EFFECT OF BAD DEBTS ON PROFITABILITY OF BANKING INSTITUTIONS (A CASE STUDY OF UNION BANK OF NIGERIA PLC.)
CHAPTER ONE
1.0 EXECUTIVE SUMMARY
Banking operations are critical in the establishment of any economy. One of the functions of a commercial bank in an economic system is the transfer of funds from surplus units to deficit units. The surplus unit provides funds to the deficit unit for investment purposes, which is critical for any country’s economic growth. Commercial banks serve as go-betweens for the demand and supply sides.
Banks create deposits in the course of performing their code of financial intermediaries between surplus and deficit units when they make a loan to a customer account with the amount involved. The credit to the customer’s account, which has now become a deposit, is now available to the bank for future lending to prospective borrowers.
The ability of a commercial bank to make a loan is determined by the amount of hours deposited and the legal reserve requirement imposed by the central bank. A bank earns a return for the role of mobilizing is important as well as the bad debt account due to a variety of reasons,
which may include the likely death of a borrower, possible illegal diversion of funds, poor state of the economy, not all loans granted by banks to if customers are promptly when due, such problems on loan and advances are classified as bad debt and doubtful debt.
This has two major concerns for both management and shareholders, but debt is less as a bank and thus capable of reducing shareholder returns and contributions to the country’s economic and social development.
1.1 THE PROBLEM’S STATEMENT
The study investigated into the management of debt in Union Bank, it was discovered that several factors influence the bank management’s decision in the numerous factors considered are the time factors, the nature of the business of the company involved and its management team, and the type of industry in which the company falls.
A study is concerned with the examination of low factors such as non-product financial management, natural disasters, prevailing economic difficulties that have caused many countries to operate below capacity, and other factors that have affected bad debt management.
1.2 MAIN GOALS AND OBJECTIVES
The bank is a business enterprise with the goal of maximizing profits, paying out handsome dividends to shareholders, and contributing to the economic growth of nations.
The main objectives of this research topic are to defall the bad debt activities through the strategies they are using in order to minimize the rapid growth of debt to become bad.
Efforts would be made to draw out the impact of bad debt on the entire banking industry including the staff, customer, and marketing activities, which would be a major constraint on the achievement of their desired objectives.
The project will also touch on the effort of prudential guidelines on bill debt and bank debt categories, study the process of credit appraisal, identify the major causes of bad and doubtful debt, analyze their effects, and offer suggestions on the minimization and effective management of bank debt in union banks.
1.3 THE STUDY’S OBJECTIVE
The scope of the research is created on the business operating and working on the union bank of Nigeria plc, which provides an insight explanation on the management of bad and doubtful debt in the loan and advances department, as well as the effect of bad debt on the bank’s profitability.
1.4 THE STUDY’S SIGNIFICANCE
The importance of this study stems from its ability to provide a preferred solution to the problem of fraud.
Second, if it exposes students to information, it builds them in the act of researching data and gathering information, as well as writing bold projects.
Third, if it is used as research material by prospective researchers for future researchers. Finally, if serves as an alert to the financial institution’s regulatory body on that, if fraud is not urgently death with it,
it may just parallax the economy completely not spanning the banking section, as they say a study in time saris nine. The significance increases if it is relied on as a source of potential solutions to the problem of fraud.
1.5 THE STUDY’S LIMITATIONS
The study’s greatest limitation was in the area of interviews; most bank officials were willing to grant us their time for an interview on the grounds that they were extremely busy. This study was also constrained by the length of the research project, which we deem insufficient.
1.6 METHODOLOGY OF RESEARCH
These are proposed answers to research questions that will be tested during the course of this research study.
These proposed methodologies will guide us in the approach we will take for this study.
Moi: There is a strong link between the threat of bad debt and the distress of Nigerian commercial banks.
Mo: There is a strong link between the threat of bad debt and the distress. Commercial banks in Nigeria
1.7 QUESTIONS FOR RESEARCH
The first question is, what are the causes of bad debt in union bank?
Question two: How does the inefficiency of the bank regulatory body affect the existence of bad debt in Union Bank?
Question three: what is the relationship between bad debt and
Question four: What impact does bad debt have on the Nigerian economy’s perceived growth?
1.8 TERMS AND CONDITIONS
Auditor: an independent professional accountant hired by a company (shareholders) to audit the company’s financial state.
Teeming and lading: The practice of using money received from one debtor to clear the account of another debtor whose money was previously misappropriated by the company in order to establish its authenticity and lunchernty to standard.
Banks such as Boflo and other financial institutions decree
Dual central system: A system consisting of two central systems, one of which serves as a check on the shortcomings of the other.
Lending: the act of lending money on credit.
Security: These are financial documents issued by the government of the public to source funds, implying the government’s state of indebtedness to the holders of such document.
Questionnaire: A collection of reposting systems of evaluation based on the use of a fictitious form of question.
Credit: The right to use or possess goods without having to pay for them right away.
Internal control: A system for comparing actual performance to standards using the tools provided.
Bankruptcy: A court of law declaring that an individual or company is insolvent (can not meet its debts on the due date)
Shareholders: Members and owners of a company are represented by their ownership of the company’s shares.
Payroll is a record card that shows gross wages, tax deductions, and net wages payable to an individual worker.
remuneration: monetary compensation for labor and services
The structural arrangement in an organization is referred to as an or grogram.
FEM stands for foreign exuding market.
CBN: Nigeria’s central bank.
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EFFECT OF BAD DEBTS ON PROFITABILITY OF BANKING INSTITUTIONS (A CASE STUDY OF UNION BANK OF NIGERIA PLC.)
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