The Consequence of Credit Performance and Capital Adequacy: Evidence from Commercial Banks in Nepal

Shrestha, Bijay Gopal; Niraula, Damodar

doi:10.3126/batuk.v7i1.35334

Cited by 2 publications

(4 citation statements)

References 6 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…On the other hand, the capital ratio of both bank types produced a positive and significant association with ROA, consistent with the many previous findings (Cheng et al, 2020;Islam & Rana, 2022;Kurawa & Garba, 2014;Lew & Lau, 2022;Shrestha & Niraula, 2021;Suganya & Kengatharan, 2018). However, this finding contradicts the studies of Ndoka and Islami (2016) and Bagale (2023), who revealed insignificant relations between these variables.…”

Section: Discussionsupporting

confidence: 87%

See 1 more Smart Citation

Credit Risk and Profitability Position of Nepalese Private and Joint Venture Commercial Banks

Thapa,

Sejuwal

2023

The Batuk

View full text Add to dashboard Cite

Credit concentrations, credit processes and other externalities have made credit risk more important over the past decade, followed by liquidity issues. This study was conducted to compare the credit risk exposure of various banks in terms of their liquidity, capital ratio, size, operational inefficiency, loan growth rate, and non-performing loans. It also investigated the spontaneous relationship between credit risk and bank profitability. Secondary data of 5 years from ten banks (5 each from joint venture and private banks) have been collected. The descriptive and comparative study designs were employed and SPSS software was used for the analysis of data. The results showed that the private banks surpass joint venture banks in terms of capital ratio and operating efficiency, but joint venture banks lead private banks in terms of liquidity, capital ratio, total assets, loan growth rate, and non-performing loans. However, the independent sample t-test did not show any significant differences on liquidity, capital ratio, size, and loan growth rate. The Pearson’s correlation showed positive associations of capital ratio (moderate and significant), operating inefficiency (weak and insignificant), and loan growth rate (weak and insignificant) with ROA. In contrast, bank size and nonperforming loans have significant moderate negative correlations, but liquidity is not found to be correlated with ROA. The empirical findings of this study are considered helpful in evaluating the comparative credit risk exposure of the banking sector and have both managerial and academic implications.

show abstract

Section: Discussionsupporting

confidence: 87%

“…A thorough approach to risk management must include the efficient management of credit risk NRB (2018). Due to their crucial role on profitability, credit performance and capital adequacy are subject to critical analysis and assessment regarding their effect on profitability performance of banks (Shrestha & Niraula, 2021).…”

Section: Introductionmentioning

confidence: 99%

Credit Risk and Profitability Position of Nepalese Private and Joint Venture Commercial Banks

Thapa,

Sejuwal

2023

The Batuk

View full text Add to dashboard Cite

show abstract

“…(2020) as they had reported positive impact of CDR on profitability banking. Impact of all three credit risk measures found statistically signifincant and consistent with the finding of Shrestha and Niraula (2021). The result indicated that the increase in nonperforming loan ratio and credit to deposit ratio leads to decrease in profitability whereas the increase in capital adequacy ratio surges banks' ROA in a small ratio (= 0.143, p = 0.000) but multiplies EPS (= 2.793, p = 0.000).…”

Section: Discussionsupporting

confidence: 82%

“…Based on dynamic panel data modelling approach, they revealed a positive and statistically significant relationship between profitability and macroeconomic-specific variables. On the other hand, they found statistically not significant relationship of non-performing loans and capital adequacy with the profitability which is consistent with the findings of Shrestha and Niraula (2021). By analyzing balanced panel data of 19 commercial banks in Nepal, Shrestha and Niraula found significant negative impact of credit to deposit ratio (CDR) and non-performing loan ratio (NPLR) on ROA.…”

Section: Credit Risk External Factors and Profit Of Bankssupporting

confidence: 74%

Impact of Credit Risk and Macroeconomic Variables on the Profitability of Commercial Banks in Nepal

Niraula,

Maharjan

2024

The Batuk

View full text Add to dashboard Cite

This study was conducted to examine the impact of credit risk and macroeconomic variables on the profitability of commercial banks in Nepal. Return on assets and earnings per share of the banks were taken as regrassands. Whereas, as regressors, non-performing loan, capital adequacy ratio and credit to deposit ratio were taken as the proxies of credit risk, and GDP growth rate, consumer price index and base rate were studied as indicators of macroeconomic variables. Following simple random sampling techniques, 14 commercial banks were selected as sample for the study. The required quantitative data were retrived from annual financial reports of the banks. Data were analyzed on Gretl software. The Pearson correlation and Ordinary Lease Square model for regression resulted that the GDP growth rate was insignificant in defining the variation on return on assets. Likely, inflation and base rate were not significant in defining the variation on earning per share. Result of this study provided sufficient scope to bankers in developing their growth strategies.

show abstract

The Consequence of Credit Performance and Capital Adequacy: Evidence from Commercial Banks in Nepal

Cited by 2 publications

References 6 publications

Credit Risk and Profitability Position of Nepalese Private and Joint Venture Commercial Banks

Credit Risk and Profitability Position of Nepalese Private and Joint Venture Commercial Banks

Impact of Credit Risk and Macroeconomic Variables on the Profitability of Commercial Banks in Nepal

Contact Info

Product

Resources

About