A Comparative Study of Non-Performing Loan Management of Nepalese Commercial Banks (With Reference to NIBL and EBL)
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Department of management
Abstract
The study was conducted with the aim of studying Non-performing loan of commercial
bank in Nepal. The study was conducted with reference to Nepal Investment Bank.ltd
and Everest Bank .ltd. The main focus of study was to analyze the NPL ratio, trend of
NPL ratio, and to investigate the impact of NPL on profitability of commercial bank.
NPL is major concern for the commercial bank because the default of loan and interest
has resulted major threat to the income of the bank. If the NPL is not managed soon, the
commercial cannot escape from the vicious circle of NPL.
Non-performing loan are those loan that has been default in the payment of interest and
principle. Loan, which payment of interest and principle is not made for more than 3
months is called non-performing loan. In specific contract the term may differ. The rate
of NPL in Nepalese banking sector is alarming.
Descriptive and Comparative research design has been used for the study. Everest Bank
ltd. and Nepal Investment Bank ltd. were used as a sample. The secondary data has been
used from the annual report of the both bank. The data analysis tool includes ratio
analysis, trend analysis, correlation, regression model, and P-value.
The study showed that the NPL ratio was in fluctuating trend. There was increase and
downfall of the NPL ratio in this six year period. There was positive and negative
correlation between loan and NPL amount. Both are not moving in the same direction.
The study showed that there was minimal influence of the NPL on the return on assets.
The NPL ratio was insignificant in studying the impact on profitability.