Determinants of loan loss provision in Nepalese commercial banks / Deepa Bhusal 

Public ISBD Title : Determinants of loan loss provision in Nepalese commercial banks Material Type: printed text Authors: Deepa Bhusal, Author Publication Date: 2018 Pagination: 96p. Size: GRP/Thesis Accompanying material: 11/B Languages : English Descriptors: Bank loans Loan loss provision Keywords: loans  loan loss  banks  banking  management  financial institutions  commercial banks' Class number: 332.12 Abstract: In today’s fast-moving business environment, banks are exposed to a large number of risks: credit risk, liquidity risk, market risk, operational risk, interest rate exchange risk, etc. Due to such exposure to various risks, efficient risk management is required. Managing risk is one of the basic tasks to be done, once it has been identified and known. Shafiq& Nasr (2010) argued that managing a risk in advance is far better than waiting for its occurrence. The focus of good risk management is the identification and treatment of risks. Its objective is to add maximum sustainable value to all the activities of the organization. The loan loss provision increase with the riskiness that bank makes on the loan. A bank making a small number of risky loans will have a low loan loss provision compared to a bank taking higher risks. The high quality loan requires low loan loss provision, whereas bad loan requires high loan loss provision. A loan loss provision is considered as an adjustment of the bank value of a loan which regards future changes in the loan’s value due to default events (Hlawatch&Ostrowski, 2010). Managerial discretion in the use of loan loss provision (LLP) has attracted considerable attention from both regulators and academics for a long time. Earlier studies focused on the use of LLP for capital management (Ahmed et al., 1999). More recently, the study focuses on the timeliness of LLP over the business cycle and the associated effects on banks' lending behavior and financial stability (Laeven&Majnoni, 2003; Bikker&Metzemakers, 2005 and Beatty & Liao, 2011). If banks account for the fact that the latent credit risk in their loan portfolios rises during upswings when competition between banks increases and monitoring efforts decrease, they should increase their provisioning level during upswings and lower it during downturns as losses occur, thus build and release provisions in a countercyclical fashion. The major purpose of this study is to analyze the impact of bank specific and macroeconomic factors on loan loss provisions in Nepalese commercial banks. The specific objectives of this study are: a) To analyze the structure and pattern of dependent (LLP1 and LLP2) and independent variables (capital adequacy ratio, loan growth, bank size and non-performing loan), b) To examine the relationship between macroeconomic variable like GDP growth rate, inflation rate and interest rate with loan loss provision, c) To identify the effect of capital adequacy ratio, loan growth and bank size on loan loss provision, d) To examine the relationship between non-performing loan and loan loss provision of the bank. The study is based on the secondary data which were gathered for a sample of 18 commercial banks of Nepal within the time period from 2008 to 2015, leading to the total of 144 observations. This study employs descriptive and causal comparative research design to deal with bank specific and macroeconomic determinants of loan loss provision of Nepalese commercial banks. More specifically, the study examines the effect of capital adequacy ratio, loan growth, bank size, non-performing loan, GDP growth rate, inflation rate and interest rate on loan loss provision. The main sources of data are various issues of banking and financial statistics, World Bank, bank supervision reports of NRB and various annual reports of selected commercial banks. The average loan loss provision to total loan is highest for NBB (9.88 percent) and lowest for SCBL (1.34 percent).CZBL has the highest average loan loss provision to non-performing loan of 7.29 times and HBL has lowest of 1.25 times.The average capital adequacy ratio is highest for SCBL (15.18 percent) and lowest for SBL (10.76 percent).The analysis of loan growth indicates that average loan growth is highest for GBIME (38.33 percent) and lowest for SCBL (11.73 percent).The average bank size is highest for NABIL (83695.83 million) and lowest for NCC (22907.86 million).NBB has the highest average non-performing loan of 6.39 percent and EBL has lowest of 0.51 percent. The descriptive statistics for the variables are used in this study. Clearly, The average loan loss provisions to total loan and loan loss provision to non-performing loan for 18 sample banks is 2.62 percent and 2.85 times respectively. Similarly, average capital adequacy ratio is 12.31 percent; loan growth is 23.71 percent. Similarly, the mean proportion of bank size is 45266.58 million, non-performing loan is 1.73 percent, GDP growth rate is 3.86 percent and inflation rate is 9.53 percent. Furthermore, the average interest rate is of 3.25 percent. From the analysis, non-performing loan, inflation rate and interest rate are positively correlated with loan loss provision to total loan. This study reveals that capital adequacy ratio, loan growth, bank size and GDP growth rate are negatively correlated with loan loss provision to total loan. It indicates that higher the capital