Issuance Of Loans Research Articles

INSOLVENCY AND BANKRUPTCY CODE: A STUDY OF INDIAN BANKS WITH REFERENCE TO ALTMAN Z SCORE

The implementation of the Insolvency and Bankruptcy Code 2016, which has been carried out in phases since August 5, 2016, was instituted with the aim of revamping the antiquated and intricate corporate insolvency regulations in India. This legislative measure was designed to tackle the pervasive issue of non-performing loans, which has had far-reaching consequences for the banking industry and the availability of credit within the broader economy. However, the unusual and surprising actions taken by the Reserve Bank of India, the central bank of India, to list delinquent borrowers and instruct banks to commence insolvency procedures against them, demonstrate a remarkable level of speed and determination. One notable illustration is the case of Essar Steel, which has encountered a default on loans amounting to around $6.9 billion and is presently undergoing a distressed sale in accordance with the Code. In light of the proactive implementation of the Code by Indian banks, as mandated by the Reserve Bank, and the commendable quality of available assets, it becomes imperative for foreign debt and equity investors to have a comprehensive understanding of the Code, along with the attendant obstacles and prospects it presents. The current investigation employed the Altman-Z score model to forecast the level of safety exhibited by banks in India with respect to potential insolvency and bankruptcy. The banks that were chosen for this study were picked based on specific criteria. The analysis conducted to assess the safety of these banks relied on information that was published in their respective Annual Reports. The research indicates that a significant proportion of Indian banks exhibit a higher level of safety in relation to insolvency and bankruptcy. The Altman-Z score analysis revealed that the performance of banks in India was strong during the first eight years of the study period. However, notable variations were observed during the latter two years of the study period. It is recommended that bank management proactively address these substantial disparities to minimise the risk of insolvency and bankruptcy. KEY WORDS: Banking Governance, Banking Regulation, Banking Sustainability

Impact investing in disadvantaged urban areas

AbstractResearch SummaryWe examine whether impact investing is more effective in fostering business venture success and social impact when investments are directed toward ventures in disadvantaged urban areas compared to similar investments directed toward ventures outside these areas. We explore this question in the context of loans made to business ventures in French “banlieues” versus “non‐banlieues.” We find that, following the loan issuance, banlieue ventures achieve greater improvements in financial performance and greater social impact in terms of the creation of local employment opportunities, quality jobs, and gender‐equitable jobs. This suggests that impact investors are able to contract with ventures of greater unrealized potential in banlieues, as banlieue ventures tend to be discriminated on the traditional loan market. The latter is corroborated in a controlled lab experiment.Managerial SummaryWe shed light on the unrealized potential of business ventures in economically disadvantaged urban areas, known as “banlieues” in France. Our results show that, after receiving loans from an impact investor, banlieue ventures achieve greater financial performance compared to non‐banlieue ventures. What is more, banlieue ventures achieve greater social impact by creating more jobs that benefit the local community. Why are traditional investors missing out on these opportunities? Our results point toward discrimination of banlieue ventures on the traditional loan market. This is confirmed in a controlled lab experiment, in which participants are less likely to approve loans to banlieue ventures compared to identical non‐banlieue ventures. These insights can guide managers and investors seeking sustainable, socially impactful, and financially viable investment opportunities.

The impact of bank capital, liquidity and funding liquidity on sustainable bank lending: Evidence from MENA region

This research analyzes the impact of bank capital, liquidity and funding liquidity on sustainable bank lending in the Middle East and North Africa (MENA) region. An unbalanced panel dataset covering 55 banks using ESG scoring criteria from 2010–2020 was employed for this purpose. Results indicate that higher capital and liquidity ratios hinder the MENA banking sector’s ability to improve its sustainable lending capacity. Funding liquidity has a positive and significant effect on sustainable bank lending growth, which suggests that funding liquidity raises sustainable bank lending capacity. Furthermore, the impact of funding liquidity on sustainable bank lending growth remains positive and statistically significant to all capital ratios. It implies that bank capital improves the relationship between funding liquidity and banks’ capacity to issue loans in the MENA region. Finally, the results of too-big-to-fail banks indicate that bank lending growth is positively affected by higher capital ratios. Hence, it may help them to increase their capacity to issue sustainable bank loans in the market. Overall the results are robust to principal component analysis and other estimation techniques like bootstrapped-based bias correction fixed effects.

