrast, it jumped sharply
from 8.13% to 24.19% in Uttara Corporate Branch of JBL. (Please see screenshot A05, Appendix A)

Page 24 of 29
4.2.1.3.3 Trend of NPL ratio
NPL ratio represents the percentage of loan of a bank that has become non-performing that doesn’t earn
interest or principal or both. The less the NPL ratio is, the better the bank is performing efficiently in terms
of its credit management. International standard of NPL ratio is ≤ 2%.
NPL ratio=Non-performing loans/ Total outstanding loans and advances
Table 11: Trend of NPL ratio by JBL and Uttara Corporate Branch of JBL (In Percent)

Bank Categories Years

2018 2017 2016 2015 2014
JBL 33.72 16.54 14.73 12.34 11.69
Uttara Corporate Branch of JBL 14.38 12.88 10.73 9.03 8.16
Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)

Figure-11:
Trend of NPL ratio by JBL and Uttara Corporate Branch of JBL (in percent)

Uttara Corporate Branch of JBL JBL

2014
2015
Year

2016
2017
2018
0 5 10 15 20 25 30 35 40
Percent

Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)
Table 11 and Figure 11 are the tabular and graphical representation of trend of NPL ratio (In Percent) by
JBL and Uttara Corporate Branch of JBL at 1-year interval from 2014 to 2018.Looking from an overall
perspective, it is readily apparent that gross NPL ratio in both JBL and Uttara Corporate Branch of JBL
experienced a steady rise from 2014 to 2018.
The gross NPL ratio of JBL and Uttara Corporate Branch of JBL was 11.69% and 8.16% respectively at
the end of 2014. Contrarily, it was 33.72% and 14.38% respectively at the end of December, 2018.
From the above figure we can see that both JBL and its Uttara Corporate Branch experienced upward trend
but JBL experienced a drastic shift in 2018. (Please see screenshot A06, Appendix A)

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4.2.1.3.4 Trend of Provision maintenance ratio
Provision is the specified amount of money that banks have to keep against Non-performing loans.
Provision maintenance ratio (PMR) states whether the bank maintained to book the required level of
provisions or not. If PMR ≥100%, the bank is said to book the required level of provisions.
Provision Maintenance Ratio= Provision maintained/ Provision required
Table 12: Trend of provision maintenance ratio by JBL and Uttara Corporate Branch of JBL (In Percent)

Bank Categories Years

2018 2017 2016 2015 2014
JBL 100 100.2 101.1 100.4 101.7
Uttara Corporate Branch of JBL 101 107.6 102.5 100.1 102.9
Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)

Figure-12:
Trend of provision maintenance ratio by JBL and Uttara Corporate Branch of JBL
(In Percent)
Provision maintenance ratio

110
105
100
95
2018 2017 2016 2015 2014
Year

JBL Uttara Corporate Branch of JBL

Source: Author’s calculation from annual report of JBL and officials of Uttara Corporate Branch of JBL
(2014-18)
Table 12 and Figure 12 are the tabular and graphical representation of changes of provision maintenance
ratio (In percent) by JBL and Uttara Corporate Branch of JBL at 1-year interval from 2014 to 2018.

From the table 12 and figure 12 it can be seen that both JBL and Uttara Corporate Branch of JBL maintained
requisite provisions having PMR>100% between the years 2014 and 2018. (Please see screenshot A07,
Appendix A)

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4.2.2 Summary of Findings
From the above analysis we have seen that Uttara Corporate Branch of Janata Bank Limited is in better
position compared to Janata Bank Limited in terms of NPL ratio that means the branch is handling its loan
portfolio better than Janata Bank Limited and as a consequence it has less Non-performing loans during the
study period. But the branch is slightly behind than the banking industry though both Uttara Corporate
Branch and banking industry yield relatively higher NPLs as the international standard of NPL ratio is 2%
or less.
Moreover, Uttara Corporate Branch of Janata Bank Limited has been able to book the required level of
provisions along with Janata Bank Limited while the banking industry struggled to maintain it throughout
the study period because of state-owned banks.
From the data analysis of the previous section following findings were also revealed-
Banking industry of Bangladesh

 Among different categories of banks, SCBs had the highest and FCBs had the lowest amount of
NPLs during the study period. SCBs tend to have abnormally higher amount of NPLs compared to
others’ banks.
 Growth rate of NPLs is higher in SCBs and lower in FCBs among different categories of banks.
 PCBs yielded the lowest while SCBs yielded the highest NPL ratio among different clusters of
banks.
 PCBs and FCBs maintained requisite provisions but SCBs failed to maintain it during the study
period.