adequacy ratio, loan growth, bank size and GDP growth rate, lower would be loan loss provision to total loan. The result also shows that loan growth, inflation rate and interest rate are positively correlated to loan loss provision to non-performing loan. Also, this study reveals that capital adequacy ratio, non-performing loan, bank size and GDP growth rate are negatively correlated to loan loss provision to non-performing loan. The regression result found beta coefficient of capital adequacy ratio is negative with loan loss provision to total loan and loan loss provision to non-performing loan which indicates that banks having higher capital adequacy ratio have lower loan loss provision to total loan and loan loss provision to non-performing loan. The beta coefficient is significant at 1 percent level of significance for loan loss provision to total loan and significant at 5 percent level of significance for loan loss provision to non-performing loan. The beta coefficient for loan growth is negative for loan loss provision to total loan and positive for loan loss provision to non-performing loan. The beta coefficient for loan growth is insignificant for both loan loss provision to total loan and loan loss provision to non-performing loan. The result found negative beta coefficient for the bank size with loan loss provision to total loan and loan loss provision to non-performing loan. The coefficient is significant at 5 percent level of significance for bank size with loan loss provision to total loan. The result shows positive beta coefficient for non-performing loan with loan loss provision to total loan. However, beta coefficient for non-performing loan is negative with loan loss provision to non-performing loan. The beta coefficient for non-performing loan is significant at 1 percent level of significance. The beta coefficient for GDP growth rate is negative and insignificant for all proxy of loan loss provision i.e. loan loss provision to total loan and loan loss provision to non-performing loan which means that with an increase in GDP growth rate leads to decrease in loan loss provision. The positive beta coefficient is observed for inflation rate with loan loss provision to total loan and loan loss provision to non-performing loan which indicates that higher the inflation rate; higher would be loan loss provision to total loan and loan loss provision to non-performing loan. The beta coefficient is insignificant for inflation rate. The result found positive beta coefficient for the interest rate with loan loss provision to total loan and loan loss provision to non-performing loan. The coefficient is significant at 1 percent level of significance for interest rate with loan loss provision to non-performing loan and insignificant for loan loss provision to total loan. Determinants of loan loss provision in Nepalese commercial banks [printed text] / Deepa Bhusal, Author . - 2018 . - 96p. ; GRP/Thesis + 11/B. Languages : English Descriptors: Bank loans Loan loss provision Keywords: loans  loan loss  banks  banking  management  financial institutions  commercial banks' Class number: 332.12 Abstract: In today’s fast-moving business environment, banks are exposed to a large number of risks: credit risk, liquidity risk, market risk, operational risk, interest rate exchange risk, etc. Due to such exposure to various risks, efficient risk management is required. Managing risk is one of the basic tasks to be done, once it has been identified and known. Shafiq& Nasr (2010) argued that managing a risk in advance is far better than waiting for its occurrence. The focus of good risk management is the identification and treatment of risks. Its objective is to add maximum sustainable value to all the activities of the organization. The loan loss provision increase with the riskiness that bank makes on the loan. A bank making a small number of risky loans will have a low loan loss provision compared to a bank taking higher risks. The high quality loan requires low loan loss provision, whereas bad loan requires high loan loss provision. A loan loss provision is considered as an adjustment of the bank value of a loan which regards future changes in the loan’s value due to default events (Hlawatch&Ostrowski, 2010). Managerial discretion in the use of loan loss provision (LLP) has attracted considerable attention from both regulators and academics for a long time. Earlier studies focused on the use of LLP for capital management (Ahmed et al., 1999). More recently, the study focuses on the timeliness of LLP over the business cycle and the associated effects on banks' lending behavior and financial stability (Laeven&Majnoni, 2003; Bikker&Metzemakers, 2005 and Beatty & Liao, 2011). If banks account for the fact that the latent credit risk in their loan portfolios rises during upswings when competition between banks increases and monitoring efforts decrease, they should increase their provisioning level during upswings and lower it during downturns as losses occur, thus build and release provisions in a countercyclical fashion. The major purpose of this study is to analyze the impact of bank specific and macroeconomic factors on loan loss provisions in Nepalese commercial banks. The specific objectives of this study are: a) To analyze the structure and pattern of dependent (LLP1 and LLP2) and independent variables (capital adequacy ratio, loan growth, bank size and non-performing loan), b) To