Why too high a level of NPLs damages your business.
Is your bank’s inventory of NPLs or bad debts, e.g. from enforceable receivables, getting bigger and bigger? In the long term you are not just losing out on interest payments but also any kind of flexibility. The missing revenues mean that you have to cut back on issuing new loans, and the establishment of reserves also ties up other capital that is then not available for your day-to-day business. For the banks affected, an excessive inventory of NPLs and enforceable receivables not only impairs profitability in the long term but also causes problems with balance sheet and equity.