2024, Vol. 7, Issue 2

Methodology: A descriptive and causal-comparative research design was employed. Secondary data were collected from seven Nepalese commercial banks over the period 2015-2023, resulting in 70 observations. Analytical tools, including descriptive statistics, Pearson correlation, and regression analysis, were applied using SPSS software.

Analysis and Findings: Descriptive analysis revealed significant variability in LLP and associated variables across banks and over time. Correlation analysis showed a positive relationship of LLP with Non-Performing Loans (NPL), inflation, and interest rates, and a negative relationship with bank size and GDP growth. Regression analysis confirmed NPL (β = 0.688, p < 0.01), loan growth (β = 0.65, p < 0.01), and inflation (β = 0.594, p < 0.01) as significant predictors of LLP. Relationships with Capital Adequacy Ratio (CAR) and interest rates were insignificant. Conclusion: NPL, loan growth, and inflation significantly influence LLP in Nepalese commercial banks. Larger banks exhibit lower LLP due to better risk management. These findings underscore the need for prudent credit risk management and macroeconomic stability to ensure financial resilience.

Novelty: The study addresses a critical gap by analyzing LLP determinants in the Nepalese banking sector, providing empirical insights into the interplay of macroeconomic and bank-specific factors.