SAMA, the Banks and Efforts to Control Bad Loans

2021 ◽  
pp. 141-155
Author(s):  
Peter W. Wilson
Keyword(s):  
Bad Loans

Critical Perspectives to Non-performing Assets of Indian Banks, Shrinking Balance Sheet, Challenges and Way Ahead

2021 ◽  
pp. 231971452110402
Author(s):  
Pramahender
Keyword(s):  
Banking Sector ◽  
Balance Sheet ◽  
High Rate ◽  
Balance Sheets ◽  
Coverage Ratio ◽  
Public Sector Banks ◽  
Bad Loans ◽  
Bankruptcy Code ◽  
Indian Banks ◽  
Debt Recovery

Indian banking sector is facing the problem of rising bad loans as gross non-performing assets (GNPA) of Indian banks is on continuous rise. The present study is an attempt to analyse rising bad loans scenario of Indian banks, various factors that contributes to non-performing assets (NPA), along with the present state of Indian banks. This study found that poor recovery measures, lack of proper credit and risk management system at bank level, wilful default by borrowers, lack of stringent regulation, poor level of corporate governance and misuse of funds by borrowers are the key factors behind the rising level of bad loans of Indian banks. It was found that public sector banks (PSB) are suffering the most from rising level of NPA, high rate of NPA of banks have adverse impact on banks’ balance sheets, their assets quality, increased provisioning coverage ratio of banks and low return on assets. Although various concerned stakeholders have taken numerous measures to curb the situation, such as recapitalization of PSB, construction of assets reconstruction companies (ARC), Debt Recovery Tribunals for speedy recovery of bad loans and enactment of insolvency and bankruptcy code (IBC),still there is much more to do, and have a huge scope to bring reforms in banking sector, especially in PSB of India.

scholarly journals PENDEKATAN MAQASHID AL-SYARI’AH DALAM PRAKTIK PEMBIAYAAN DI KOPERASI PETERNAK SAPI BANDUNG UTARA (KPSBU) LEMBANG

Asy-Syari ah ◽  
2019 ◽  
Vol 21 (1) ◽  
pp. 31-38
Author(s):  
Ade Iskandar Nasution
Keyword(s):  
Profit Sharing ◽  
Analytic Methods ◽  
Bad Loans

Abstract: The chairman of KPSBU took a solution in Annual Member Meeting to eliminate interest on their loan product in order to reduce bad loans and complies the concept of sharia cooperation. This research analyzed whether the maqâshid syarî'ah has been applied and become a solution to their problems. With descriptive-analytic methods, this research comes to the conclusions that KPSBU Lembang has been implements the maqâshid syarî'ah with dharûrriyat, hajiyat and tahsiniyat principles. Through the maqâshid syarî'ah implementation on financing/loan products, customers receive waivers since there is no loan interest, but the customer/member payment is based on profit sharing from the milk sale. Abstrak: Ketua Koperasi Peternak Sapi Bandung Utara (KPSBU) Lembang mengambil solusi dalam Rapat Anggota Tahunan (RAT) untuk menghilangkan bunga pada produk pinjaman dengan harapan dapat menekan tingkat kredit macet, sejalan dengan konsep koperasi secara syari’ah. Penelitian ini mencoba untuk menganalisis apakah nilai-nilai maqâshid al-syarî’ah telah diterapkan dengan baik dan menjadi solusi bagi masalah yang dihadapi. Dengan metode deskriptif analitis, penelitian ini menunjukkan kesimpulan bahwa KPSBU Lembang sudah menerapkan maqâshid al-syarî’ah dalam prinsip dharrû­riyat, hajiyat dan tahsiniyat. Melalui penerapan maqâshid al-syarî’ah pada produk pem­biaya­an/ pinjaman, nasabah memperoleh keringanan. Karena tidak dikenakan bunga atas pinjaman, melainkan bagi hasil berdasarkan hasil penjualan susu dari nasabah kepada koperasi

Intercorporate default contagion from industry failures: Stress testing on creditee linkage networks of China

2014 ◽  
Vol 01 (02) ◽  
pp. 1450019 ◽  
Author(s):  
Mingmin Yang ◽  
Haoyu Gao ◽  
Zhigang Cao ◽  
Xiaoguang Yang
Keyword(s):  
Manufacturing Industry ◽  
Mining Industry ◽  
Logistic Function ◽  
Financial Contagion ◽  
Underlying Network ◽  
Initial Shock ◽  
Bad Loans ◽  
Default Contagion ◽  
Regulatory Commission ◽  
Two Parameter

This paper explores a simulation framework to examine the financial contagion on the creditee linkage networks, owing to a comprehensive loan-level database of China Banking Regulatory Commission (CBRC). We merge two kinds of connections together, i.e., loan guarantee and shareholding relationships, when constructing our underlying network. Default transmission probabilities are characterized by the two-parameter logistic function with a variant of leverage. Our main finding is that, under the above channel, contagion spreads in a linear form. To be precise, as the scale of the initial shock grows, the total number of default firms and the amount of bad loans incurred both increase linearly. The main reason for this is that the underlying network is rather sparse. Within the same ratio of initially default companies, the Manufacturing Industry is likely to cause the largest number of companies to fail and the largest amount of bad loans. We also find that the default contagion mostly spreads within the same industries, explaining again why the domino effect is very limited. We investigate the impacts on different regions from industry failures, and get many interesting findings, e.g., most industries may influence the Yangtze Delta Economic Circle significantly except for Agriculture and the Mining Industry.

