BANKING FACTORS OF NON-PERFORMING LOANS IN STATE-OWNED BANKS

• Main Author: Prawira, Renno
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/51874
• Institution: Institut Teknologi Bandung

The increase in NPLs has been shown to have a negative impact on the banking sector, so it is highly necessary to consider the determinants of NPLs to ensure the overall economy’s effectiveness and soundness. This study aims to shed light on bank-specific factors affecting Indonesia’s NPLs, whose banking sectors have a crucial impact on the overall economy. The data used 35 state-owned banks (conventional, Islamic, and regional banks) throughout 2010–2019. The banking factors in this study include bank efficiency, profitability, income diversification, and capital adequacy. Random and fixed effects regression model was used to make the estimates. Results show that the bank efficiency variable positively correlates with NPLs, but the profitability variable correlates negatively. Both variables were significant statistically, while income diversification and bank capital variables were insignificant statistically. Based on this study, we supposed that the government must require banks to have adequate profit. So that banks able to make a good credit management process. Finally, NPLs in the bank will decrease