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Impact of macroeconomic and bank specific variables on lending behaviour of banks: a case of public and private sector commercial banks of Nepal / Sumira Pradhan
Title : Impact of macroeconomic and bank specific variables on lending behaviour of banks: a case of public and private sector commercial banks of Nepal Material Type: printed text Authors: Sumira Pradhan, Author Publication Date: 2016 Languages : English Descriptors: Macroeconomics Class number: 332.632 Abstract: Commercial banks provide loans to customers on the basis of three principles guiding their operations which are, profitability, liquidity and solvency (Olokoyo, 2011).Banks do grant loans and advance to individuals; business organizations as well as government in order to enable them embark on investment and development activities as a mean of aiding their growth in particular or contributing toward the economic development of a country in general (McKinnon, 2009). Vohra and Sehgal (2012) argued that lending is the most profitable, for the interest rates realized on loans have always been well above those realized on investments. The study focus on dependent variable lending behavior which consists of two proxies: total loans to total assets and non-performing loans to total loans.
The major objective of the study was to examine the impact of macroeconomic (i.e. GDP and inflation) and bank specific (i.e. CRR, liquidity, deposit, WAIRS and bank size) variables on lending behavior of Nepalese commercial banks. However, the specific objectives are to: (a) to analyze the structure and pattern of total loan to total assets, nonperforming to total loan, cash reserve ratio, liquidity, deposit, interest rate spread and size.; (b) to find out the relationship of macroeconomic (GDP and inflation) and bank specific (CRR, deposit, liquidity, interest rate spread and size) variables with total loan to total assets and nonperforming loan to total loan; (c) to examine the effect of macroeconomic and bank specific variables on lending behavior of Nepalese public commercial banks ; (d) to evaluate the impact of macroeconomic and bank specific variables on lending behavior of Nepalese private commercial banks.
The study has employed descriptive research design and causal comparative research design to deal with the issues associated with the impact of macroeconomic and bank specific variables on lending behavior. Total loans to total assets and non-performing loans to total loans are the dependent variables whereas gross domestic product, inflation, cash reserve ratio, deposit, liquidity, weighted average interest rate spread and bank size are the independent variables. The study is based on secondary data for a sample of 18 commercial banks which includes 2 public sector banks and 16 private sector banks leading to a total of 122 observations. The study used the panel data for the period of 7 years from the year 2007/08 to 2013/2014. Stratified sampling technique was used to select 18 sample banks from the population of 29 commercial banks. The secondary data were collected from different sources like annual reports of concerned sample banks, supervision reports published by Nepal Rastra Bank and World Bank for the macroeconomic variables.
The average TL/TA for the selected commercial banks of Nepal is highest for PCBL and lowest for SCB. The average NPL/TL for the total sample is highest for NBB and lowest for EBL. Similarly, the average TL/TA for public commercial banks is highest for ADBL and lowest for NBL. The average NPL/TL for public commercial banks is highest for ADBL and lowest for NBL. Likewise, the average TL/TA for private commercial banks is highest for PCBL and lowest for SCB. The average NPL/TL is highest for NBB and lowest for EBL.The result shows that GDP is positively related to total loans to total assets for Nepalese commercial banks. Moreover, gross domestic product, cash reserve ratio and weighted average interest rate spread are positively related to non-performing loans to total loans for Nepalese commercial banks. The result also shows that GDP is positively related to total loans to total assets for Nepalese public commercial banks. Moreover, gross domestic product is positively related to non-performing loans to total loans for Nepalese public commercial banks.The result shows that inflation and weighted average interest rate spread are positively related to total loans to total assets for Nepalese private commercial banks. Moreover, gross domestic product, cash reserve ratio and weighted average interest rate spread is positively related to non-performing loans to total loans for Nepalese private commercial banks.
The major conclusion of the study is that CRR, liquidity, deposit and bank size plays a major role on total loans to total assets as one of the proxy of bank lending behavior in the context of Nepalese commercial banks. Likewise, for the second proxy i.e. non-performing loans to total loans, CRR and weighted average interest rate spread plays a major role in the context of Nepalese commercial banks. The study also concludes that in the context of Nepalese public commercial banks, liquidity and weighted average interest rate spread have an important role on total loans to total assets. The study further concludes that liquidity and bank size plays a major role on total loans to total assets as one of the proxy of bank lending behavior in the context of Nepalese private commercial banks.
