Open AccessAssessing Banks Internal and Macroeconomic Factors as Determinants of Non- Performing Loans: Evidence from Nepalese Commercial Banks
Author(s) -
Bishnu Prasad Bhattarai
Publication year - 2018
Publication title -
international journal of accounting and finance review
Language(s) - English
Resource type - Journals
eISSN - 2576-1293
pISSN - 2576-1285
DOI - 10.46281/ijafr.v3i1.28
Subject(s) - non performing loan , return on assets , loan , capital adequacy ratio , financial system , inflation (cosmology) , business , ordinary least squares , panel data , variables , cost of funds index , economics , interest rate , financial intermediary , gross domestic product , monetary economics , finance , econometrics , macroeconomics , profitability index , statistics , profit (economics) , physics , mathematics , theoretical physics , microeconomics
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.