Business groups and the impact of industry relatedness on firms' borrowing costs

PurposeThis study analyzes whether industry relatedness between a corporate borrower and its group peers significantly affects that firm's borrowing cost.Design/methodology/approachA regression analysis is run on bank-loan data of a sample of Indonesian companies for 2010–2020. The main variables of interest are the natural logarithms of the borrowing firm's number of affiliates classified within either similar 2- or 4-digit GICS industries, and the Caves weighted index of these firms' related diversification. This index measures how firms in a group are diversified in relation to the borrower. The dependent variable is the all-in credit spread, stated in basis points, over the LIBOR or similar benchmark, as of the loan issuance date.FindingsFindings support the industry-relatedness hypothesis and contradict the risk-reduction hypothesis and show that banks charge lower loan spreads on a borrowing firm that either operates within a similar industry as its affiliate or diversifies into related sectors or industries. Consistent with the co-insurance-effect hypothesis, the results also underline the importance of the parent and first-layer firms as supporting instead of the tunneling vehicles within business groups. These conclusions hold even after segregating the sample and using the loan maturity as the dependent variable.Originality/valueThis study uses a unique diversification measurement based on the borrowing firm's sector or industry, relative to other group members, and offers new insights on business group diversification and bank loan costs.

COVID-19 and bank branch lending: The moderating effect of digitalization

We examine how COVID-19 and digitalization have changed bank lending behavior. Using microdata from Brazil, we investigate the determinants of these changes at the bank branch level and by credit type. Branches in areas more affected by COVID-19 reduced loan issuances and experienced lower credit revenues. These branches could not adjust their costs in the short term due to this decline in lending, resulting in increased marginal costs. We also find that branches of more digitalized banks were less sensitive to local borrowers’ conditions and could expand their clientele. These branches extended credit to borrowers in remote localities less affected by COVID-19, positioning themselves better than branches of less digitalized banks. Our research highlights the critical role of digitalization in distressed periods, as it enables banks to respond more swiftly and effectively, favoring financial stability.

Online Loan Application against Islamic Sharia from the Informatics Aspect

In discussing social and organizational change, religion is one important aspect that is often overlooked despite its significant role in social life and society. Religion influences culture, customs, behavior, and communication. Several studies on the use of information technology based on religion have been carried out with a case study approach in areas such as education, economics, and health. However, none of them have incorporated the religious aspect in the application design. One of the information technology and economic products that is closely related to everyday life is online loan applications. Many studies have been conducted on online loan applications in terms of law, economics, and psychology, but they have not explored Islamic Sharia based on informatics aspects. As the main foundation for online loan applications, informatics should be the basis of studies used to consider making regulations for both general and Islamic Sharia. This study aims to conduct an in-depth analysis of Islamic Sharia values in online loan applications related to the informatics aspect. Based on the laws of OJK (Financial Services Authority) and the fatwas of MUI (Majelis Ulema Council) regarding online loan applications, it has been found that applications legally registered with the OJK have complied with Islamic Sharia as stipulated by the MUI. However, in illegal online loan applications, many detrimental problems are found that do not comply with Islamic Sharia. Therefore, it is deemed necessary to take action in the form of regulations, social education, and support for religious knowledge to address these online loan issues.

Assessment of the effectiveness of credit operations management as a factor in the development of the banking activity

The main task of banks is to issue loans, which are the backbone of the modern economy, an integral element of the country's economic development. Lending is currently used by both individuals and legal entities, that is, everyone uses loans, starting with state and ending with citizens. For commercial bank in these conditions, it is important not only to correctly form loan portfolio on various grounds, but also to monitor changes in timely manner, which are carried out through in-depth analysis. At the same time, each bank develops its own lending technology based on digital technologies and new technical solutions. The purpose of study is to assess effectiveness of credit operations management of commercial bank, on example of the activity of PJSC Bank “FK Otkritiye”. Study uses methods of comparative analysis, synthesis, and graphical method to visualize obtained results. Based on results of study, author determined dynamics of corporate lending in commercial bank of PJSC Bank “FK Otkritiye” and changes made during analyzed period, according to results of which it was determined that share of corporate lending initially increases by 2021, and tends to decline by end of 2022. So, on 01.01.2020, share of corporate lending was 1,3 percent, on 01.01.2021 is 3,8 percent, after which the value declined again and returned to the value of 1,2 percent. Increase in corporate lending in 2021, according to results of analysis, was achieved by attracting large corporate clients in this period. As result, in order to improve corporate portfolio of commercial bank, author has developed new proposals for improving it and achieving performance indicators. Based on results of study, author has formed recommendations for increasing reserve funds. In general, it should be emphasized that effective work of bank is necessary, ensuring increase in lending volumes and stable financial indicators, the bank’s desire to increase customer confidence, active credit policy and worthy place in rating of commercial banks.

