Nonperforming Loans in Malaysia’s Commercial Banks: Analysis of Trend and Issues

Abstract

Inability of the banks to monitor the loan properly and efficiently might cause a tendency of nonperforming loans to keep rising in the banking system. This will indicate the failure of banks in managing their performance and operations. The involvement of banks in providing aggressive lending without following the proper credit assessment and negotiated credit terms when dealing with the activities can contributes to the severity of the problem of nonperforming loans in Malaysia. Therefore, this descriptive study is aimed to analyze the trend and issues of nonperforming loans in Malaysia’s commercial banks. Using a descriptive method, diagram analysis, discussion and issues are used to support the study. Finding of the study indicates that bank characteristics and economic condition especially during the crises can contribute to the increasing amount of nonperforming loans in Malaysia’s commercial banks. It is suggested for the banking sector to focus on the internal bank characteristics to strengthen the commercial banks and the government need to increase the stability of macroeconomic conditions to avoid the problems during the unexpected crisis. In the future research, empirical study can be done to investigate the impact of the issues on the non performing loans.