Abstract

Non-performing loans (NPL) and foreign direct investment (FDI) are pivotal financial parameters exerting contrasting effects on economic performance, particularly in developing and emerging economies. Foreign direct investment, known for stimulating economic activity, has the potential to reduce the number of non-performing loans. This paper investigates how foreign direct investment influences non-performing loan dynamics using data from Bangladesh spanning from 1991 to 2022 alongside key macroeconomic variables. The findings indicate that, overall, FDI has a very minimal positive impact on NPL, underscoring that the relationship between foreign investment and banking stability is complex and likely influenced by multiple factors beyond just FDI.