Abstract:
Purpose
The preliminary purpose of this research work and study is to recognize and assess the
determinants of Non-Performing Loans in the Financial (Banking) industry of Pakistan and
establish a correlation between these variables.
Methodology & Design
To work for this determination, historical data on Macro-economic variables have been
collated and used to determine the relationship between these variables and Non-Performing
loans statistically. Regression and Correlation based techniques have been used to establish
the dependency
Findings
This in depth and empirical study of the macro - economic variables in explaining the
variation in non - performing loans, revealed that collectively Inflation (CPI Index), GDP
growth (LSM Index), Exchange Rate (ER), Discount Rate (DR), Imports, Exports, Private
Sector Credit, PSX performance (KSE 100 Index), Oil prices, Money Supply (M2) and
Infection Rate (Textile Sector), statistically are able to significantly explain the variation in
the non - performing loans. Upon conducting detailed multi-variate regression analysis, it
was deduced that regardless of underlying correlation of each macro - economic variable vis
- a - vis non - performing loans, except for GDP Growth, PSX performance and Oil prices,
all other variables are significant predictor of non - performing loans