Lending relationships when creditors are in control

Violations of financial covenants shift control rights to lenders. When borrowers have lending relationships with these lenders in control, they experience not only smaller declines in investment, but also lesser deteriorations in both firm survival probabilities and in sales. These effects are largely driven by opaque borrowers without any credit ratings. They are present where lending relationships existed already before loan issuance (ex-ante), but also where a contractual relationship without pre-issuance interaction is more mature (ex-post). Surprisingly, there is no evidence of any “dark side” of lending relationships when creditors are in control, such as an increase in interest expenses or a lesser degree of financial discipline.

MORTGAGE LENDING

Mortgages are an important support in the lives of many people. The demand for mortgages has been growing rapidly in recent years. A large part of the society is not able to make large enough savings to be able to afford to buy real estate for the accumulated funds, therefore the opportunity to receive a mortgage loan is the only option for buying a home. The issuance of mortgage loans to individuals is influenced by both external and internal factors.

Bank loan loss provisioning for sustainable development: the case for a sustainable or green loan loss provisioning system

ABSTRACT The purpose of this study is to present a sustainable (or green) loan loss provisioning system that align bank loan loss provisioning with the sustainable development goals. The findings of the paper are that the proposed sustainable (or green) loan loss provisioning system will align bank loan loss provisioning with the sustainable development goals by adjusting loan loss provisions estimates to reflect the environmental benefits and costs of borrowers’ business activities. Banks will incur additional provisions above normal provisions for loans issued to businesses whose activities are harmful to the environment and the climate. Banks will allocate fewer provisions whenever they issue loans to eco-friendly or green businesses. The implication of the proposed sustainable (or green) loan loss provisioning system is that bank regulators and supervisors need to consider the impact of the sustainable (or green) loan loss provisioning system on bank capital and bank stability.

СУЧАСНІ ТЕНДЕНЦІЇ РОЗВИТКУ МАРКЕТИНГОВОЇ ПРОДУКТОВОЇ ТА ЗБУТОВОЇ ПОЛІТИКИ БАНКУ

The study found that the war caused a drop in demand for banking products, non-payment on loans, and a reduction of the commercial revenue base banks of Ukraine. To improve their financial situation, Ukrainian banks must intensify their product and sales policies. Expand the banking institution may have a product range through the issuance of loans for financing of startups by domestic companies or using co-branding, for example, offering co-branding cards in conjunction with partners, using their premises to sell their products. In order to maintain their competitive position, commercial banks of Ukraine should constantly update their product range as single and limited products (we can talk not only about financial products), and massive and unlimited. In this case, the first may not be offered to corporate clients only. Improve management efficiency relationships with customers, banks allow CRM systems, formation own databases. It is determined that today there are several groups of the most relevant tools of banking marketing: informational technologies, web, and mobile banking. In the digital economy, it is important for a commercial bank to develop a unified concept for the organization's remote banking services, which should become multichannel. This will allow customers to choose the most convenient for themselves service channel in a particular case. However, due to the subsequent development of online trading banking operations often goes online mode due to the use of non-cash payments. It is determined that in general, it is possible to distinguish such trends in the development of marketing product and sales policy of commercial banks of Ukraine: expansion use of Internet banking and mobile banking, active use of contactless payments through contactless cards in smartphones and other NFC devices; biometric identification of clients; the formation of neo banks; distribution of digital wallets and QR codes; development banks of joint products with FinTech companies; formation of financial supermarkets; implementation of CRM systems; offer calculators on official websites of banks; formation of customer self-service zones.

Аналіз іпотечного ринку: вітчизняний та іноземний досвід

In the conditions of an economic crisis, the activation of economic activity through mortgage lending becomes crucial, and the study of the development of the mortgage market in the world is necessary for a comprehensive understanding of its impact on social, economic, and financial growth. It is also essential for determining optimal management strategies for the housing sector in a specific country. The article aims to substantiate the features of the functioning of the mortgage market in the world and in Ukraine. Investigating the peculiarities of domestic and foreign mortgage markets, the authors used a statistical method to analyze the mortgage market and government mortgage credit programs in Ukraine and worldwide. Empirical evidence in the research includes data from the Ukrainian Financial Housing Company, the Ministry of Finance of Ukraine, and the Diya platform, presented using a graphical method. Abstraction, analysis, and synthesis methods formed the basis for developing recommendations for improving government programs for developing the mortgage market for housing in the world and in Ukraine. The dynamics of mortgage loans issued in Ukraine for 2019–2022 indicate a decline in mortgage loan issuance due to unstable political and economic situations. It was revealed that the restoration of mortgage lending in Ukraine is facilitated by the Ukrainian government's eOselya program, which is aimed at providing citizens with affordable housing. The specifics of mortgage lending in different countries worldwide are disclosed. The overall trend of diversity in mortgage lending conditions in the European Union indicates significant differences in approaches to housing loans in different countries. However, some positive characteristics of the mortgage market development in the EU can serve as valuable experience for reforming Ukraine's national mortgage lending market. Among them are financial and investment capacities, low cost of loans, socio-legal protection, macroeconomic stability, transparency, informational clarity, and unified regulatory approaches.

