SCOPES AND REMEDIES FOR THE MANAGEMENT OF BAD DEBT IN THE NIGERIAN banking SYSTEM
SCOPES AND REMEDIES FOR THE MANAGEMENT OF BAD DEBT IN THE NIGERIAN BANKING SYSTEM
A Synopsis of the Management of Non-Performing Debt in the Nigerian Banking System: Scopes and Solutions
The scope, solutions, and management of bank debt in the Nigerian banking system are the main topics of this study.
It is intended to assess the bad debt issue in lending from banks. Another asset is the degree to which customers can effectively assist a banker in evaluating a customer's loan proposal.
This study's conclusions show that bad debt has become the banking sectors' tax sibling. Since the bank receives back a portion of the interest that accrues prior to the principle, it is able to remain firm without providing a loan to the consumer.
But some are unable to repay their loans because they are not sincere. Consequently, such loans remain unpaid. Regarding ability to repay debt, the implications are clear for the bank as well as its clients.
When a banker is confident enough in the customer's creditworthiness, they will request collateral to support the loan. The project's focal point is this.
Section One: Handling Unpaid Debt in the Nigerian Banking System: Scopes and Remedies Overview
1. BACKGROUND OF THE STUDY
Banks are widely acknowledged for playing an enviable position as a crucial source of cash or funds for the growth of the economy.
The majority of banking institutions play a significant role in mobilising deposits and directing some of them towards projects that are both practical and profitable, which is where this recognition comes from.
The nation in which the bank is located benefits economically from the size, kind, and degree of this lucrative outlet as well as from other supplementary elements. Because of this, banking institutions have acted as a catalyst for both economic expansion and possibly development.
Only a modest deposit from a customer is required for banks to have access to these loanable funds, which they then use to provide loans and advances to borrowers in order to earn interest on any advances made.
As a result, the bank is able to maintain operations, pay its stockholders a sufficient dividend, and handle daily administrative expenses.
1.2 STATEMENT OF THE PROBLEM:
It is regrettable that the borrowers profit excessively from the loans and advances provided to them by not using them for the intended purpose, which results in loan default and subsequent bad debts.
Thus, unrecoverable debts might be characterised as bad debt. The borrower's persistent lack of compliance with loan repayment demands results in many consequences, including making it exceedingly difficult for other prospective borrowers or fund seekers to take advantage of these facilities.
1.3 As a result, the project's evaluation activities centre on the following aspects:
(a) To assess the bad debt issue in bank lending
(b) Determining both its root causes and their proximity.
(C) To assess the impact on the economy as a whole.
(d) Recommendations on how to proceed.
1.5 DEFINITION OF TERMS,
1. BANK: In this study, the term “bank” refers to explicitly designated commercial banks. The Banking Act of 19689 defines a commercial bank as one whose operations include accepting deposits, making advances, and allowing cheque withdrawals.
The risk that a borrower won't be able to pay back the loan that the bank has given him is known as loan credit risk.
4. MONEY RATE: This contains the potential for a rise or fall in the value of money.
The likelihood of an interest rate change is 5. MARKET RATE.