LOAN GRANTING AND ITS RECOVERY PROBLEMS OF COMMERCIAL BANKS IN NEPAL

Abstract

The main objective of this study is to discover the problem faced by commercial banks while collecting the disbursed loan. The descriptive and causal research design was employed in this study. This study used primary data from one hundred sixty-two borrowers and one hundred-five bank officers currently working at Nepal Bank Limited. The collected data has been analyzed by using some statistical tools such as frequency, mean, standard deviation, correlation analysis, ANOVA and regression analysis. The data is collected through a structured questionnaire method using the Likert Scale. Many determinants of loan default and loan recovery, in this study borrower characteristics, proximity of bank characteristics and loan characteristics are the determinants of loan default and credit product management, credit evaluation management, credit risk management, collection procedure management, performance management and team productivity are the independent variables. The collected information and the numerical data have been analyzed by using the SPSS 27.0 version to show the data and results clearly. The regression analysis shows that The independent variables such as borrower’s characteristics, proximity bank’s characteristics and loan characteristics variance account for 0.069 i.e. 6.99% on the dependent variable (loan default). The remaining percentage is due to other factors. The borrower’s characteristics and proximity bank’s characteristics have a negative but not statistically significant impact on loan default. The loan default is positively but not significantly influenced by the loan characteristics. Credit product management and credit evaluation management have a negative but not statistically significant impact on loan recovery. The loan recovery is positively but not significantly influenced by credit risk management (CRM). The loan recovery is positively and significantly influenced by collection process management (CPM2). The loan recovery is positively but not significantly influenced by performance management (PM). The loan recovery is positively but not significantly influenced by team productivity management (TPM). In order to satisfy customers' demands for new or existing products, the loan amount or size should be increased to the proper amount for each individual customer based on their financial needs, creditworthiness, ability, and capacity to repay. Customers should have enough flexibility in the loan term, payback cycle, and period to avoid having an influence on the loan default.