Commercial Bank Lending And Loan Recovery Strategies

PROPOSAL

This research work will focus on the possible reason for bank failures. In this regard of loan lending and loan recovery and effects of such on the rest of populace plus how the financial industry could be transformed to meet the increasing challenge of the present day and finally, assessing the role of the Central Bank of Nigeria in ensuring safety of banks loan.

This research project will include the following literature review, guide for commercial bank services provided commercial banks, current policies, general guidelines for senior credit initials and account officer, credit approval, procedures, credit facility administration, causes of problem loans, collateral security, recovering of debts procedures, bad and doubtful debts, the prudential guidelines and its implication for bank lending, the effect of government policies at its effect, the growth of banking industry in Nigeria.

In order to solve the research problem, the primary and secondary data ha to be used. In the collection of data which are questionnaires and personal recommendation. These involves those in the banking field and those in the financial institutions.

While organizing or presenting the data collected the various hypothesis will be tested using chi-square, data analysis, evaluation and interpretation will bring about the summary, conclusion and recommendation.

 

CHAPTER ONE

• BACKGROUND OF THE STUDY

Many enterprises is established with the assumption that the objectives of every management is to maximize profit. The importance of these organization cannot be over emphasized as they are the bed rock of other sector of the economy. A very good example of the sector is the financial institution known as the banking sector. The phenomenal growth of banks following the introduction of SAP creates a take impression that the banking sectors is an all corners business. The financial industry was thus flocked by incompetent hand and operators with not too clear records and credential which culminate in and aggregated the distress situation.

The banking and financial industry is unique in that it depends mostly on the public confidence and once the confidence is eroded in some banks, it may spread to other banks and institutions and this could be very dangerous to the whole system and the economy at large. Capital adequacy is a parameter of solvency at banks and basis of public confidence in the sector. It should be also be noted as (Orji 1998) stressed that bank lending simply means credit creation and that implies that the profit maximization of the banks is mainly realised through credit creation, the  bank authorities should abide by the rules and regulation of eh Apex Bank (CBN) ie lending to the worst unit sector of the economy and on a reliable collaterals. The effort of the monetary authorities in Nigeria is commendable. In this respect as in the financial industry margins and acquisition is a possible solution for some category of banks in which assets are restricted and consolidated as this helps to enhance the quality of banks.

This research work will focus on the possible reasons for bank failures. In this regard  of loan lending and loan recovery and effect of such on the rest of the populace plus how the financial industry could be transformed to meet the increasing challenges of the present day and finally assessing the role of the central Bank of Nigeria in ensuring safety of banks loan.

 

• STATEMENT OF PROBLEMS

There are number of signal that we often tend to either overlook or discount as in consequential.  This signals later term out to be the beginning of a co-operate failure. The earlier we pick up these signs, the more we are able to recover from the customers. Simple put it is all about being provocative. The early warning signs are legion and the list, presented have under is not an exclusive one.

However, the characteristic are the same but more advanced with loss foreseen. That is a high probability of loss but the extent of which cannot be determined at this time. Full repayment of both interest and principal is improbable. A prudent credit officer will be best advised to quit and reduces his loss.

Other characteristics associated with doubtful classification include; past due obligations/defaults. Auditors disclaimer of opinion or qualification as to continued viability; serious collateral coverage short fall to earlier payment, full recovering dependent upon include events and ineffective of borrowers or creditors remedial efforts.

 

• OBJECTIVE OF THE STUDY

The issue of banks lending and its recovery strategies has posed as a challenge to the financial sector in particular and the whole economy in general and as such the project work is carried out to meet the following aims and objectives:

1. To know if the increased administrative expenses can be eliminated by good lending policies.
2. To find out if default borrowers can be reprimanded by serving a demand notice.
3. To ascertain how secured the collateral securities of these loans are.
4. To find out the extent of difficulties in the repayment of loan advances.
5. To establish the factors responsible for loan repayment in Nigeria.

