What are the determinants of non-performing loans?
Ghosh (2015) noted that the variables related to NPL increases are poor credit quality, liquidity risk, inefficiency cost, larger capitalization and the size of the banking industry as well as unemployment, inflation, and public debt.
What are the determinants of non-performing loans in Botswana?
It was found that the following industry level variables (i.e. credit growth, industry size and profitability) and macroeconomic variables (i.e. real gross domestic product (GDP) growth, inflation, real interest rates and the unemployment rate) have a statistically significant impact on the NPL rate.
What causes non-performing loans?
The main causes of NPL are high-interest rate, Low GDP, Poor credit appraisal, Inflation, unemployment and improper lending disbursement to agriculture sector.
What are the categories of non-performing loan?
Non-performing, non-speacilised loans are classified into: i. Substandard (overdue>90days); ii. Doubtful (180-360days); and iii. Lost (>360days).
Where are non-performing loans in financial statements?
Nonperforming assets are listed on the balance sheet of a bank or other financial institution. After a prolonged period of non-payment, the lender will force the borrower to liquidate any assets that were pledged as part of the debt agreement.
Why are non-performing loans important?
As soon as a loan is non-performing, the likelihood of it being repaid in full is considered to be significantly lower. Non-performing loans can cause serious problems for lenders. They are no longer producing income and represent money that is probably lost, thus posing cash problems for banks.
What is non-performing loans in banks?
A non-performing loan (NPL) is a loan in which the borrower is in default and has not paid the monthly principal and interest repayments for a specified period. Usually, banks classify loans as non-performing loans when the repayments of principal.
What are the disadvantages of non-performing loans?
Knowing the disadvantages of nonperforming assets can help you avoid ending up as a lender or borrower of this type of loan.
- Reduced Income. Interest Income is the first account that gets hit whenever an asset is declared nonperforming.
- Unrecoverable Principal.
- Reduced Cash Flow.
- Negative Indicator.
What is non-performing loan in financial statement?
IMF stated that a loan is considered as NPL if it does not generate interest and the principal amount for a minimum of 90 days Alton and Hazen (2001) stated that loans become NPLs if the full payment of principal amount and interest is not done on the due date and is no longer expected in future dates.
What is the meaning of non-performing loans?