This study examines the effect of bank specific factors on loan performance of commercial banks in Nepal. Bank size, capital, deposit, liquidity ratio and lending interest rate are taken as bank specific factors. The study has conducted correlation and regression analysis using panel data of twenty four commercial banks during the period of 1996 -2017. The empirical results show that bank size, capital and deposit have positive impact on bank lending. Hence, commercial bank willing to increase lending should increase its capital, even more than regulatory standard. Further banks willing to lend more should expand their total assets and deposit. Liquidity ratio and interest rate have negative impact on bank lending. Thus, commercial banks willing to increase bank lending, should be careful in maintaining minimum liquidity requirement and interest rate fluctuation. Central bank willing to increase bank lending to productive sector should encourage banks to decline their lending interest rate.
Effects of Monetary Policy on Bank Lending in Nepal (Published)
Bank lending and monetary transmission mechanism are closely interlinked phenomena. Banks cannot be efficient in their performance without analyzing the impact of monetary policy actions. On the other hand, central bank cannot take appropriate policy actions without having appropriate knowledge of bank lending behavior. This study attempts to find out the impact of monetary policy actions such as cash reserve ratio, open market operations and bank rate on bank lending. In the study, panel data of 24 commercial banks during the period of 1996 to 2015 were collected and analyzed using descriptive statistics, correlation and regression analysis. This analysis shows that open market operations and cash reserve ratio have negative impact but bank rate has positive impact on bank lending. Therefore, the central bank of Nepal should rely mostly on open market operations and cash reserve ratio for monetary operation. Further, the study recommends that central bank should hold cash reserve ratio constant as a cushion for the borrowers from fluctuating lending rates by commercial banks. However, since excessive borrowing will have inflationary effect in the economy, the study recommends that central bank commit commercial banks to open market operations to control short term interest rate and money supply in the economy.
Macroeconomic Analysis of the Relationship between Interest Rate, Economic Growth and Bank Lending in Nigeria (Published)
This study examined the relationship between interest rate, economic growth and bank lending in Nigeria. Secondary time series panel data on the study variables were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin for the period 1985 – 2014. The study employed Ordinary Least Squares (OLS) technique to analyze data. The study found that interest rate had negative relationship with bank lending in Nigeria. While economic growth had positive correlation with bank lending in Nigeria. The study recommended a policy shift towards infrastructural development and an increased productive base of the notion in order to improve the financial sector performance by stabilizing the macroeconomic instruments. This it is hoped would not only help in enhancing the profitability of banks in the country but would also improve the standard of living of the Nigerian people.