AN APPRAISAL OF THE LENDING AND CREDIT MANAGEMENT AGEMENT POLICIES OF A TYPICAL MONEY-DEPOSIT BANK (THE UNION BANK OF NIGERIA PLC)

1.1 Background of Study

1.2     STATEMENT OF THE PROBLEMS

The problem for this study is to appraise the lending and credit management policies of a typical Money-deposit bank (the Union bank of Nigeria Plc) with a view of finding the causes, consequences 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 efforts by bank management, committee of chief inspectors and the bankers committee on the other hand, the wave of bad debts in banks is 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 civilian government. These contractors borrowed to execute the project awarded to them but could not repay the loan, due to government action on re 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 bank credit officers 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 have always borne the burden alone, but this may not continue in future as the 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 the risk with a realistic reward which they are clearly failing to achieve at present.

1.3       PURPOSE/OBJECTIVE 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.
(ii) To highlight the rate at which inadequate collateral security provision by borrowers increases the incidences of bad debt in Nigerian.
(iii) To determine whether fund diversion has any effect on bad debt of money deposit banks in Nigerian.
(iv)   To ascertain the extent to which government intervention in lending policies of money deposit banks has influenced bad debts in Nigerian money deposit banks,
(v)  To highlight the extent to which improper project evaluation influence bad debt of money deposit banks in Nigerian.

1.4    RESEARCH QUESTIONS
In 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.
l. Has in adequate collateral security provision by borrowers caused bad debt in Union bank of Nigeria 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 Nigeria Plc?
4.  To what extent does improper project evaluation influenced bad debt of Union bank of Nigeria, plc?

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