examine the relationship between macroeconomic variable like GDP growth rate, inflation rate and interest rate with loan loss provision, c) To identify the effect of capital adequacy ratio, loan growth and bank size on loan loss provision, d) To examine the relationship between non-performing loan and loan loss provision of the bank. The study is based on the secondary data which were gathered for a sample of 18 commercial banks of Nepal within the time period from 2008 to 2015, leading to the total of 144 observations. This study employs descriptive and causal comparative research design to deal with bank specific and macroeconomic determinants of loan loss provision of Nepalese commercial banks. More specifically, the study examines the effect of capital adequacy ratio, loan growth, bank size, non-performing loan, GDP growth rate, inflation rate and interest rate on loan loss provision. The main sources of data are various issues of banking and financial statistics, World Bank, bank supervision reports of NRB and various annual reports of selected commercial banks. The average loan loss provision to total loan is highest for NBB (9.88 percent) and lowest for SCBL (1.34 percent).CZBL has the highest average loan loss provision to non-performing loan of 7.29 times and HBL has lowest of 1.25 times.The average capital adequacy ratio is highest for SCBL (15.18 percent) and lowest for SBL (10.76 percent).The analysis of loan growth indicates that average loan growth is highest for GBIME (38.33 percent) and lowest for SCBL (11.73 percent).The average bank size is highest for NABIL (83695.83 million) and lowest for NCC (22907.86 million).NBB has the highest average non-performing loan of 6.39 percent and EBL has lowest of 0.51 percent. The descriptive statistics for the variables are used in this study. Clearly, The average loan loss provisions to total loan and loan loss provision to non-performing loan for 18 sample banks is 2.62 percent and 2.85 times respectively. Similarly, average capital adequacy ratio is 12.31 percent; loan growth is 23.71 percent. Similarly, the mean proportion of bank size is 45266.58 million, non-performing loan is 1.73 percent, GDP growth rate is 3.86 percent and inflation rate is 9.53 percent. Furthermore, the average interest rate is of 3.25 percent. From the analysis, non-performing loan, inflation rate and interest rate are positively correlated with loan loss provision to total loan. This study reveals that capital adequacy ratio, loan growth, bank size and GDP growth rate are negatively correlated with loan loss provision to total loan. It indicates that higher the capital adequacy ratio, loan growth, bank size and GDP growth rate, lower would be loan loss provision to total loan. The result also shows that loan growth, inflation rate and interest rate are positively correlated to loan loss provision to non-performing loan. Also, this study reveals that capital adequacy ratio, non-performing loan, bank size and GDP growth rate are negatively correlated to loan loss provision to non-performing loan. The regression result found beta coefficient of capital adequacy ratio is negative with loan loss provision to total loan and loan loss provision to non-performing loan which indicates that banks having higher capital adequacy ratio have lower loan loss provision to total loan and loan loss provision to non-performing loan. The beta coefficient is significant at 1 percent level of significance for loan loss provision to total loan and significant at 5 percent level of significance for loan loss provision to non-performing loan. The beta coefficient for loan growth is negative for loan loss provision to total loan and positive for loan loss provision to non-performing loan. The beta coefficient for loan growth is insignificant for both loan loss provision to total loan and loan loss provision to non-performing loan. The result found negative beta coefficient for the bank size with loan loss provision to total loan and loan loss provision to non-performing loan. The coefficient is significant at 5 percent level of significance for bank size with loan loss provision to total loan. The result shows positive beta coefficient for non-performing loan with loan loss provision to total loan. However, beta coefficient for non-performing loan is negative with loan loss provision to non-performing loan. The beta coefficient for non-performing loan is significant at 1 percent level of significance. The beta coefficient for GDP growth rate is negative and insignificant for all proxy of loan loss provision i.e. loan loss provision to total loan and loan loss provision to non-performing loan which means that with an increase in GDP growth rate leads to decrease in loan loss provision. The positive beta coefficient is observed for inflation rate with loan loss provision to total loan and loan loss provision to non-performing loan which indicates that higher the inflation rate; higher would be loan loss provision to total loan and loan loss provision to non-performing loan. The beta coefficient is insignificant for inflation rate. The result found positive beta coefficient for the interest rate with loan loss provision to total loan and loan loss provision to non-performing loan. The coefficient is significant at 1 percent level of significance for interest rate with loan loss provision to non-performing loan and insignificant for loan loss provision to total loan.

