Conclusion
This study has shown that the economies with higher NPL ratios are more
prone to economic consequences and repercussions that economies with
lower NPL ratios are less at risk of. It has also shown that high NPL
ratios damage both individual banks as well as the national economy if
too many banks in a country has unnaturally high ratios. Non-performing
loans plays a key role in not only bank functioning but also maintaining
confidence in the market, how credit is allocated in the country, all
the loans given out, the total amount of loans available, as well as the
risk of possible credit distortion. Countries that can maintain low
levels of NPL ratios receive benefits such as increased market
confidence, an even spread of credit supply, and large supply of loans.
Nations that work actively to decrease a high NPL have been shown to
have significant positive long-term results that includes boosting bank
loaning and lending behavior to increase the total amount of loans.
Indeed, a low non-performing loan ratio is beneficial to not only the
bank but also to the citizens and governments and the overall economy.
Governments and lawmakers around the world draft different ways to
maintain low NPL ratios as well as bring them down when needed to, and
that trend should continue.