DETERMINANTS OF NON-PERFORMING LOAN ON CONVENTIONAL BANKS IN INDONESIA

Abstract

Rendering loans is still the primary concern of banking operational in Indonesia. As the bank gives loans to its customers, it bears credit risk since not all loans are free from peril. Non-performing loan (NPL) is an important aspect when it comes on measuring the level of credit risk and even a bank’s health level. Therefore an insight about the determinants of NPL is needed. This study conducted on purpose of knowing how is NPL affected by bank-specific variables, such as ROA, NIM, NII, CAR, and LDR, with stepwise – multiple linear regression used as the analysis method. The result shows that ROA is having a negative significant impact on NPL, whereas CAR and LDR have positive significant impact on NPL. On the other hands, NIM and NII apparently have no significant impact regardless of their sign of relationship, positive or negative, toward NPL.