Abstract
Credit monitoring is performed by the banks as post approval activities for existing credit clients to indentify the early warning single of credit risk. So that, the study was accomplish to observe the credit monitoring practice in Nepalese commercial banks. The study was based on a sample of 10 commercial banks, comprising 5 private sector banks and 5 joint venture banks. This paper attempts to determine the awareness of Nepalese bankers about the significance of credit monitoring as risk identification tools. The result of the study indicates that the periodically review of the security documents, credit processing procedure, compliance of covenants setup during credit approval, technique to control default, risk reporting, review of loan account and regular follow-up were differently used as credit monitoring practice in private sector and joint venture banks in Nepal. These factors also found significant predictor for credit monitoring. Moreover, there was a positive relationship between credit monitoring practice and its factors instead of technique to control default.Credit monitoring is performed by the banks as post approval activities for existing credit clients to indentify the early warning single of credit risk. So that, the study was accomplish to observe the credit monitoring practice in Nepalese commercial banks. The study was based on a sample of 10 commercial banks, comprising 5 private sector banks and 5 joint venture banks. This paper attempts to determine the awareness of Nepalese bankers about the significance of credit monitoring as risk identification tools. The result of the study indicates that the periodically review of the security documents, credit processing procedure, compliance of covenants setup during credit approval, technique to control default, risk reporting, review of loan account and regular follow-up were differently used as credit monitoring practice in private sector and joint venture banks in Nepal. These factors also found significant predictor for credit monitoring. Moreover, there was a positive relationship between credit monitoring practice and its factors instead of technique to control default.
Highlights
Credit monitoring management is a fundamental process of the every banks and financial institutions, which replicates in the quality of the credit portfolio
During the post credit appraisal, banks try to find out risk level from the basic sources of credit risk. 1.1 Objective of the Research The major objective of the study is to compare the credit monitoring practices between private sector banks and joint venture banks in Nepal
Result and Discussion This section presents the findings obtained from the data analysis. This result is presented in two sub sections: descriptive statistical analysis and regression analysis. 4.1 Descriptive Statistical Analysis As shown in the given table, there was found difference of mean value of the credit monitoring practice such as periodically review of the security documents, credit processing procedure, compliance of covenants setup during credit approval, technique to control default, risk reporting, review of loan account and regular follow-up in private sector and joint venture banks in Nepal
Summary
Credit monitoring management is a fundamental process of the every banks and financial institutions, which replicates in the quality of the credit portfolio. The banks need to constantly do an assessment and make updates where there is a need so as to be sure to handle any unexpected risks at the right time before it is happen. This is because any neglected or minimized risk can have very long term big and negative consequences since the banking activities are so interrelated with monitoring. Governments have large amounts of non-performing loans and some commercial banks tend to finance government fiscal deficits and sustain some unprofitable government projects with large borrowings from banks These actions increase the prospects of generating NPLs in the banks. Monitoring and control is important for credit risk management practice in banking sectors. H2: There is positive relationship between credit monitoring practice and its explanatory variables. 1.3 Model Specification To test the above hypothesis, following model has been developed by the researcher
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