Shadow prices of non-performing loans and the global financial crisis

2019 ◽  
Vol 20 (5) ◽  
pp. 411-434
Author(s):  
Ameni Tarchouna ◽  
Bilel Jarraya ◽  
Abdelfettah Bouri
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Shadow Price ◽  
Market Price ◽  
Shadow Prices ◽  
Content Type ◽  
Managerial Implications ◽  
Bad Loans ◽  
The Global Financial Crisis

Purpose This paper aims to determine the opportunity cost borne by US commercial banks to reduce non-performing loans (NPLs) by one unit within the global financial crisis framework. Design/methodology/approach To achieve this aim, the authors use the directional output distance function to estimate the technical efficiency while considering NPLs as undesirable output. Then, they estimate the shadow prices of NPLs by using the envelope theorem and solving the revenue function. Findings The results indicate that medium-sized banks are the most efficient, while small banks are the most inefficient ones. Moreover, the shadow prices of NPLs of large banks are higher than those of small and medium-sized banks. This implies a more elevated cost when lessening bad loans in large banks. This is more prominent during the crisis given that the shadow prices of NPLs of large banks have risen sharply over that period. Practical implications Shadow prices have important managerial implications given that they display the amounts of required reduced revenues to lessen NPLs. Accordingly, banks’ managers are called to reduce these loans by paying more attention when choosing their customers. Originality/value With the absence of an observable market price for bad loans in financial literature, the shadow price notion offers an adequate measure to evaluate them. To the best of authors’ knowledge, this is the first study that provides an estimation of the shadow price of NPLs in the US banking sector.

Dealing with enterprises' bad loans

1993 ◽  
Vol 1 (1) ◽  
pp. 112-115 ◽  
Author(s):  
Fabrizio Coricelli ◽  
Alfredo Thorne
Keyword(s):  
Bad Loans

Impact of underwriting insurance risk on bank holding company behavior

2018 ◽  
Vol 19 (4) ◽  
pp. 343-360 ◽  
Author(s):  
Manu Gupta ◽  
Puneet Prakash
Keyword(s):  
Discretionary Accruals ◽  
Capital Gains ◽  
Risk Governance ◽  
Insurance Risk ◽  
Loan Loss ◽  
Content Type ◽  
Holding Companies ◽  
Loan Loss Provisions ◽  
Bad Loans ◽  
Financial Holding Companies

Purpose This paper aims to study differences in risk behavior between holding companies that undertake both banking activity and insurance underwriting (labeled financial holding companies or FHCs) and stand-alone bank holding companies (BHCs). Design/methodology/approach The paper examines the discretionary accruals of FHCs to comparable BHCs and compares their bad loans-to-assets ratio in the future. Findings FHCs have lower discretionary accruals (loan loss provisions and realized capital gains) than BHCs. FHCs fare better than BHCs in terms of bad loans-to-assets ratio. Insurance underwriting has a dampening effect on discretionary accruals of FHCs. Research limitations/implications This study raises additional research questions. Do shared governance and insurance underwriting serve as substitutes or complements? Will regulatory environment affect this relation? Practical implications When reported earnings do not match true earnings, the market participants lose the ability to price correctly, and the regulators lose the ability to effectively regulate banks. From the regulatory perspective, these findings suggest insurance underwriting by banks mitigate potential market distortions. Originality/value This paper is the first to study the effect of underwriting insurance risk on earnings management behavior of BHCs and its link to risk governance.

scholarly journals Bad Loans of Public Sector Banks in India: A Panel Data Study

2019 ◽  
Vol 5 (1) ◽  
pp. 22-30
Author(s):  
Kandela Ramesh
Keyword(s):  
Public Sector ◽  
Panel Data ◽  
Financial Stability ◽  
Random Effect ◽  
Random Effect Model ◽  
Negative Relationship ◽  
Banking System ◽  
Capital Adequacy ◽  
Public Sector Banks ◽  
Bad Loans

The soundness of the banking system is necessary for economic advancement and financial stability. In the contemporary era, the Indian banking system has suffered from the accumulation of substantial non-performing assets (NPAs), especially in the public sector banks (PSBs). This article examines the financial determinants of bad loans in the Indian PSBs with the help of panel data regression analysis. Panel dataset of 21 Indian PSBs for eight years from 2010 to 2017 is used for the study. For analysis, net non-performing assets (NNPAs) as a dependent variable and financial indicators as independent variable are used. Using the random effect model, it is found that credit–deposit ratio, loan maturity, and return on assets have a negative relationship with NNPAs. These factors have an association with a lower level of NPAs. Operating expenses and capital adequacy ratio have an insignificant effect on NNPAs. On the other hand, factors such as priority sector loans, collateral values, and non-interest income have a positive impact on NNPAs. These factors are an indication of a higher level of bad loans and are adding to the accumulation of NPAs in PSBs.

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