Does Deviation from Prudential Regulation Leads to Non-Performing Loans? Evidence from Habib Bank and National Bank of Pakistan

Abstract

This study focuses on the deviation from prudential regulation leading to the non-performing loans and to show how these values have been avoided, especially in the Pakistani Banking Industry. This research is descriptive in nature, population incudes HBL and NBP branches of Bahawalpur region. In order to find out the objectives of this study, 30 unstructured Interviews with Credit in- charges, Credit Officers, Loan Officers, and Loan Recovery Officers of National Bank of Pakistan and Habib Bank Ltd. of Bahawalpur region were conducted. 23 Respondents were positively replied while 7 were negatively replied. Some special loan cases from banks file were also added. Research concluded that banks personnel's sometimes deviate from Prudential Regulations at the time of loan issuing, which leads to non-performing loans. Banks need more effective regulations and policies which can secure the bank's profitability.