Hold

Place a hold on this item

Copies

Barcode	Call number	Media type	Location	Section	Status
470/D	332.12 BHU	Books	Uniglobe Library	Social Sciences	Available

Impact of customer satisfaction, customer retention , perceived quality on loyalty of the Nepalese commercial banks / Rina Gurung 

Public ISBD Title : Impact of customer satisfaction, customer retention , perceived quality on loyalty of the Nepalese commercial banks Material Type: printed text Authors: Rina Gurung, Author Publication Date: 2014 Pagination: 105p. Size: GRP/Thesis Accompanying material: 2/B General note: Includes bibliographies Languages : English Descriptors: Banking Banks Commercial banks Customers Financial institutions Nepal Keywords: 'banking systems  customer satisfaction  Case studies  customer retention  Nepal  commercial banks  banks' Class number: 332.12 Impact of customer satisfaction, customer retention , perceived quality on loyalty of the Nepalese commercial banks [printed text] / Rina Gurung, Author . - 2014 . - 105p. ; GRP/Thesis + 2/B. Includes bibliographies Languages : English Descriptors: Banking Banks Commercial banks Customers Financial institutions Nepal Keywords: 'banking systems  customer satisfaction  Case studies  customer retention  Nepal  commercial banks  banks' Class number: 332.12

Hold

Place a hold on this item

Copies

Barcode	Call number	Media type	Location	Section	Status
32/D	332.12 GUR	Thesis/Dissertation	Uniglobe Library	Social Sciences	Available

Impact of loan loss provision on financial performance of Nepalese commercial banks / Archana Shrestha 

Public ISBD Title : Impact of loan loss provision on financial performance of Nepalese commercial banks Material Type: printed text Authors: Archana Shrestha, Author Publication Date: 2017 Pagination: 96p. Size: GRP/Thesis Accompanying material: 11/B Languages : English Descriptors: Loan loss provision Keywords: 'loans  loan loss  banks  banking  management  financial institutions  commercial banks' Class number: 332.12 Abstract: This study entitled “Impact of loan loss provision on financial performance of Nepalese commercial banks” has been conducted to satisfy the partial requirements for the degree of Masters of Business Administration (Finance) of Pokhara University. Every project big or small is successful largely due to the effort of a number of wonderful people who have always given their valuable advice or lent a helping hand. I sincerely appreciate the inspiration; support and guidance of all those people who have been instrumental in making this study a success. First of all, I would like to extend my immense gratitude to my honorable supervisor, Prof. Dr. Radhe Shyam Pradhan who accepted me as his GRP student without any hesitation. His valuable supervision and guidance have been the major boost in completing this study. I am highly indebted and very thankful for his continuous support and constructive suggestions that have enabled this research project to achieve its present form. Moreover, I am also indebted and thankful to him for his motivation, support and instruction in completing my overall MBA degree. Similar, profound gratitude goes to Dr. Nar Bahadur Bista (Principal) and Mr. Dipkar Thapa, (Program Director) for their constant faith, guidance, and for the support they provided when it mattered. Special mention goes to Mr. Jagadish Prasad Bist (Research Assistant) for his timely and continuous guidance throughout the study. He not only reviewed my work but also suggested valuable advices and insights. I also highly appreciate the efforts, supervision, guidance and inspirations of all the faculties of Uniglobe College not only throughout this study but throughout the whole MBA course. I would like to acknowledge all Uniglobe College staffs and my friends. Last but not the least, I would like to express my warm respect to my parents and my siblings for their affection and emotional support that has inspired me to achieve every success including this study. I would also like to take full responsibility of any kind of deficiency presented in this study. Impact of loan loss provision on financial performance of Nepalese commercial banks [printed text] / Archana Shrestha, Author . - 2017 . - 96p. ; GRP/Thesis + 11/B. Languages : English Descriptors: Loan loss provision Keywords: 'loans  loan loss  banks  banking  management  financial institutions  commercial banks' Class number: 332.12 Abstract: This study entitled “Impact of loan loss provision on financial performance of Nepalese commercial banks” has been conducted to satisfy the partial requirements for the degree of Masters of Business Administration (Finance) of Pokhara University. Every project big or small is successful largely due to the effort of a number of wonderful people who have always given their valuable advice or lent a helping hand. I sincerely appreciate the inspiration; support and guidance of all those people who have been instrumental in making this study a success. First of all, I would like to extend my immense gratitude to my honorable supervisor, Prof. Dr. Radhe Shyam Pradhan who accepted me as his GRP student without any hesitation. His valuable supervision and guidance have been the major boost in completing this study. I am highly indebted and very thankful for his continuous support and constructive suggestions that have enabled this research project to achieve its present form. Moreover, I am also indebted and thankful to him for his motivation, support and instruction in completing my overall MBA degree. Similar, profound gratitude goes to Dr. Nar Bahadur Bista (Principal) and Mr. Dipkar Thapa, (Program Director) for their constant faith, guidance, and for the support they provided when it mattered. Special mention goes to Mr. Jagadish Prasad Bist (Research Assistant) for his timely and continuous guidance throughout the study. He not only reviewed my work but also suggested valuable advices and insights. I also highly appreciate the efforts, supervision, guidance and inspirations of all the faculties of Uniglobe College not only throughout this study but throughout the whole MBA course. I would like to acknowledge all Uniglobe College staffs and my friends. Last but not the least, I would like to express my warm respect to my parents and my siblings for their affection and emotional support that has inspired me to achieve every success including this study. I would also like to take full responsibility of any kind of deficiency presented in this study.

