Microeconomic and Social Factors as Determinants of NonPerforming Loans: Based on Opinion of Pakistani Bankers

Abstract

Form the past few years the Non-Performing loans not present a good picture in the context of Pakistani banking sector.The aim of the study is to assesses microeconomic and social factors that influence the rate of Non-Performing loans in Pakistani commercial banking sector. Microeconomic factors include monitoring of loan, risk assessment, interest charge and social factors include political interference, banker’s incompetence, corruption. This study was based on the Opinion of bankers in Pakistan so the data was collected through primary survey questionnaire from top 10 banks. Regression analysis was used to analyse the factors that influence NPLs in Pakistan. The findings indicate that microeconomic factors like monitoring of loan, risk assessment, interest charge have significant positive relation with Non-Performing loans. The social factors political interference has significant positive relation while banker’s incompetence and corruption have insignificant relation with Non-Performing loans.