| Title : | Determinants of non-performing loan in Nepalese commercial banks | | Material Type: | printed text | | Authors: | Seema Bhattari, Author | | Publication Date: | 2013 | | Pagination: | 113p. | | Size: | GRP/Thesis | | Accompanying material: | 2/B | | General note: | Including bibliography
| | Languages : | English | | Descriptors: | Bank loans
Banks
Banks and banking
Commercial banks
Loans
Nepal
Non-performing loan
Seema Bhattarai
| | Keywords: | 'bank loans banks banks and banking commercial banks nepal loans seema bhattarai non-performing' | | 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. The immediate consequence of large amount of NPLs in the banking system is bank failure. Non-performing loans are one of the main reasons that cause insolvency of the financial institutions and ultimately hurt the whole economy. Studies show that the failure of banks in Nepal was also the result of the high non-performing assets due to and the result of lending without differentiating markets, products and borrowers’ credit worthiness and excessive loan exposure to real estate. However, there is not any study regarding the factors affecting non-performing loan in Nepal. Finding the factors affecting NPL covering both micro (banks specific) and macroeconomic variables may help to reduce the NPL and improve the profitability of each commercial banks and may also help for improvement of the economy as a whole.
In this context the study aims to identify the impact of macroeconomic variables (GDP, Inflation, and Real Effective Exchange Rate) and bank specific variables (size, change in loan, real lending rate of interest, and share of loan to total assets) on the non-performing loan of the commercial banks in Nepal. It further aims to identify the perception of bankers regarding the impact of bank specific variables and macroeconomic variables on non-performing loan in Nepalese Commercial Banks.
The study is conducted with primary as well as secondary sources. The secondary data are collected for 26 commercial banks covering the period of 2002-2012 with 227 observations. The primary data are collected from 140 bankers of ten top commercial banks of Nepal. It followed both qualitative and quantitative approach to analyze the findings of the study.
It is found that the government owned banks have the highest non-performing loan in all the years while the standard chartered bank has the lowest non-performing loan. However, newly established banks also have low non-performing loan. In terms of size, the government owned banks occupy the largest share while the share is low in the newly established banks like Citizens bank, Grand bank and Kist bank.
Macroeconomic variables such as the real effective exchange rate have significantly negative impact on non-performing loan which is inconsistent with the findings of previous studies. The impact of GDP growth rate is found to be insignificant in this study. One year lagged inflation rate has significant positive impact on non-performing loan. The banks which charge relatively higher real interest rate have higher non-performing loan, which is consistent with the findings of previous studies. If the bank is government owned bank the non-performing loan would be higher than that of the private owned banks since ownership dummy has positive coefficient and significant at one percent level. As well, more lending in the previous years and current year reduces the non-performing loan since the coefficient of change in loan in current and previous years have negative coefficient and significant at one percent level.
The bankers of Nepalese commercial bank perceive that energy crisis; lack of timely budgetary expenditure by the government and instable political environment increases the non-performing loan. Similarly bankers also perceive that borrowers honesty in disclosing the information, better monitoring and evaluation of the loan, increase in GDP growth rate have significantly negative impact on non-performing loan. However, the banker’s perception shows that the macroeconomic variables like unemployment rate, inflation rate, exchange rate and interest rate are not much important variables to influence non-performing loan of the commercial banks of Nepal. These findings of the study may add the literature on the area of determinants of non-performing loan within Nepalese Commercial banks in Nepal.
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Determinants of non-performing loan in Nepalese commercial banks [printed text] / Seema Bhattari, Author . - 2013 . - 113p. ; GRP/Thesis + 2/B. Including bibliography
Languages : English | Descriptors: | Bank loans
Banks
Banks and banking
Commercial banks
Loans
Nepal
Non-performing loan
Seema Bhattarai
| | Keywords: | 'bank loans banks banks and banking commercial banks nepal loans seema bhattarai non-performing' | | 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. The immediate consequence of large amount of NPLs in the banking system is bank failure. Non-performing loans are one of the main reasons that cause insolvency of the financial institutions and ultimately hurt the whole economy. Studies show that the failure of banks in Nepal was also the result of the high non-performing assets due to and the result of lending without differentiating markets, products and borrowers’ credit worthiness and excessive loan exposure to real estate. However, there is not any study regarding the factors affecting non-performing loan in Nepal. Finding the factors affecting NPL covering both micro (banks specific) and macroeconomic variables may help to reduce the NPL and improve the profitability of each commercial banks and may also help for improvement of the economy as a whole.
In this context the study aims to identify the impact of macroeconomic variables (GDP, Inflation, and Real Effective Exchange Rate) and bank specific variables (size, change in loan, real lending rate of interest, and share of loan to total assets) on the non-performing loan of the commercial banks in Nepal. It further aims to identify the perception of bankers regarding the impact of bank specific variables and macroeconomic variables on non-performing loan in Nepalese Commercial Banks.
The study is conducted with primary as well as secondary sources. The secondary data are collected for 26 commercial banks covering the period of 2002-2012 with 227 observations. The primary data are collected from 140 bankers of ten top commercial banks of Nepal. It followed both qualitative and quantitative approach to analyze the findings of the study.
It is found that the government owned banks have the highest non-performing loan in all the years while the standard chartered bank has the lowest non-performing loan. However, newly established banks also have low non-performing loan. In terms of size, the government owned banks occupy the largest share while the share is low in the newly established banks like Citizens bank, Grand bank and Kist bank.
Macroeconomic variables such as the real effective exchange rate have significantly negative impact on non-performing loan which is inconsistent with the findings of previous studies. The impact of GDP growth rate is found to be insignificant in this study. One year lagged inflation rate has significant positive impact on non-performing loan. The banks which charge relatively higher real interest rate have higher non-performing loan, which is consistent with the findings of previous studies. If the bank is government owned bank the non-performing loan would be higher than that of the private owned banks since ownership dummy has positive coefficient and significant at one percent level. As well, more lending in the previous years and current year reduces the non-performing loan since the coefficient of change in loan in current and previous years have negative coefficient and significant at one percent level.
The bankers of Nepalese commercial bank perceive that energy crisis; lack of timely budgetary expenditure by the government and instable political environment increases the non-performing loan. Similarly bankers also perceive that borrowers honesty in disclosing the information, better monitoring and evaluation of the loan, increase in GDP growth rate have significantly negative impact on non-performing loan. However, the banker’s perception shows that the macroeconomic variables like unemployment rate, inflation rate, exchange rate and interest rate are not much important variables to influence non-performing loan of the commercial banks of Nepal. These findings of the study may add the literature on the area of determinants of non-performing loan within Nepalese Commercial banks in Nepal.
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