Hold

Place a hold on this item

Copies

Barcode	Call number	Media type	Location	Section	Status
396/D	332.12SHR	Books	Uniglobe Library	Social Sciences	Available

Loan loss provision practices of Nepalese commercial banks / Sajana Dangol 

Public ISBD Title : Loan loss provision practices of Nepalese commercial banks Material Type: printed text Authors: Sajana Dangol, Author Publication Date: 2013 Pagination: 88p. Size: GRP/Thesis Accompanying material: 1/B General note: Including bibliography Languages : English Descriptors: Banks Banks and banking Commercial banks Loan loss provision Loans Nepal Sajana Dangol Keywords: 'sajana Dangol  nepal  loans  loan loss  banks  banking  management  financial institutions  commercial banks' Class number: 332.12 Abstract: Loan loss provisions ensure level of protection for expected credit losses. The intention of a loan loss provision is the anticipation of the loan's expected losses by adjusting the book value of the loan. Loan loss provisions reflect not only the probability of default, but also the amount the lender can recover in case of default. This study investigates the determinants of loan loss provisions of commercial banks in Nepal with respect to firm specific and macroeconomic variables. The specific objectives of this study were to analyze the relationship and impact of credit quality, earnings, capital adequacy ratio, bank size and GDP on loan loss provision. The research was based on primary and secondary data. The methods used for secondary data analysis included descriptive statistics, and analysis by forming portfolios and regression analysis. The methods used for primary data analysis included percentage frequency distribution, mean scores and standard deviation of responses to Likert scale items. The major conclusion of this study is that nonperforming loans, growth of loan, earnings before tax and provision, capital adequacy ratio and total assets explain loan loss provision in the context of Nepal. The determinants of LLP are not equally applicable for all types of ownership of banks. Some determinants like CAR and TA are common to all banks while other determinants like NPL, LAR, GL, ROA, EBTPTA, ME and GDP are not equally significant for all banks. The results also indicate strong role of capital adequacy ratio and nonperforming loan to explain loan loss provision except for state owned banks. However, total assets also has consistent significant negative with loan loss provision in all case. This study also concluded that provisioning tends to be low when there is rapid growth in loan. This study also concluded that banks have provisioning for loan loss by setting aside extra buffers in high earning years and banks use loan loss provisions to smooth income over the period. Loan loss provision practices of Nepalese commercial banks [printed text] / Sajana Dangol, Author . - 2013 . - 88p. ; GRP/Thesis + 1/B. Including bibliography Languages : English Descriptors: Banks Banks and banking Commercial banks Loan loss provision Loans Nepal Sajana Dangol Keywords: 'sajana Dangol  nepal  loans  loan loss  banks  banking  management  financial institutions  commercial banks' Class number: 332.12 Abstract: Loan loss provisions ensure level of protection for expected credit losses. The intention of a loan loss provision is the anticipation of the loan's expected losses by adjusting the book value of the loan. Loan loss provisions reflect not only the probability of default, but also the amount the lender can recover in case of default. This study investigates the determinants of loan loss provisions of commercial banks in Nepal with respect to firm specific and macroeconomic variables. The specific objectives of this study were to analyze the relationship and impact of credit quality, earnings, capital adequacy ratio, bank size and GDP on loan loss provision. The research was based on primary and secondary data. The methods used for secondary data analysis included descriptive statistics, and analysis by forming portfolios and regression analysis. The methods used for primary data analysis included percentage frequency distribution, mean scores and standard deviation of responses to Likert scale items. The major conclusion of this study is that nonperforming loans, growth of loan, earnings before tax and provision, capital adequacy ratio and total assets explain loan loss provision in the context of Nepal. The determinants of LLP are not equally applicable for all types of ownership of banks. Some determinants like CAR and TA are common to all banks while other determinants like NPL, LAR, GL, ROA, EBTPTA, ME and GDP are not equally significant for all banks. The results also indicate strong role of capital adequacy ratio and nonperforming loan to explain loan loss provision except for state owned banks. However, total assets also has consistent significant negative with loan loss provision in all case. This study also concluded that provisioning tends to be low when there is rapid growth in loan. This study also concluded that banks have provisioning for loan loss by setting aside extra buffers in high earning years and banks use loan loss provisions to smooth income over the period.