Impact of macroeconomic and bank specific variables on lending behaviour of banks: a case of public and private sector commercial banks of Nepal [printed text] / Sumira Pradhan, Author . - 2016.
Languages : English
Descriptors: Macroeconomics Class number: 332.632 Abstract: Commercial banks provide loans to customers on the basis of three principles guiding their operations which are, profitability, liquidity and solvency (Olokoyo, 2011).Banks do grant loans and advance to individuals; business organizations as well as government in order to enable them embark on investment and development activities as a mean of aiding their growth in particular or contributing toward the economic development of a country in general (McKinnon, 2009). Vohra and Sehgal (2012) argued that lending is the most profitable, for the interest rates realized on loans have always been well above those realized on investments. The study focus on dependent variable lending behavior which consists of two proxies: total loans to total assets and non-performing loans to total loans.
The major objective of the study was to examine the impact of macroeconomic (i.e. GDP and inflation) and bank specific (i.e. CRR, liquidity, deposit, WAIRS and bank size) variables on lending behavior of Nepalese commercial banks. However, the specific objectives are to: (a) to analyze the structure and pattern of total loan to total assets, nonperforming to total loan, cash reserve ratio, liquidity, deposit, interest rate spread and size.; (b) to find out the relationship of macroeconomic (GDP and inflation) and bank specific (CRR, deposit, liquidity, interest rate spread and size) variables with total loan to total assets and nonperforming loan to total loan; (c) to examine the effect of macroeconomic and bank specific variables on lending behavior of Nepalese public commercial banks ; (d) to evaluate the impact of macroeconomic and bank specific variables on lending behavior of Nepalese private commercial banks.
The study has employed descriptive research design and causal comparative research design to deal with the issues associated with the impact of macroeconomic and bank specific variables on lending behavior. Total loans to total assets and non-performing loans to total loans are the dependent variables whereas gross domestic product, inflation, cash reserve ratio, deposit, liquidity, weighted average interest rate spread and bank size are the independent variables. The study is based on secondary data for a sample of 18 commercial banks which includes 2 public sector banks and 16 private sector banks leading to a total of 122 observations. The study used the panel data for the period of 7 years from the year 2007/08 to 2013/2014. Stratified sampling technique was used to select 18 sample banks from the population of 29 commercial banks. The secondary data were collected from different sources like annual reports of concerned sample banks, supervision reports published by Nepal Rastra Bank and World Bank for the macroeconomic variables.
The average TL/TA for the selected commercial banks of Nepal is highest for PCBL and lowest for SCB. The average NPL/TL for the total sample is highest for NBB and lowest for EBL. Similarly, the average TL/TA for public commercial banks is highest for ADBL and lowest for NBL. The average NPL/TL for public commercial banks is highest for ADBL and lowest for NBL. Likewise, the average TL/TA for private commercial banks is highest for PCBL and lowest for SCB. The average NPL/TL is highest for NBB and lowest for EBL.The result shows that GDP is positively related to total loans to total assets for Nepalese commercial banks. Moreover, gross domestic product, cash reserve ratio and weighted average interest rate spread are positively related to non-performing loans to total loans for Nepalese commercial banks. The result also shows that GDP is positively related to total loans to total assets for Nepalese public commercial banks. Moreover, gross domestic product is positively related to non-performing loans to total loans for Nepalese public commercial banks.The result shows that inflation and weighted average interest rate spread are positively related to total loans to total assets for Nepalese private commercial banks. Moreover, gross domestic product, cash reserve ratio and weighted average interest rate spread is positively related to non-performing loans to total loans for Nepalese private commercial banks.
The major conclusion of the study is that CRR, liquidity, deposit and bank size plays a major role on total loans to total assets as one of the proxy of bank lending behavior in the context of Nepalese commercial banks. Likewise, for the second proxy i.e. non-performing loans to total loans, CRR and weighted average interest rate spread plays a major role in the context of Nepalese commercial banks. The study also concludes that in the context of Nepalese public commercial banks, liquidity and weighted average interest rate spread have an important role on total loans to total assets. The study further concludes that liquidity and bank size plays a major role on total loans to total assets as one of the proxy of bank lending behavior in the context of Nepalese private commercial banks.
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Barcode Call number Media type Location Section Status 219/D 332.632 PRA Books Uniglobe Library Social Sciences Available