 

• RESEARCH QUESTION

Based on this aims and objectives of the project work, the following questions stands and needs to be answered at the end of the work.

1. Is the increased administrative expenses eliminated through good lending policies?
2. Can the default borrowers be reprimanded by serving a demand notice?
3. Is the collateral securities of these loan advances secured enough to recover the loan advances to customers?
4. Has there been any loan repayment defaulters in your bank in recent times?
5. What is usually responsible for the these loan repayment default in recent times?

 

• STATEMENT OF HYPOTHESIS

In the cause of this work, the author will embark on the test of the following hypothesis and those findings will help in reaching a final conclusion and answer to the above research questions.

Hypothesis 1

Ho: The increased administrative expenses can not be eliminated by a good policies.

Hi: the increased administrative expenses will be eliminated through a good lending policies.

 

Hypothesis 2

Ho: the default borrowers cannot be reprimanded by serving a demand notice

Hi: the default borrowers can be reprimanded by serving a demand notice.

 

Hypothesis 3

Ho: the collateral securities of these loans are not secured enough to recover those loans advances and at when due.

Hi: the collateral securities of these loans are secured enough to recover those loans advances and at when due.

 

Hypothesis 4

Ho: there has not been any loan defaulter in our bank in recent times.

Hi: there has been some loan defaulters in our bank in recent times.

 

• SIGNIFICANCE OF THE STUDY

The research study will bring to light the observed reasons for commercial banks credit recovery failure and the effect of such on the institution, this will help banks to make amendment where necessary and help them. Increase there creation abilities and recover them at the fullness of time.

 

• SCOPE AND LIMITATIONS

This research work focuses on the commercial bank lending and loan recovery strategies due to problems associated in the regards in the sector.

The study will reflect briefly on the history of banking business in Nigeria, the development over the policies on operations and mode of xx.

However due to limitation the work now focuses on the citizens International bank. Currently there has not been enough work now focused on the citizens international bank. Currently there has not been enough work on the loan recovery strategy in the industry. It is expected that the more will be affected by those factors.

This financial constraints has adversely affected this study. Also proximity to published books on the said project topic was a difficult task to overcome.

Moreso, the data obtained is with the scope of the domestic banking as financial system, the issue of time constrain the project works.

Since this work needed extensive research to come out a very constructive project and while it was done simultaneously with other class work it has not easy to allocate enough time to this study.

The work through very interesting was constrained by certain factors. It would have been wonderful if author was opportune to have all the resources needed at his disposal, but this was not possible due to time factors and financial constraint on the other hand the financial problem coupled with general like in fares as occasioned by the fuel crisis that prevailed over the period of the study automatically limited my visitation to places where I would have sourced information.

 

• DEFINITION OF TERMS

The following are some technical terms used in the project.

1. CREDIT POLICY: This is how a firm plans to give its credit collection of debts owned to it by it customers.
2. LOAN PORTFOLIO: A mixture of shares and bonds held by a firms.
3. CAPITAL: It is the money by which one start off a business with. In a more technical terms, it could be referred to as the resultant between total assets and the habitation of a firm.
4. MANAGEMENT: The dismantling of regulation by central banks around the world. This has been another features of xxx internationalization.
5. CAMEL: Capital adequacy, asset quality management competence, barning strengths and inquisity sufficiency.
6. NIGER EUGENE: (1999) defines manager as “the fusing together to two or more companies to form a company whether fusion it voluntary of forced.
7. SAP: Structural adjustment programme
8. APEX BANK: This is the regulatory authorities of banking in Nigeria and if otherwise known as central bank of Nigeria.

 

 

References

Orjih, J, (2001) Financial Management (220) credit creation plasmedia organization.

Eugene F.B. (1999) pg 860 fundamental of financial mangement 5^th edition, USA dryden press New York.

 

Kanu, O. (2000) “why we curd tensing” this day daily Newspaper vol. 5 No. 80.

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