Hold

Place a hold on this item

Copies

Barcode	Call number	Media type	Location	Section	Status
18/D	332.12 DAN	Thesis/Dissertation	Uniglobe Library	Social Sciences	Available

Problem loans and cost efficiency in Nepalese Commercial Banks / Shreesh Parajuli

Public ISBD Title : Problem loans and cost efficiency in Nepalese Commercial Banks Material Type: printed text Authors: Shreesh Parajuli, Author Publication Date: 2015 Pagination: 78p. Size: GRP/Thesis Accompanying material: 6/B Languages : English Descriptors: Bank and banking Bank loans Class number: 332.12 Abstract: Researchers over the last decades believe that there is a connection between problem loans and cost efficiency. There are many studies published to examine this relationship. The relationship between problem loans and cost efficiency are studied extensively by several researchers. In regards to the relationship between problem loans and cost efficiency, researchers found different results. Some of the scholars’ state that, problem loans has negative relationship with cost efficiency. Meanwhile other researchers indicate the nonlinear negative and positive relationship between problem loans and cost efficiency. This study investigates the impact of problem loans and cost efficiency and determinants of problem loans and cost efficiency of commercial banks of Nepal. The study has employed descriptive and causal comparative research designs to deal with the fundamental issues associated with problem loans and cost efficiencies and factors influencing these parameters in the context of Nepal.The study is based on secondary data. The variables used in the study are categorized into bank specific variables (capital adequacy ratio, return on assets, bank size, risk weighted assets, priority sector lending, foreign ownership, credit growth, percentage of loan to deposit and percentage loan loss provision to total loans) and control variables (inflation, real GDP growth). Similarly this study covers data on bank specific variables for 7 years ranging for year 2008 to 2014. The study reveals that problem loans have significant impact on cost efficiency of banks and suggests specifically that bank should try to minimize problem loans in order to achieve cost efficiency. More specifically, the study finds that capital adequacy ratio, credit growth, loan to deposit percentage, priority sector lending, and risk weighted assets, were statistically significant factors that determine the problem loans of commercial banks in Nepal. However, the result did not support the significant effect of return of assets, inflation and real GDP growth. Similarly problem loans, capital adequacy ratio, bank size and loan loss provision were statistically significant factors that determine the cost efficiency of commercial banks in Nepal. However, the result did not support the significant effect of foreign ownership, inflation and real GDP growth. The study observed a negative relationship between return on assets and problem loans indicating that profitable banks have low problem loans. Hence, it is recommended that banks should be able to maximize and maintain optimum ROA so that they don’t have to go for lending in riskier assets to increase revenue. Likewise, the study observed a negative and significant relationship between capital adequacy ratio and problem loans. Hence it is recommended that banks should focus on enhancing their capital, as well capitalized banks are less incentive to take risk which reduces the percentage of problem loans in such banks. The study remains enough ground for future researchers in the same topic. The future studies can be done by using both secondary and primary data so that along with determinants of problem loans and cost efficiency, perception of loan officers, operation officer as well as managers regarding the impact of problem loans on cost efficiency can also be obtained. In addition to commercial banks, the further studies can select other financial institutions like development banks, finance companies, micro finance and cooperatives can be included in sample so as to grasp the wider view of impact of problem loans on cost efficiency and their determinants. Problem loans and