| Title : | Macroeconomic and bank specific determinants of non-performing loan in Nepalese commercial banks: a comparative study of public banks, joint venture banks and private banks | | Material Type: | printed text | | Authors: | Arogya Joshi, Author | | Publication Date: | 2017 | | Pagination: | 111p. | | Size: | GRP/Thesis | | Accompanying material: | 8/B | | Languages : | English | | Descriptors: | Macroeconomics
Non-performing loan
| | Class number: | 332.632 | | Abstract: | Commercial banks are the heart of economic system. One of the important functions of the commercial banks is the financial intermediation functions and thus it transfers the fund from surplus units to the deficit units. It accepts deposits and provides loan and advances to the needed people, institutions and investors. It also invests in several short term and long term projects. They accept the deposits of millions of people, government and business units. They exchange money, accept deposits, grant loan and operate commercial transaction. Commercial banks are primarily organized for the purpose of earning profit and it has been transformed from an earlier period when banks were predominantly short-term financiers (Umar, 2011). While offering funds to deficit unit in the economy the probability of default may occur this is known as non-performing loans. Non-performing loan has negative impact in banks growth as well as ineconomic growth. In one hand it stops the interest earnings of banks and in other handit causes the bank to make certain percent provision (for possible loss of principle)from the operating profit.
This study investigates the macroeconomic and bank specific determinants of non-performing loans in Nepalese commercial banks with respect to firm specific and macroeconomic variables. The study is based on secondary data of 20 commercial banks with 140 observations for the period of 2008/09 to 2014/15. The main source of data include various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of selected commercial banks. The pooled cross sectional data analysis has been undertaken in the study. The research design adopted in this study is descriptive and causal comparative research design as it deals with the relationship between macroeconomic and bank specific variables of Nepalese commercial banks.
The study shows that RBBL has highest average NPL and ADBL has the highest average NPL/TA among the selected commercial bank throughout the study period. Similarly, the average loan loss provision is highest for ADBL (1820.60 million) and the average loan to asset ratio is highest for PCBL (69.88 percent), average capital adequacy ratio is highest for LBL (18.73 percent), inflation rate is highest in year 2009 (12.63 percent) and the gross domestic product growth rate is highest in year 2014 (5.48 percent).
The descriptive statistics for public banks reveals that the average non-performing loan, non-performing loan to total assets, loan loss provision, capital adequacy ratio, inflation and gross domestic product is 2710.56 million, 3.19 percent, 900.10 million, 49.59 percent, 0.27 percent, 10.08 percent and 4.34 percent respectively. Similarly, descriptive statistics for joint venture banks reveals that the average non-performing loan, non-performing loan to total assets, loan loss provision, capital adequacy ratio, inflation and gross domestic product is 460.99 million, 0.74 percent, 525.71 million, 56.31 percent, 12.20 percent, 10.08 percent and 4.34 percent respectively. Likewise, descriptive statistics for private banks reveals that the average non-performing loan, non-performing loan to total assets, loan loss provision, capital adequacy ratio, inflation and gross domestic product is 340.45 million, 1.16 percent, 295.05 million, 65.94 percent, 12.80 percent, 10.08 percent and 4.34 percent respectively.
In the case of public banks, capital adequacy ratio, loan to asset ratio and gross domestic product have negative relationship with non-performing loans. Loan loss provision and inflation have positive relationship with non-performing loan. The result shows the positive relationship of loan loss provision and loan to asset ratio with non-performing loan in case of joint venture banks. However inflation is negatively related to non-performing loan. Capital adequacy ratio, loan to asset ratio, gross domestic product and inflation has negative relation with non-performing loan in case of private banks.
The regression result of public banks shows the negative impact of capital adequacy ratio and gross domestic product with non-performing loan and non-performing loan to total asset. Result also shows the negative impact of loan to asset ratio with non-performing loan. The study observed the positive impact of loan loss provision and inflation with non-performing loan and non-performing loan to total assets. Similarly, in the case of joint venture banks loan loss provision and loan to asset ratio have positive impact on non-performing loan and non-performing loan to total asset. On other hand capital adequacy ratio and gross domestic product a have negative impact on non-performing loan and non-performing loan to total assets. However, inflation is negatively related to non-performing loan to total assets. The result shows the capital adequacy ratio, loan to assets ratio, gross domestic product and inflation have negative impact non-performing loan of private banks. However, loan loss provision and loan to assets ratio has positive relationship with non-performing loan to total assets.
