In a modern Economy, there is a distinction between surplus economics units and
the deficit economics units and in a separation of the saving investment
mechanism. This has necessitated the existence of financial institutions whose
jobs includes the transfer of funds from savers to investor. One of such
institution is the commercial Bank.
The commercial Banks are regarded as banks because they create money. They do
this by establishing chequing account for their customers for whom they create
demand deposited and pay out cash on demand.
Traditionally, the essential features of a commercial bank lies on the service
it renders to its numerous customers. These services basically includes
deposite stabilization, credit management money transmission, and consultancy
services etc. however their most vital function and which has a great impact on
the economy as a whole is credit.
The primary function of commercial bank is the extension of credit to worthy
Commercial bank are rendering a great financial services. Through their actions
production is increased, capital investments are expanded and a higher standard
of living is realized.
Additionally, this functions are very important in that they distinguish bank
from all other financial institutions and very unique position to manipulate
the level and volume of demand deposite by limiting borrowing.
Credit extension management is one of the most intricate function performed by
banks. This is so because loan portfolio is the greatest risk in the banking
activity. Hence if due care and prudence is not exercised, it might result in
bad debts. Bad debts are normal business expense and must be charged as such
when calculating the profit and loss for the period.
Besides, business sin the other hand cannot exist without debt. It is now
impossible to achieve any thing weather as an individual or as a group of
person without going into some form of debt or the other. It seen to be
generally agreed that debt is essential to business.
STATEMENT OF PROBLEM
The volume and value of bank loans which have became classified has continued
to increase even a faster rate than the increase in bank lending. This has
adverse effect on banks since it effects their cash flow and impairs their
profitability. It is believe that most debts go bad because of the inadequacy
of loan management and recovery procedure of banks.
The problem of this study is to appraise the lending and credit
management policies of a typical commercial bank union bank of Nigeria Plc with
a view of finding the cause and consequences of bad debts in banks.
OBJECTIVE OF STUDY
The main objective of this study is to appraise the lending procedure and loan
management of banks using union bank of Nigeria plc as a test case with a view
fof highlighting the effectiveness and adequacy or otherwise of the credit
management policy of Nigeria Banks and in reducing the occurrence and
consequences of bad debts.
SIGNIFICANCE OF THE STUDY
The difference between success and failure in the banking industry’s is in the
effective management of the banks loan and advance efficient loan management is
vital to the protection of asset and the achievement of adequate return to
investments on the technique of lending the methods of securing such lending
and the pit falls that awaits the unwary banker; bys comparison there appears
to be very little imprint on the subject of loan management and recovery. A
study on this subject will therefore be a welcome addition to the existing
volume of banking literature.
Effective loan management recognize that beyond the application of sand banking
principles whenever a loan is made, there is need for urgency in appreciating
the point when loan begins to look doubtful arriving at a decision as to the
appropriate action and in taking that action. This will enable the bank to at
best obtain full repayment including accrued interest.
In the face of increase competition among banks, future profits are likely to
be harder to come and since bad debts are a charge against profit. It is
appropriate that we review the methods proportions and margin of lending to bad
and doubtful debts.
Hence the significance if this study to bankers. Beside the bankers more than
ever before will appreciate an appraisal of their lending and control mechanism
now that are expected to lend under tight monetary conditions, with it negative
effects on investment outcomes.
The economy as a whole will benefit from the study because if the level of bad
debts is reduced, bank will be left with more profits to enable them make the
expected contribution to the development of the economy.
SCOPE AND LIMITATION OF THE STUDY
The standard of which this research is written is to cover a wide and
reasonable ground. This wide coverage will help us to understand fully the
study of credit management. To under score this point efforts were made to
cover such are, as that will make the work meaningful.
In view of these the research has connived on the knowledge gathered from
textbooks of accountancy and finance ad some relevant Journals magazine.
These were really explored by considering the ideas gathered in the write-up.
DEFINITION OF TERMS
Bad debt:- These are loans that the borrowers are unwilling or
unable to repay due to one reason or the other.
Credit management:- It is a money transmission and consultancy
Commercial Banks:- A bank means any firm incorporated and
licensed by the central bank of Nigeria to carry on the business of banking.
FUNCTION OF COMMERCIAL BANKS
Foreign Exchange facilities
Providing Status Report
TERMS AND CONDITIONS APPLY
For more informations on project materials and more