Assessing Banks Internal and Macroeconomic Factors as Determinants of Non- Performing Loans: Evidence from Nepalese Commercial Banks

  • Bishnu Prasad Bhattarai Dr. Bhattarai, Academic Director/ Business Unit Head, Excel Business College & Faculty Member, Patan Mutiple Campus, Faculty of Management, Patan Dhoka, Lalitpure,Nepal
Keywords: Nonperforming loan, total assets, return on assets, capital adequacy ratio, loan to deposit ratio, annual gross domestic products and annual inflation rate.

Abstract

This study has attempted to ascertain the factors affecting to non-performing loans in Nepalese commercial banks using a sample of ten commercial banks for the period of 2013-2017 with 50 observations, a balanced set of panel data. The descriptive and causal comparative research designs have been adopted for the study. The dependent variable was non-performing loans, while independent variables included both bank specific factors; bank size, return on assets, total loan and advance to total deposit ratio, capital adequacy ratio and macro-economic factors; real gross domestic product growth rate and inflation. The existence of high levels of NPLs would hinder the benefits to the county through inefficient financial intermediation. Hence, there is a national level responsibility towards banks, to manage the NPL ratio at an acceptable level. Consequently, it is important to identify “what causes NPLs and significance of these factors on NPLs”. Therefore, this study would help to get an insight on the bank specific and macro-economic factors, which affect NPLs in commercial banks and in which magnitude bank specific or macroeconomic factors contribute to NPLs. The estimated ordinary least square (OLS) regression model reveals that the bank specific: ROA, LTD and CAR and macroeconomic factors GDP have significant impact on nonperforming loan in Nepalese commercial banks.

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Published
2018-09-30
How to Cite
Bhattarai, B. (2018). Assessing Banks Internal and Macroeconomic Factors as Determinants of Non- Performing Loans: Evidence from Nepalese Commercial Banks. International Journal of Accounting & Finance Review, 3(1), 13-32. Retrieved from http://www.cribfb.com/journal/index.php/ijafr/article/view/28