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Determinants of Cost of Debt

In: Business and Management

Submitted By ATMF
Words 8278
Pages 34
1.0 Introduction

1.1 Background of the study

Private Commercial Banks (PCBs) started their journey in Bangladesh in 1982. Since then, they play a vital role in the economic development of the country. With the help of developed banking technologies and client- focused mentality, they try to ensure quality services in quick time to their customers as per their expectation. Their prudence in selecting appropriate borrowers and sector of providing loans and monitoring them closely has decreased the percentage of non-per forming loan. Besides, the prudent regulatory measure of the central bank including guidance regarding prudential norms of capital adequacy, classification of loans, on-site and off- site super vision have made the PCBs sound in Banking operation. For these reasons, they are found profitable in their business. Their exposure in respect of the cost of debt helps them to ensure higher profitability and their potentiality in the banking industry. An effectively functioning financial system requires a banking system that can earn a reasonable return by taking an acceptable level of risks.

2.0 Statement of the problem

In order to survive in the long run, it is important for a bank to find out what are the factors influencing cost of debt so that it can take initiatives to increase its profitability and performance. Bank performance is also vitally important for all stakeholders, such as the owners, the investors, the debtors, the creditors, the depositors, the managers of banks, the regulators and the government. In this study the research question is “What are the factors that influence cost of debt of private commercial banks in Bangladesh Capital is an important and critical resource for all companies. The capital resources can be divided into two...

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