IDENTIFICATION AND MANAGEMENT OF BAD DEBTS, IN BANKS ISSUES AND CHALLENGES

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

One of the prevailing features in our banks today is the ever increasing incidence of bad debts. This ugly situation stems from inadequate training, improper appraisal of loan application and indiscriminate lending on the part of bank managers or credit officers.

A bank through its intermediation role is able to channel the surplus deposit of its customers as credit to the needy customers in order to earn a return.

The success or failure of a bank depends on, among other things, its ability to grant recoverable credit facilities and make reasonable margin from them. “Assessment of application for lending by customers cannot be based on rule of thumbs”. (Talabi 2000). Customers credit needs may appear similar when considered in terms of purpose, period of repayment, source of repayment. The possibility of this is the consideration of the analysis of the financial performance of all firms in an industry and their comparison at a given point of time. To ascertain the relative financial standing of a firm, its financial ratios are compared either with its immediate competitors or with the industry average and other factors.

This work will also examine in some details both act of:

Bad debts: issues and challenges and how it can be handled by the bank. (L.C MATHER), a banking author of great renown and expert in practical aspects of banking, has advised against following lending rules and regulation rigidly. He compared the principles of lending to economic laws. In that, certain facts and other things being equal, prescribe course should also be followed.

They are neither independent nor unbreakable thus, the principles, such as credit administration and corporate planning should be weighed carefully. A lot of criticisms have been leveled against banks by borrowers of their lending and supervisory policies to the sector, and banks have decreed the insincere attitude of the borrowers to bank funds. Whichever case, the important thing is that, banks in their lending operations cannot afford to throw to the winds good credit appraisal because it is the only way to minimize the incidence of bad debts, issues and their challenges. One sure way for banks to avoid distress is to be prudent in its credit assessment and disbursement critical in credit monitoring and stop actions when warning signs that thing may go wrong become visible.

1.2 STATEMENT OF PROBLEM

Attempts have been made to identify possible areas of constraints which though cannot be exhaustively examined in this research work, will nevertheless serve to illustrate some of the factors that may inhibit the performance of lending and the solution should be a challenge to practicing bankers. In some cases, lending proposals are not supported with financial data that will aid the sound judgments of the bank manager. In fact, where this financial data are available, there may be a deliberate falsification to satisfy the credit office due to the problems created by borrowers.

In order to safeguard the interest of the third party who keeps money with the bank, and to regulate the economy, the government prescribes specific laws and regulations which are intended to control the lending activities of banks.

The failure of banks to reduce high interest rate on the borrowed money leads to low turnover and subsequently low sales, retrenchment and shut down of factory lines. But when the interest rate is reduced to an extent, it will help to propagate bank lending and also favor the borrowers.

1.3 PURPOSE OF THE STUDY

As granting of credit facilities appears to be one of the most intricate services provided by banks, therefore taking the risk that some of the customers may never pay back.

This has the following as its purposes.

...

1.4 RESEARCH QUESTIONS

A research question is the fundamental core of a research project, study or review of literature. It focuses on the study, determines the methodology, and guides all stages of inquiry, analysis and reporting.

1.6 SIGNIFICANCE OF THE STUDY

The significance of this study, “identification and management of bad debts in banks: issues and challenges cannot be over emphasized. It will be significant to the following:

1.7 SCOPE OF STUDY

The scope of this research work focuses on the identification and management of bad debts in banks: issues and challenges with particular reference to Fidelity bank PLC, Unwana, Afikpo branch.

1.8 LIMITATIONS OF THE STUDY

In the course of this study the researcher encountered a lot of problem such as, financial constraints, time constraints and psychological problems in the area of the work as they feel not to release the real information needed by the researcher to accomplish this study effectively without bias.

1.9 DEFINITION OF TERMS

At this stage of this research work, the researcher deems it right to define certain terms employed in this research work in order to make the research easy to understand.

Back To All Departments Project Topics and Materials »

If you have any Project Material or E-Book(s) and you want us to help you market it on our Website and you will earn money from sales,

Submit it Here!

RECENT BLOG POSTS
(Latest News Updates, Tutorials, ETC)

2025 NECO AGRICULTURAL SCIENCE QUESTIONS AND ANSWERS
2025 NECO Agricultural Science Questions & Answers (Essay and Objectives answers) ...

Read More �

2025 NECO FURTHER MATHEMATICS QUESTIONS AND ANSWERS
2025 NECO Further Mathematics Questions & Answers (Essay and Objectives anwsers) ...

Read More �

2025 NECO CHRISTIAN RELIGION STUDIES QUESTIONS & ANSWERS
2025 NECO Christian Religion Studies Questions & Answers, crk, crs, irs, irk, neco, neco 2025, ...

Read More �

HOW TO CONNECT WHM AND CPANEL TO WHMCS
2025 NECO ECONOMIC ESSAY AND OBJECTIVES QUESTIONS AND ANSWERS...

Read More �

2025 NECO CIVIC EDUCATION QUESTIONS & ANSWERS
2025 NECO Civic Education Questions and Answers (ESSAY AND OBJECTIVES) ...

Read More �

FEDERAL POLYTECHNIC UGEP ADMISSION SCREENING FORM 2024/2025
This is to inform the general public that the registration for 2024/2025 academic session Post Unified Tertiary Matriculation Examination (Post UTME) of Federal Polytechnic Ugep will commence on Monday 2nd September, 2024 and end on Monday 30th September, 2024....

Read More �

WHY DOCTORATE THESIS RESEARCH?
Why Doctorate Thesis research: The central purpose of a PhD thedis is to produce new, original insights that advance the body of knowledge in a particular academic discipline...

Read More �

HOW TO MAKE MONEY WITH E-MATERIAL PROGRAMME
In this programme, you can earn as much as 60% of the value of the material while we help you promote the material for sale. This is just an added way of making money with your material and does not stop you from your other marketing campaigns....

Read More �

HOW TO INSTALL VTU PORTAL CREATING SOFTWARE
Below are the steps to follow in Installing VTU Portal creating software. Download VTU Portal Creator from the purchase link and upload it to your Cpanel directory. Login to your site cpanel e.g. www.yoursite.com/cpanel. Open File manager ......

Read More �

HOW TO CREATE YOUR OWN VTU WEBSITE FROM SCRATCH
Below is a list of things you will need to create your VTU website from scratch: A Domain Name, A Web Hosting Account/Space, A Website Template or Wordpress, A Text Editor, A Laptop, Desktop, or Smart Phone, A VTU Portal Creating Software, A reliable internet connection, A VTU business Account...

Read More �