CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Bank have been credited generally with enviable role of being a very important source of funds or capital for the development of the economy. This recognition largely emanates from the roles assumed by most banking institute in mobilizing various deposits and channeling some towards feasible and viable ventures. This size tyre and level of such profitable outlet along with other complimentary factors contribute to economy well being of the country in which the bank is situated. As a result of this banking institutes have been an agent of economic growth and perhaps economic development. This deposit which are loanable funds can only be made available to the banks if customer make substantial deposit which banks in turn employ to make loan and advance interest which may accrue from the advances. This enable the bank to run its day to day administrative cost, remain in business and pay satisfactory dividend to its shareholders.

1.2   STATEMENT OF THE PROBLEMS

It is unfortunate that the borrowers take undue advantage of these loan and advances granted to them by not utilizing them for the purpose for which were given hence bringing about default in the repayment of such loans and subsequent of loan and make it extremely difficult for other intending borrowers or fund seekers to avail themselves of the opportunity of enjoying such facilities among other consequences.

1.3   OBLECTIVE OF THE STUDY

The project work therefore is aimed at evaluating the following points.

a)  To evaluate the problem of bad debts in banking lending.

b)  To identifying its remote and immediate causes.

c)  To determine its effects to the economy in general.

d)  To make recommendation on how possible.

1.4   DELIMINATION, SCOPE AND LIMITATION OF THE PROJECT.

This project work intended to be more encompassing but was hampered by certain unavoidable constraints, some of which are: First and foremost, is the financial disability which compelled me to restrict this volume due to high cost of stationers? Finally, the refusal by the institute of management and technology Enugu library (reference section) and University of Nigeria Nsukka to laid out already written work which would have helped in a lot of ways to the making of this project posed a serious constraints. On the scope. Project work is made up of three chapters. First chapter is introduction of background of lending as an important factor in bank   development.      Chapter two deals with the review related literature then chapter three which is the summary of findings.

1.5  DEFINITION OF TERMS:

1)  BANK: Otherwise specially stated bank in this study refer to commercial banks. Commercial bank is described by the banking act, 1969 as a bank whose business include the acceptance of deposit, withdrawal by cheque include loans and advances.

2)  CAPITAL: This is the amount used for the commencement of business with addition subsequently made. It is also a set aside wealth for the production of more wealth.

3)  LOAN CREDIT RISK: This is the profitability that a borrower m ay not repay the loan granted him by the bank.

4)  MONEY RATE: This entails the probability of value of money increasing or decreasing.

5)  MARKET RATE: The probability of the interest rate changing.