In a modern economy, there is distinction between the surplus economic units and the deficit economic units and in consequence a separation of the savings investment mechanism. This has necessitated the existence of financial institution whose job includes the transfer of found from savers to investors. One of such institution is the money deposit banks, the intermediating roles of the money deposit bank place them in a position of trustees of the saving of the widely depressed surplus economy units as well as the determinant of the rate and shade of the economic development .the techniques employed by banker in the intermediary function should provide them with perfect knowledge of the out-come of lending such that funds will be allocated to investments in which the probability of full payment is certain.
TABLE OF CONTENT
Table of content
1.1 Background of the study
1.2 Statement of the study
1.3 Research questions
1.4 object of the study
1.5 Research hypothesis
1.6 Significance of the study
1.7 Scope of the study
1.8 Definition of terms
1.9 Plan of the study
2.1 Theoretical frame work
2.2 Government control over credit
3.1 Source of data
3.2 Population of the study
3.3 Sample size determination
3.4 Method of data collection
3.5 Method of data analysis
3.6 Limitations of methodology
Data presentation analysis and interpretation
1.1 BACKGROUND OF THE STUDY
However, in practice no such tools can be found in the decision of the lending banker. Virtually all lending decision are made under creditors on uncertainty associated with lending decision, situation are so great that the concept of risk and risk analysis needs to be employed by lending bankers in order to facilitate sound decision making and judgment. This statement implies that if risk are to be objective assessed, lending delicious by the money deposit bank should be base less on quantitative data and more on principle too subjective to proved sound and unbiased judgment. Furthermore the bank depends heavily on historical information as a basis for decision making.
Apparently aware of the inadequacies of his decision base the lending banker has often sought solace in tangible and marketable assets as security giving the impression that lending against such security is an insurance against bad debt. This makes the bankers complacent his loan portfolio. The increasing trend of provision for bad and doubtful debt in most money deposit banks is a major source of concern not only to management but also to the shareholder are becoming more aware of the dangers posed by these debts. Bad depts. destroy of the earning asset of bank such as loan and advance which have been described as the main source of earning and also determine the liquidity and solvency which generate two major problems that profitability and liquidity, has to earn sufficient income to meet its operating cost and to have adequate return on its investment.
1.2 STATEMENT OF THE PROBLEMThe problem for this study is appraised the lending and credit management policies of a typical money depot bank (the union banks of Nigeria plc)with a view of finding the causes, consequence of bad debts in banks. Year after year, banks suffer much from the part of full loan extended which has for one reason or the other proved unrecoverable. Banks lose millions of naira in various bad debts yearly and despite effort by bank management, committee of chief inspector and the banker committee on other hand the wave of bad debt in bank are still on alarming proportion. This is gathered from a combination of literature reviews on the topic.
On the other hand, many banks experienced a lot of bad debts when the new government abandoned the project awarded to the contractors by past government. These contractors borrowed to execute the project awarded to them to them but could not repay the loan, due to government action on ramping the economy thereby abandoning the project. Other experiences were during the time of draught or poor rainfall and pest. These however led to low harvest which did not give the farmers enough time to repay their debt.
Again, experience may arise in respect of lapses on the part of the banks credit officers. For instance, there may be excesses over approved facility, unformatted facilities and expired facilities not renewed on time. In each of these cases the customer may easily deny even owing the bank all or part of the amount. Money deposit banks may be unable to take the risk of lending more but when eventually they do, they would seek the best way they come out of risk with a realistic reward which they are clearly failing to achieve at present.
1.3 RESEARCH QUESTIONSIn view of the consequences of bad debt in Nigerian money deposit banks, it is necessary to formulate some research question which will enable the researcher formulate statistical tables for testing hypothesis
1. Has inadequate collateral security provision by borrower caused bad debt in union bank of Nigerian plc?
2. Does fund diversion have any effect on bad debt of union bank of Nigeria plc?
3. To what extent has government intervention in lending policies of money deposit bank influenced bad debt in union bank of Nigerian plc?
4. To what extent does improper project evaluation influenced bad debt of union bank of Nigeria plc?
1.4 OBJECT OF THE STUDY
i.to determine and appraise the lending procedure of banks using union bank of Nigerian plc as a case study with a view to highlighting the effectiveness and adequacy or otherwise the credit management policy of Nigerian banks in reducing the occurrence and consequences of bad debts.