Modern interaction between the state and the population in the implementation of housing loans

At the present stage of development, the issue of housing is facing the population of the country and it can be observed that not everyone can afford to buy it. Therefore, the interaction of the state and the population in the implementation of housing loans is becoming especially relevant today. The main purpose of the study is to analyze the interaction of the state and the population in the implementation of housing loans. The main scientific and practical significance of the study lies in the fact that the authors assessed the interaction of the state and the population in the implementation of housing lending at the present stage of development. The methodological basis for the implementation of new forms of housing lending can serve as a theoretical and practical study of the basic principles of housing lending, foreign experience in this field of practice and its adaptation to modern events. As part of the work, it was revealed that in recent years the rate of increase in the issuance of housing loans has increased significantly in Kazakhstan, the growth of which was influenced by state housing lending programs and the ability to apply excess pension savings to obtain, repay mortgages and improve the living conditions of citizens. The authors also analyzed such a program as the housing and communal development program “Nurly Zher” revised for 2020– 2025. Special attention was paid to the housing lending program – “7-20-25” and “Baspana Hit”. The results of the conducted research make a certain contribution to the development of housing lending, can be used to prepare lectures on relevant disciplines, and be the basis for further in-depth research.

Corporate Debt Policy—Pre- and Post-financial Market Reforms: The Case of the Textile Industry of Pakistan

The literature provides evidence that the capital structure of a firm is often a combination of several securities; it can arrange (1) Bank loan (2) issue debentures/bonds, (3) issue shares (4) lease financing, or (5) utilise its retained earnings. Eventually number of ideas and theories has been developed to discuss the optimal capital structure. Optimum is the trade-off between the benefit of tax and costs of financial distress; a firm faces due to the borrowed money. Although extensive research work has been done on the capital structure but still it remains one of the unsettled topics in finance. Optimal capital structure has an impact on corporate profits. Debt is considered as the cheapest source of financing due to tax shield, higher the firm’s tax bracket more the debt is advantageous to a firm. The trade off theory states that higher debt is associated with higher profitability. Three reasons support this theory; one debt allow tax shield. Second, more trust is built on profitable companies considering more sustainable and less prone to bankruptcy; hence high profitable companies are able to seek more debt. Third, agency cost, for the profitable firms, lenders/creditors give relaxation in monitoring charges, which reduces the debt cost. This motivates profitable firms to go for more debt.

ПОДДЕРЖКА МАЛОГО И СРЕДНЕГО ПРЕДПРИНИМАТЕЛЬСТВА В ЭКВАДОРЕ И РОССИИ: СРАВНИТЕЛЬНЫЙ АНАЛИЗ

This article presents the results of a study of support measures and state regulation of small business in Ecuador and the Russian Federation. The article provides a comparative analysis of the criteria for classifying economic entities as micro-enterprises, small and medium-sized companies, measures of state support for small businesses in these countries. The development of small business is the most important link in the economy of Russia and Ecuador; for this purpose, an effective system of its state regulation and support is needed. In Russia, in order to support small businesses, such tools as the issuance of preferential loans, the introduction of credit holidays, limits on commissions for acquiring, a moratorium on scheduled inspections, postponement of tax payments and reporting, reduction of admin-istrative burden, subsidies for starting a business, and new measures to support the information technology sector. In Ecuador, on the other hand, a set of laws and agencies has been developed to plan, execute and control public policies related to business development in general and for small and medium-sized organizations. The state has also developed special economic measures, including the creation of an entrepreneurship platform, a unified craft register, a unified register of small and medium-sized business entities, a national register of entrepreneurs, a portfolio of services for entrepreneurs and the Ecuador Entrepreneur virtual platform.

