| Title : | Determinants of non-performing loan and cost efficiency of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Nikita Khanal, Author | | Publication Date: | 2017 | | Pagination: | 97p. | | Size: | GRP/Thesis | | Accompanying material: | 11/B | | Languages : | English | | Descriptors: | Non-performing loan
| | Keywords: | 'bank loans banks banks and banking commercial banks nepal loans' | | Class number: | 332.175 | | Abstract: | The non-performing loans (NPL) of financial institutions are considered as a significant issue in the context of Nepal for last few decades. Nepal Rastra Bank (NRB) has made amendment to the provision related to classification of loans of banks and financial institutions (BFIs). The central bank instructed ‘A’,’B’ and ’C’ class banks to classify their non-performing loans(NPL) into five different types i.e. Pass, Sub-standard, Doubtful, and Loss categories, depending on duration of delay in debt servicing . Now, new categoryhave to add i.e. watch list. Non-performing loan is a loan on which the borrower is not making interest payments or repaying any principal.
This study attempts to examine the determinants of non-performing loan and cost efficiency in Nepalese commercial banks. The study is based on secondary data of 16 commercial banks with 128 observations for the period of 2008/09 to 2015/16. Data and information have been collected from Nepal Stock Exchange, Security Exchange Board of Nepal, Banking and Financial Statistics of NRB and annual reports of the selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design as it deals with the macro-economic variables and bank specific variables with non-performing loan and cost efficiency of Nepalese commercial banks.
The result shows that the average non-performing loan ratio is highest for NBBL (4.308 percent) and lowest for SCBL (0.573 percent).The average cost efficiency is highest for PCBL (11.139 percent) and lowest for NIBL (1.179 percent).The average return on equity is highest for NABIL (29.07 percent) and lowest for SUBL (8.094 percent).SBL has highest average loan to deposit ratio (83.414 percent) and SCBL has lowest average loan to deposit ratio (50.51 percent).The average credit growthis highest for NMB (54.891 percent) and lowest for SCBL (12.490 percent). The averageloan to total assets ratio shows that loan to total assets ratio is highest for SBI (1.968 percent) and lowest for NBBL (1.934 percent).
The descriptive statistics for selected commercial bank shows that the average non-performing loan ratio is 1.567 percent, average cost efficiency is 2.799 percent,average return on equityis 18.288 percent,average loan to deposit is 76.159 percent, average gross domestic product growth rate is 3.912 percent, average inflation is 9.112 percent, average credit growth is 24.143 percent and average loan to assets ratio is 90.713 percent.
The correlation matrix shows that return on equity is negatively correlated to non-performing loan ratio. However,loan to deposit and gross domestic product growth rate are positively related to non-performing loan ratio. Similarly, inflation has positive relationship with non-performing loan ratio. Additionally, credit growth and loan to assets ratio has positive relationship with non-performing loan ratio. The correlation result also shows that return on equity and gross domestic product growth rate are positively related to cost efficiency. On the other hand, loan to deposit and credit growth is negatively related to cost efficiency. Additionally, inflation and loan to assets ratio has positive relationship with cost efficiency.
The regression result shows that return on equity has negative and insignificant impact on non-performing loan ratio. It indicates that increase in return on equity leads to decrease in non-performing loan ratio. Moreover, loan to deposit has positive and significant impact on non-performing loan ratio. It indicates that higher the loan to deposit, higher would be the non-performing loan ratio. Likewise, gross domestic product growth rate has positive impact on non-performing loan ratio. It reveals that higher the gross domestic product growth rate, higher would be the non-performing loan ratio. Similarly, inflation has positive impact on non-performing loan ratio. The result states that higher the inflation, higher would be the non-performing loan ratio.Additionally, credit growth has negative and significant impact on non-performing loan ratio. It reveals that higher the credit growth, lower would be the non-performing loan ratio. Likewise, loan to assets ratio has negative and significant impact on non-performing loan ratio. The result denotes that higher the loan to assets ratio, lower would be the non-performing loan ratio.
The result indicated that there is positive and significant impact of return on equity on cost efficiency. It indicates that higher the return on equity, lower would be the cost efficiency. Moreover, loan to deposit has negative and significant on cost efficiency. It indicates that higher the loan to deposit, lower would be the cost efficiency. Additionally, gross domestic product growth rate has positive impact on cost efficiency. It reveals that highergross domestic product growth rate leads to higher cost efficiency. On the other hand, inflation has positive and insignificant impact on cost efficiency. The result states that higher the inflation, higher would be the cost efficiency. Additionally, credit growth hasnegative impact on cost efficiency. It reveals that higher the credit growth, lower would be the cost efficiency. However, loan to assets ratio has positive and significant impact on cost efficiency. The result reveals that higher the loan to assets ratio, higher would be the cost efficiency.
