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Does Excess Bank Liquidity Impact Non-Performing Loan? A Study on Bangladeshi Economy

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  • Amir, Md. Khaled

Abstract

This study endeavored to find out the impact of excess bank liquidity on non-performing loans (NPL) by using both technical and empirical analysis. The paper found that explanatory variable (excess bank liquidity) has moderate influence on the dependent variable (NPL), suggesting some other hypothetical and psychological aspects such as the intention to fraud, immoral lending, lack of loan monitoring, capital injection and nepotism, etc. which may affect the current economic and banking system in Bangladesh. The study conducts simple linear regression analysis where the beta coefficient of excess bank liquidity is -0.435 clearly indicates, the inverse movement of both the variables which supports the real banking system. The model equation supports an economical relation between excess bank liquidity and non-performing loan (NPL) because loan recovery is the meaning of reducing non-performing loan (NPL) amount and boosts up the bank liquidity of any bank again.

Suggested Citation

  • Amir, Md. Khaled, 2019. "Does Excess Bank Liquidity Impact Non-Performing Loan? A Study on Bangladeshi Economy," MPRA Paper 101150, University Library of Munich, Germany, revised 10 Aug 2019.
    • Handle: RePEc:pra:mprapa:101150
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    References listed on IDEAS

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    Cited by:

    1. Changjun Zheng & Probir Kumar Bhowmik & Niluthpaul Sarker, 2019. "Industry-Specific and Macroeconomic Determinants of Non-Performing Loans: A Comparative Analysis of ARDL and VECM," Sustainability, MDPI, vol. 12(1), pages 1-17, December.

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    More about this item

    Keywords

    Bank Liquidity; Bank Run; Inflation; Investment; OLS; Interest Rates; Loanable Funds.;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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