Management Of Non-Performing Loans (Npls) Of Banking Institutions In Malaysia

C.H. Ponnu, T.N. Ramakrishnan
This study evaluates the management of non-performing loans (NPLs) of banking institutions in Malaysia surrounding the East Asian crisis in 1997. The study aims to determine if the level of NPLs has declined and the asset quality has improved since the 1997–1998 crisis. In addition, it also aims to evaluate the effectiveness of Danaharta, Malaysia's national asset management company, in addressing the NPL problem in banking institutions of Malaysia. The trend of gross NPL
ratios and percentage of total loan provisions, the ageing of NPLs and the percentage of NPLs restructured and disposed were some of the indicators used on the secondary data collected from Bank Negara Malaysia and Danaharta. Results show that the level of NPLs has declined since the 1997–1998 crisis. In addition, a less volatile rate of change in the NPL ratios after year 1998, and the decline in NPL ratios along with a decline in total NPL provisions after year 1999 suggests that
better prudential practices on NPLs are followed and asset quality in banking institutions has been improving after the 1997–1998 crisis. Danaharta has been effective in reducing the level of NPLs in banking institutions but less effective in disposing the NPLs acquired.
288-300.pdf [261.92 Kb] (Count: 32)