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Determinants of non-performing loan and cost efficiency of Nepalese commercial banks [printed text] / Nikita Khanal, Author . - 2017 . - 97p. ; GRP/Thesis + 11/B. Languages : English | Descriptors: | Non-performing loan
| | Keywords: | 'bank loans banks banks and banking commercial banks nepal loans' | | Class number: | 332.175 | | Abstract: | The non-performing loans (NPL) of financial institutions are considered as a significant issue in the context of Nepal for last few decades. Nepal Rastra Bank (NRB) has made amendment to the provision related to classification of loans of banks and financial institutions (BFIs). The central bank instructed ‘A’,’B’ and ’C’ class banks to classify their non-performing loans(NPL) into five different types i.e. Pass, Sub-standard, Doubtful, and Loss categories, depending on duration of delay in debt servicing . Now, new categoryhave to add i.e. watch list. Non-performing loan is a loan on which the borrower is not making interest payments or repaying any principal.
This study attempts to examine the determinants of non-performing loan and cost efficiency in Nepalese commercial banks. The study is based on secondary data of 16 commercial banks with 128 observations for the period of 2008/09 to 2015/16. Data and information have been collected from Nepal Stock Exchange, Security Exchange Board of Nepal, Banking and Financial Statistics of NRB and annual reports of the selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design as it deals with the macro-economic variables and bank specific variables with non-performing loan and cost efficiency of Nepalese commercial banks.
The result shows that the average non-performing loan ratio is highest for NBBL (4.308 percent) and lowest for SCBL (0.573 percent).The average cost efficiency is highest for PCBL (11.139 percent) and lowest for NIBL (1.179 percent).The average return on equity is highest for NABIL (29.07 percent) and lowest for SUBL (8.094 percent).SBL has highest average loan to deposit ratio (83.414 percent) and SCBL has lowest average loan to deposit ratio (50.51 percent).The average credit growthis highest for NMB (54.891 percent) and lowest for SCBL (12.490 percent). The averageloan to total assets ratio shows that loan to total assets ratio is highest for SBI (1.968 percent) and lowest for NBBL (1.934 percent).
The descriptive statistics for selected commercial bank shows that the average non-performing loan ratio is 1.567 percent, average cost efficiency is 2.799 percent,average return on equityis 18.288 percent,average loan to deposit is 76.159 percent, average gross domestic product growth rate is 3.912 percent, average inflation is 9.112 percent, average credit growth is 24.143 percent and average loan to assets ratio is 90.713 percent.
The correlation matrix shows that return on equity is negatively correlated to non-performing loan ratio. However,loan to deposit and gross domestic product growth rate are positively related to non-performing loan ratio. Similarly, inflation has positive relationship with non-performing loan ratio. Additionally, credit growth and loan to assets ratio has positive relationship with non-performing loan ratio. The correlation result also shows that return on equity and gross domestic product growth rate are positively related to cost efficiency. On the other hand, loan to deposit and credit growth is negatively related to cost efficiency. Additionally, inflation and loan to assets ratio has positive relationship with cost efficiency.
The regression result shows that return on equity has negative and insignificant impact on non-performing loan ratio. It indicates that increase in return on equity leads to decrease in non-performing loan ratio. Moreover, loan to deposit has positive and significant impact on non-performing loan ratio. It indicates that higher the loan to deposit, higher would be the non-performing loan ratio. Likewise, gross domestic product growth rate has positive impact on non-performing loan ratio. It reveals that higher the gross domestic product growth rate, higher would be the non-performing loan ratio. Similarly, inflation has positive impact on non-performing loan ratio. The result states that higher the inflation, higher would be the non-performing loan ratio.Additionally, credit growth has negative and significant impact on non-performing loan ratio. It reveals that higher the credit growth, lower would be the non-performing loan ratio. Likewise, loan to assets ratio has negative and significant impact on non-performing loan ratio. The result denotes that higher the loan to assets ratio, lower would be the non-performing loan ratio.
The result indicated that there is positive and significant impact of return on equity on cost efficiency. It indicates that higher the return on equity, lower would be the cost efficiency. Moreover, loan to deposit has negative and significant on cost efficiency. It indicates that higher the loan to deposit, lower would be the cost efficiency. Additionally, gross domestic product growth rate has positive impact on cost efficiency. It reveals that highergross domestic product growth rate leads to higher cost efficiency. On the other hand, inflation has positive and insignificant impact on cost efficiency. The result states that higher the inflation, higher would be the cost efficiency. Additionally, credit growth hasnegative impact on cost efficiency. It reveals that higher the credit growth, lower would be the cost efficiency. However, loan to assets ratio has positive and significant impact on cost efficiency. The result reveals that higher the loan to assets ratio, higher would be the cost efficiency.
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