cost efficiency in Nepalese Commercial Banks [printed text] / Shreesh Parajuli, Author . - 2015 . - 78p. ; GRP/Thesis + 6/B. Languages : English Descriptors: Bank and banking Bank loans Class number: 332.12 Abstract: Researchers over the last decades believe that there is a connection between problem loans and cost efficiency. There are many studies published to examine this relationship. The relationship between problem loans and cost efficiency are studied extensively by several researchers. In regards to the relationship between problem loans and cost efficiency, researchers found different results. Some of the scholars’ state that, problem loans has negative relationship with cost efficiency. Meanwhile other researchers indicate the nonlinear negative and positive relationship between problem loans and cost efficiency. This study investigates the impact of problem loans and cost efficiency and determinants of problem loans and cost efficiency of commercial banks of Nepal. The study has employed descriptive and causal comparative research designs to deal with the fundamental issues associated with problem loans and cost efficiencies and factors influencing these parameters in the context of Nepal.The study is based on secondary data. The variables used in the study are categorized into bank specific variables (capital adequacy ratio, return on assets, bank size, risk weighted assets, priority sector lending, foreign ownership, credit growth, percentage of loan to deposit and percentage loan loss provision to total loans) and control variables (inflation, real GDP growth). Similarly this study covers data on bank specific variables for 7 years ranging for year 2008 to 2014. The study reveals that problem loans have significant impact on cost efficiency of banks and suggests specifically that bank should try to minimize problem loans in order to achieve cost efficiency. More specifically, the study finds that capital adequacy ratio, credit growth, loan to deposit percentage, priority sector lending, and risk weighted assets, were statistically significant factors that determine the problem loans of commercial banks in Nepal. However, the result did not support the significant effect of return of assets, inflation and real GDP growth. Similarly problem loans, capital adequacy ratio, bank size and loan loss provision were statistically significant factors that determine the cost efficiency of commercial banks in Nepal. However, the result did not support the significant effect of foreign ownership, inflation and real GDP growth. The study observed a negative relationship between return on assets and problem loans indicating that profitable banks have low problem loans. Hence, it is recommended that banks should be able to maximize and maintain optimum ROA so that they don’t have to go for lending in riskier assets to increase revenue. Likewise, the study observed a negative and significant relationship between capital adequacy ratio and problem loans. Hence it is recommended that banks should focus on enhancing their capital, as well capitalized banks are less incentive to take risk which reduces the percentage of problem loans in such banks. The study remains enough ground for future researchers in the same topic. The future studies can be done by using both secondary and primary data so that along with determinants of problem loans and cost efficiency, perception of loan officers, operation officer as well as managers regarding the impact of problem loans on cost efficiency can also be obtained. In addition to commercial banks, the further studies can select other financial institutions like development banks, finance companies, micro finance and cooperatives can be included in sample so as to grasp the wider view of impact of problem loans on cost efficiency and their determinants.

Hold

Place a hold on this item

Copies

Barcode	Call number	Media type	Location	Section	Status
111/D	332.12 PAR	Thesis/Dissertation	Uniglobe Library	Social Sciences	Available

Problem loans and cost efficiency in Nepalese Commercial Banks / Bidya Nanda Yadav 

Permalink

The determinants of loan loss provision in Nepalese commercial banks / Binita Dhakal 

Permalink

---

page 1/1