| Title : | Bank specific and macroeconomic determinants of non-performing loans evidence from commercial banks of Nepal | | Material Type: | printed text | | Authors: | Garima Dawadi, Author | | Publication Date: | 2015 | | Pagination: | 72p. | | Size: | GRP/Thesis | | Accompanying material: | 5/B | | General note: | Including bibilography | | Languages : | English | | Descriptors: | Banks
Banks and banking
Macroeconomics
Non-performing loan
| | Keywords: | 'macroeconomics economic policy banks banks and banking nepal' | | Class number: | 332.632 | | Abstract: | Loans have a vital contribution towards development of economy. However, its nonpayment also leads to incidence of huge loss on banks in particular and country in general. Hence, this study was conducted to examine both bank specific and macroeconomic determinants of NPLs of commercial banks in Nepal.
A total of 17 commercial banks are chosen to represent the Nepalese commercial banks during period form 2004/2005 to 2013/14. The independent variables for this research are return on assets, return on equity, capital adequacy ratio, size, interest gross domestic product, inflation rate.For analysis of data descriptive statistics, correlation, and regression analysis among the dependent and independent is used.This study is based on secondary data and data are collected from the annual reports of the individual bank, Nepal Rastra Bank BFIs statistics, and audited balance sheet of respective bank, published journals and books.
Pearson Correlation Analysis shows that non-performing loan is positively correlated with interest rate however there is negative relationship between NPL and inflation. Similarly, the highest positive correlation is between size and NPL at 1 percent significance level.NPL has positive relation with other variable such as interest, CAR, but negative relationship between GDP and Inflation.
The linear regression model is used to examine the relationship between dependent variable, non-performing loan, and independent variables, firm specific and macro-economic. Among the firm specific variables, size and capital adequacy ratios have significant relationship with non-performing loan. However, the macroeconomic variables, gross domestic product and inflation do not have significant relation with non-performing loan.
The study shows that capital adequacy ratio is negatively related with non-performing loan and the relationship is significant, which also supports the priori hypothesis. The negative relationship with non-performing loans indicates that increase in capital adequacy ratio leads to decrease in non-performing loan. Similarly, bank size has positive significant relation with non-performing loan which is however against the priori hypothesis. The positive relation with non-performing loan indicates that increase in bank size leads to increase to non-performing loans.
Thus, of the variables considered, capital adequacy ratio and bank size have higher explanatory power than other variables as indicated by significant relationship. Other variables like return on assets, return on equity, interest, gross domestic product and inflation are not significant with non-performing loans. |
Bank specific and macroeconomic determinants of non-performing loans evidence from commercial banks of Nepal [printed text] / Garima Dawadi, Author . - 2015 . - 72p. ; GRP/Thesis + 5/B. Including bibilography Languages : English | Descriptors: | Banks
Banks and banking
Macroeconomics
Non-performing loan
| | Keywords: | 'macroeconomics economic policy banks banks and banking nepal' | | Class number: | 332.632 | | Abstract: | Loans have a vital contribution towards development of economy. However, its nonpayment also leads to incidence of huge loss on banks in particular and country in general. Hence, this study was conducted to examine both bank specific and macroeconomic determinants of NPLs of commercial banks in Nepal.
A total of 17 commercial banks are chosen to represent the Nepalese commercial banks during period form 2004/2005 to 2013/14. The independent variables for this research are return on assets, return on equity, capital adequacy ratio, size, interest gross domestic product, inflation rate.For analysis of data descriptive statistics, correlation, and regression analysis among the dependent and independent is used.This study is based on secondary data and data are collected from the annual reports of the individual bank, Nepal Rastra Bank BFIs statistics, and audited balance sheet of respective bank, published journals and books.
Pearson Correlation Analysis shows that non-performing loan is positively correlated with interest rate however there is negative relationship between NPL and inflation. Similarly, the highest positive correlation is between size and NPL at 1 percent significance level.NPL has positive relation with other variable such as interest, CAR, but negative relationship between GDP and Inflation.
The linear regression model is used to examine the relationship between dependent variable, non-performing loan, and independent variables, firm specific and macro-economic. Among the firm specific variables, size and capital adequacy ratios have significant relationship with non-performing loan. However, the macroeconomic variables, gross domestic product and inflation do not have significant relation with non-performing loan.
The study shows that capital adequacy ratio is negatively related with non-performing loan and the relationship is significant, which also supports the priori hypothesis. The negative relationship with non-performing loans indicates that increase in capital adequacy ratio leads to decrease in non-performing loan. Similarly, bank size has positive significant relation with non-performing loan which is however against the priori hypothesis. The positive relation with non-performing loan indicates that increase in bank size leads to increase to non-performing loans.
Thus, of the variables considered, capital adequacy ratio and bank size have higher explanatory power than other variables as indicated by significant relationship. Other variables like return on assets, return on equity, interest, gross domestic product and inflation are not significant with non-performing loans. |
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