Crisis and credit: tackling corporate NPLs in Sri Lanka

Abstract

Purpose Explores strategies that private licensed commercial banks formulate to manage Non-performing Loans (NPLs) for struggling corporate borrowers under challenging economic conditions in Sri Lanka. This study critically evaluates traditional NPL management approaches and their obstacles, suggesting a unique framework to manage NPLs. Design/methodology/approach Study sampled five severely affected private licensed commercial banks listed on the Colombo Stock Exchange (CSE). Data is collected through semi-structured interviews, analyzed using Thematic Analysis and Grounded Theory techniques. The 20-in-depth interviews with bank professionals in corporate credit management form a theory. Findings Final theory emphasizes successful NPL resolving strategy entails the adaptive implementation of a systematic approach underpinned by strategic vigilance of banks, ensuring resilience and responsiveness to dynamic financial landscapes. Originality/value Study presents a unique holistic modern approach to managing NPLs challenging traditional reliance on the 5Cs framework. Study lightens paradoxes exist in literature with viable approaches in managing NPLs. The methodology and unique qualitative data analysis approach broadly theorized and descriptively provide a significant guide to what any strategy commercial banks implement in resolving NPLs for corporate borrowers under a challenging economy should look like.