FACTORS INFLUENCING RECOVERY RATE IN COMMERCIAL BANK

Abstract

The purpose of this research is to identify the factors that impact on the Recovery Rate upon the default account of a commercial bank. The sample used in this research is accounts receivable of business loans defaulted from 2009 to 2016 totally 2,838 accounts. Under the hypothesis that the business size, the loan type, the restructuring debt, the exposure at default, the region, the collateral type, the business type, the risk rating, the utilization, the gross domestic product (GDP), and the inflation have relationship with the Recovery Rate using regression analysis. The results of this research will be make benefit to the financial institution for making decision in policy setting in order to prevent Non Performing Loan (NPL) .

The result show that the default accounts of business loans have the characteristics as follows: have small loan size, use land collateral, run business in agriculture and livestock industries and have high utilization. In regression analysis, there are 8 significant factors out of 11 input factors that impact on the Recovery Rate at 95% confidence level. That are the business size, the loan type, the collateral type, the business type, the risk rating, the utilization, the Gross Domestic Product (GDP) and the inflation.