Interplay of renewable energy investment efficiency, shareholder control and green financial development in China

The study aims to test the interplay of renewable energy investment efficiency, shareholder control, and green financial development in the context of China. To estimate the connections regression analysis approach and the Richardson model are used. This model is specifically used to assess China's renewable energy investment efficiency. The study's findings suggest that renewable energy companies and green finance development assist in alleviating investment shortages. Moreover, shareholder control has a significant connection with both the study constructs. Intermediary effects between short- and long-term bank loans account for 9.38% of the overall impact. Green finance development has a role in the efficiency of renewable energy investments via short- and long-term bank loans. The study analysis further showed that the annual growth rate was roughly 1%, lower in the Chinese context. Around 4% yearly growth in 2012–2013 indicated that the economy started a strong development period. Green finance development in China was found to have a negative influence on bank loan issuance and hindered the efficiency of renewable energy investment to some degree in 2018, yet the amount of development was marginally decreased with an effective degree of 0.17. Moreover, a risk factor is also significant that green financing growth may increase under-investment in renewable energy enterprises, although reducing credit availability mitigates this risk. According to this study, to complete and build a green financial development system, government should use rules and regulations. Financial institutions and renewable energy firms need to work together to enhance their management and construct financing channels to support the growth of renewable energy enterprises. However, multiple practical implications are recommended on it.

Research on credit strategy of small, medium, and micro enterprises based on commercial banks

In order to help banks formulate Credit Strategies for small, medium-sized and micro enterprises, this paper analyzes enterprises from two aspects. On the one hand, starting from the enterprise's data and from the enterprise's relevant data, including qualitative indicators such as reputation level, invoice information, credit record and operating income, a model is established to quantitatively analyze the operation status and reputation status of the enterprise. On the other hand, through the analysis of the "maximum lending rate" and "maximum lending rate" of the bank, we can analyze the "maximum lending rate" and "how much lending rate" of the bank. Combining the above variables, we can get the best credit strategy of the bank under the factors of credit risk and income. Firstly, without considering the influence of other data, this paper abstracts five indicators to measure the reputation status and enterprise-scale from the data of small and medium-sized enterprises with credit rating, quantifies the indicators. At the same time, the Euclidean distance is calculated by MATLAB modeling, the correlation between lending enterprises and non-lending enterprises is analyzed, and the high-risk enterprises in lending enterprises are selected. Then, among the remaining enterprises that can issue loans, five different credit strategies are formulated according to the weighting of their credit rating and enterprise scale as the primary basis for the number of bank loans and interest rate. Secondly, the focus is on how to comprehensively quantify the credit status and business problems of small, medium-sized and micro enterprises without credit records. Without considering the influence of other data, this paper mainly analyzes the correlation between the enterprises without credit records and the enterprises mentioned above that do not grant loans. It preliminarily obtains the enterprises that can grant loans. Then, through decision tree modeling, the loan demand of enterprises with different credit levels is estimated as a variable. By fitting the curve between interest rate and customer churn rate, different interest rate ranges under different levels are obtained as the second variable. Finally, through the above two variables, we establish the profit function of bank credit, find the corresponding variables at the maximum value, and formulate relevant credit strategies.

The China-U.S. Trade War and Chinese Firms’ Global Syndicated Loans

This paper studies the impact of the recent China–U.S. trade war on Chinese firms’ international borrowing. We find a significant and persistent loan cutback of Chinese firms from the U.S. lending syndicates after the Section 301 investigations. The reductions are in terms of the equilibrium aggregate number of loan issuances, as well as loan amounts. We highlight that the drop is a supply-dominated contraction since the equilibrium interest rate have increased in the wake of the shock. Moreover, we document longer loan maturities and a higher likelihood of secured loan formation between China borrower–U.S. lender pairs.

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

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.

Loans and employment: Evidence from bank-specific liquidity shocks

This paper investigates the relationship between expansionary credit events and firms’ employment decisions. To overcome the endogeneity coming from the supply side of credit we exploited the legal and political framework in Mexico to examine the effects of local governments’ prepayment of loans, a situation that leads banks to channel newfound liquidity in firms. Analysis of a novel data set covering a 10-year period showed that a 1-standard-deviation increase in the issuance of new loans increases firms’ employment by 2.57 percentage points. Timing of the boost in employment varies, with smaller firms reacting immediately and larger firms reacting four months later. The effects are driven by firms in the manufacturing sector. Our results highlight the importance of the bank lending channel to stimulate employment in the short term, especially for smaller firms. Further, our estimates suggest that the effect of credit on employment could be amplified with policies that promote a more competitive corporate loan market.