State-owned banks of Bangladesh

 ABL had more NPLs than all other SCBs and RBL amounted the lowest.
 JBL and ABL always had the positive growth rate of NPLs while SBL and RBL
experienced fluctuating growth rate during the study period. JBL was the overall leader in
terms of growth rate of NPLs and SBL had the lowest growth rate among SCBs.
 SBL had the highest and JBL had the lowest NPL ratio among SCBs.
 JBL and SBL maintained required provisions among SCBs.

Janata Bank Limited and Uttara Corporate Branch of Janata Bank Limited

 JBL had a more upward trend than Uttara Corporate Branch in terms of percent of NPLs.
 Growth of NPLs was abnormally higher in JBL than its branch.
 The trend of NPL ratio was higher in JBL than Uttara Corporate Branch.
 Both JBL and Uttara Corporate Branch of JBL maintained to book the required level of
provisions during the study period.

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5.0 Conclusion & Recommendation

5.1 Recommendation:
Non-performing loans (NPLs) halts the financial soundness of banks, makes them vulnerable to bankruptcy
and depresses overall economic development to a great extent. The less NPL a bank has, the better it is.
Though Uttara Corporate Branch of Janata Bank Limited has been able to check NPLs compared to Janata
Bank Limited and banking industry but the branch along with our banking industry has failed to follow the
international standard of NPL. After discussing with bank’s officials and from the gap of literature review,
the researcher has found out that following strategies can be implemented to reduce NPLs in Bangladesh:
 Employees should be accountable who are associated with loan sanctioning and disbursement
procedure for his/her action. Banks should strictly monitor employees so that employees can’t
provide any loan to counterfeit customers.
 Eligible employees should be hired and they should be trained up for enhancing their efficiency
and accuracy to assessing risk management system of the banks.
 Banks should strictly follow guidelines and regulations mandated by Bangladesh Bank and they
should routinely check collateral kept against loans whether it has adequate value and legal
ownership.
 Bangladesh Bank should apply the quasi-judicial power to prevent corrupted parties or people from
becoming Board of directors of a bank even if the government intervenes in it.
 As prevention is better than cure so banks should properly maintain loan documentation and collect
sufficient data of borrower time to time and check the viability of the project before disbursing
loans whether the project can generate sufficient cash flows to repay the loan.
 Banks should take legal actions against the scrupulous loan defaulters to recover defaulted loans.

5.2 Conclusion:
Non-performing loan is a major financial factor that directly impacts the banks’ profitability, growth and
its survival. Efficient credit management can lead to minimization of non-performing loans and generation
of more profits through enhancing performing assets.
From the above analysis of the Uttara Corporate Branch of Janata Bank Limited’s NPLs, it can be predicted
that the NPLs of this branch may grow in the upcoming years as the trend of NPL ratio has always been an
upward one during the study period. Every year its NPLs to total loans and advances is increasing.
Secondary sources data from annual reports of BB, JBL, ABL, RBL, SBL and officials from respective
branch have been used to analyze to make a comparative analysis between Uttara Branch of JBL to JBL
and banking industry through NPL ratio, Provision maintenance ratio and growth rate of NPLs using
Microsoft Excel 2013 software. Variables like Non-performing loans, loans and advances, provisions have
been used to conduct the study. No other study on Non-performing loans at Uttara Corporate Branch of
JBL was done before. As Uttara Corporate Branch of JBL tries its best to maintain regulatory norms
prescribed by Bangladesh Bank despite being a branch of SCBs, it has been able to keep its NPLs within
close range of banking industry of Bangladesh and performed better than overall Janata Bank Limited
during the study period.

Page 28 of 29
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APPENDIX A
A01: Trend of growth rate of NPLs by the categories of banks

A02: Trend of the growth of NPLs by SCBs

A03: Trend of provision maintenance ratio by SCBs

A04: Trend of percent of NPLs by JBL and Uttara Corporate Branch of JBL

A05: Trend of the growth of total Amount of NPLs by JBL and Uttara Corporate Branch of JBL
A06: Trend of NPL ratio by JBL and Uttara Corporate Branch of JBL

A07: Trend of provision maintenance ratio by JBL and Uttara Corporate Branch of JBL