Signs of Bad Loans and their Quality Management

Abstract

The concept of "problem loans" plays a significant role in managing the quality of the loan portfolio. Statistical indicators when formulating the quality of a loan portfolio usually come from the share of" problem loans " in the total loan portfolio. If the interest rate is high, then the quality of the loan portfolio is poor, and accordingly, if the interest rate is low, then the quality is good. However, paradoxically, the term "problem loan" is not fixed in legislation. However, the Central Bank of Uzbekistan "On the procedure for Forming Reserves by Credit Institutions for Possible Losses on Loans, on Loan and Equivalent Debt "defines a "problem loan". In this Provision, a non-performing loan is a quality category IV loan – a loan with a high credit risk and a probability of financial losses due to the borrower's default on the loan, which causes it to be devalued in the amount of 51% to 100%. For a more precise definition of a "problem loan" in domestic and foreign countries, please refer totable 1.