Open AccessINTEREST RATES AND LOAN PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA
Author(s) -
Adeyemi Samson Ogundipe,
Abolade Francis Akintola,
Samuel Adebayo Olaoye
Publication year - 2020
Publication title -
epra international journal of economic and business review
Language(s) - English
Resource type - Journals
eISSN - 2349-0187
pISSN - 2347-9671
DOI - 10.36713/epra3014
Subject(s) - loan , interest rate , non performing loan , fixed interest rate loan , cost of funds index , descriptive statistics , business , term loan , economics , monetary economics , financial system , actuarial science , non conforming loan , finance , statistics , mathematics
There has been much speculation about the seemingly high lending rates as evident of perceived inequity on the part of bankers by their customers in reaction to huge overhang of unpaid loans in the books of Deposit Money Banks (DMBs). Data for the study was collected from the financial statements of the three banks under study (UBA, FBN and GTB), as well as the CBN’s statistical database for macroeconomic variables analysed using Microsoft Excel’s regression function to perform a descriptive, correlation and regression analysis and examine the relationship between interest rates and loan repayment. This study established that there is a significant relationship between the interest rate and loan repayment, measured by credit quality using the non-performing loan ratio. This indicates that an increase in the interest rate will likely cause a corresponding increase or decrease in the credit quality. It further showed that any slight change in the lending rate would increase non-performing loan. KEY WORDS: Prime lending rate (PLR); Monetary Policy Rate (MPR); Non-performing Loan (NPL), and loan loss provision.