MANAGEMENT OF BAD DEBT IN THE NIGERIA BANKING SYSTEM SCOPES AND REMEDIES

Thesis Overview

<p>INTRODUCTION<br>1.1 BACKGROUND TO THE STUDY<br>Banks have been credited generally with enviable role of being a very important source of funds or capital for the development of the economy. This recognition largely emanates from the roles assumed by most banking institutions in mobilizing various deposits and channeling some towards feasible and viable ventures. This size, type and level of such profitable outlet along with other complimentary factors contribute to economy well being of the country in which the bank is situated. As a result of this, banking institutions have been an agent of economic growth and perhaps economic development.<br><br>This deposit which are loanable funds can only be made available to banks, if customer make substantial deposit which banks in turn employ to make loan and advance available to borrower so as to generate interest which may accrue from the advances. This enables the bank to run its day-to-day administrative cost, remain in business and pay satisfactory divided to its shareholders.<br><br>1.2 STATEMENT OF PROBLEMS:<br>It is unfortunate that the borrowers take undue advantage of these loan and advances granted to them by not utilizing them for the purpose for which were given hence bringing about default in the repayment of such loans and subsequent bad debts. So, bad debt can be defined as unrecoverable debts. The borrower consistent inconsistency in response to demand for the repayment of loan and make it extremely difficult for other intending borrowers or fund seeker to avail themselves of the opportunity of enjoying such facilities among other consequences.<br><br>1.3 The project work therefore is aimed at evaluating the following points:<br><br>(a) To evaluate the problem of bad debts in banking lending<br><br>(b) To identifying its remote and immediate causes.<br><br>(C) To determine its effects to the economy in general.<br><br>(d) To make recommendation on how possible.<br><br>1.3 DEFINITION OF TERMS:<br>1. BANK: Otherwise specially stated bank in this study refer to commercial banks. Commercial bank is described by the banking act, 19689 as a bank whose business include the acceptance of deposit, withdrawal by cheque include loans and advances.<br><br>2. CAPITAL: This is the amount used for the commencement of business with addition subsequently made. It is also a set aside wealth for the production of more wealth.<br><br>3. LOAN CREDIT RISK: This is the profitability that a borrower may not repay the loan granted him by the bank.<br><br>4. MONEY RATE: This entails the possibility of value of money increasing or decreasing.<br><br>5. MARKET RATE: The probability of the interest rate change.<br></p>