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Macroeconomic and bank specific determinants of non-performing loan in Nepalese commercial banks: a comparative study of public banks, joint venture banks and private banks [printed text] / Arogya Joshi, Author . - 2017 . - 111p. ; GRP/Thesis + 8/B. Languages : English | Descriptors: | Macroeconomics
Non-performing loan
| | Class number: | 332.632 | | Abstract: | Commercial banks are the heart of economic system. One of the important functions of the commercial banks is the financial intermediation functions and thus it transfers the fund from surplus units to the deficit units. It accepts deposits and provides loan and advances to the needed people, institutions and investors. It also invests in several short term and long term projects. They accept the deposits of millions of people, government and business units. They exchange money, accept deposits, grant loan and operate commercial transaction. Commercial banks are primarily organized for the purpose of earning profit and it has been transformed from an earlier period when banks were predominantly short-term financiers (Umar, 2011). While offering funds to deficit unit in the economy the probability of default may occur this is known as non-performing loans. Non-performing loan has negative impact in banks growth as well as ineconomic growth. In one hand it stops the interest earnings of banks and in other handit causes the bank to make certain percent provision (for possible loss of principle)from the operating profit.
This study investigates the macroeconomic and bank specific determinants of non-performing loans in Nepalese commercial banks with respect to firm specific and macroeconomic variables. The study is based on secondary data of 20 commercial banks with 140 observations for the period of 2008/09 to 2014/15. The main source of data include various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of selected commercial banks. The pooled cross sectional data analysis has been undertaken in the study. The research design adopted in this study is descriptive and causal comparative research design as it deals with the relationship between macroeconomic and bank specific variables of Nepalese commercial banks.
The study shows that RBBL has highest average NPL and ADBL has the highest average NPL/TA among the selected commercial bank throughout the study period. Similarly, the average loan loss provision is highest for ADBL (1820.60 million) and the average loan to asset ratio is highest for PCBL (69.88 percent), average capital adequacy ratio is highest for LBL (18.73 percent), inflation rate is highest in year 2009 (12.63 percent) and the gross domestic product growth rate is highest in year 2014 (5.48 percent).
The descriptive statistics for public banks reveals that the average non-performing loan, non-performing loan to total assets, loan loss provision, capital adequacy ratio, inflation and gross domestic product is 2710.56 million, 3.19 percent, 900.10 million, 49.59 percent, 0.27 percent, 10.08 percent and 4.34 percent respectively. Similarly, descriptive statistics for joint venture banks reveals that the average non-performing loan, non-performing loan to total assets, loan loss provision, capital adequacy ratio, inflation and gross domestic product is 460.99 million, 0.74 percent, 525.71 million, 56.31 percent, 12.20 percent, 10.08 percent and 4.34 percent respectively. Likewise, descriptive statistics for private banks reveals that the average non-performing loan, non-performing loan to total assets, loan loss provision, capital adequacy ratio, inflation and gross domestic product is 340.45 million, 1.16 percent, 295.05 million, 65.94 percent, 12.80 percent, 10.08 percent and 4.34 percent respectively.
In the case of public banks, capital adequacy ratio, loan to asset ratio and gross domestic product have negative relationship with non-performing loans. Loan loss provision and inflation have positive relationship with non-performing loan. The result shows the positive relationship of loan loss provision and loan to asset ratio with non-performing loan in case of joint venture banks. However inflation is negatively related to non-performing loan. Capital adequacy ratio, loan to asset ratio, gross domestic product and inflation has negative relation with non-performing loan in case of private banks.
The regression result of public banks shows the negative impact of capital adequacy ratio and gross domestic product with non-performing loan and non-performing loan to total asset. Result also shows the negative impact of loan to asset ratio with non-performing loan. The study observed the positive impact of loan loss provision and inflation with non-performing loan and non-performing loan to total assets. Similarly, in the case of joint venture banks loan loss provision and loan to asset ratio have positive impact on non-performing loan and non-performing loan to total asset. On other hand capital adequacy ratio and gross domestic product a have negative impact on non-performing loan and non-performing loan to total assets. However, inflation is negatively related to non-performing loan to total assets. The result shows the capital adequacy ratio, loan to assets ratio, gross domestic product and inflation have negative impact non-performing loan of private banks. However, loan loss provision and loan to assets ratio has positive relationship with non-performing loan to total assets.
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