Abstract : Non-performing loans (NPLs) exacerbate banks’ overall profitability and it becomes a matter of concern for the banking sector. Under the guidance of BASEL III, banks maintain loan loss provisions as a shield to accommodate the expected loss out of NPLs. However, this provision blocks banks’ fund for lending purpose and thus creates a hindrance in earnings. The current study focuses on this issue and examines the impact of loan loss provision on banks’ loan growth and to understand which factors can drive up the efficient credit management to mitigate the NPLs problem for the commercial banks. Taking 25 private commercial banks listed in DSE has been taken as sample, a multiple regression analysis has been done through the SPSS software to identify whether loan loss provision significantly influence the loan growth or not. The results show that profitability, deposit growth, liquidity and GDP growth positively influence the loan growth of selected private commercial banks and these relations are statistically significant. Conversely, Capital Adequacy Ratio and lending rate have significant negative influence on the loan growth. We found no significant impact of loan loss provision (LLP) on credit growth. The limitation of this study is that it has been conducted by considering the overall provision for loan losses. Further investigation can be done splitting the provision into general and specific provision.

Keyword : Commercial Banks, Credit Risk, Growth, Loan Loss Provision, Loans.