THE RELATIONSHIP BETWEEN COVID-19 PANDEMIC AND NON-PERFORMING LOAN RATIO IN INDONESIAN COVENTIONAL BANKS

• Main Author: Haykal Hamdi, Muhammad
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/83013
• Institution: Institut Teknologi Bandung

This study aims to analyse the relationship of the COVID-19 specific variables (COVID-19 cases and COVID-19 death) and non-performing loan ratio in Indonesian conventional banks during the study period from q1 2017 to q4 2022. This study uses data from 56 conventional banks, 4 government owned banks and 56 private owned banks, that are collected secondary data from the Indonesian Financial Service Authority banks publication report. This study use quantitative method by utilizing panel data regression with the fixed effect model. Non-performing loan ratio is the dependent variable used in this study. COVID19 cases and COVID-19 death is main independent variables for this study. Loan to deposit ratio, bank size, return on asset, regulatory capital ratio, equity ratio, GDP growth rate, inflation rate, overnight rate, and unemployment rate are used as a control variables in this study. The regression analysis will be separated into 2 model, one for COVID-19 cases and one for COVID-19 death, to ensure that the relationship of each COVID-19 variables on NPL ratio can be evaluated independently. The findings reveal that COVID-19 cases and COVID-19 death have a significant positive relationship with the NPL ratio. additionally, the study find a negative significant relationship of control variables such as return on asset, loan to deposit ratio, bank size, regulatory capital ratio, and GDP growth rate on NPL ratio. this study provide suggestions for bank managements to increase their regulatory capital ratio and bank size to reduce non-performing loan ratio during economic crisis like COVID-19 pandemic.