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Non Performing Loans (Causes (Unemployment (without hold job, fail to…
Non Performing Loans
Causes
-
Unemployment
- without hold job, fail to repay
-
Inflation rate
- value of currency reduce
- consumer purchase power affected
-
Signs
Behaviour
- family problems
- serious disease
- avoid loan officer
Business
- bad borrower-supplier
- bad borrower customers
- speculative behavior
-
Conduct of Loan
- acc balance
- overdraft acc
- credit usage trend
FInancial Statement
- asset
- liability
- expense
- owner's equity
-
Introduction
- borrower failed to make payment on time
- not being paid for 6 continuous months
Bad debt VS NPL
Bad debt
- acc rec that uncollectable
- written off
- cannot be collected back
NPL
- either default/ close to default
- -maybe uncollectable/collected
Effects
Inefficiency in bank
- earning decreased
- massive capitals
- spend more resources
-
Preventions
- undertake risk assessment
- know borrower's fin. condition
- evaluate creditworthiness
- monitor process loan agreement