Are non-performing loans sensitive to macroeconomic determinants? an empirical evidence from banking sector of SAARC countries

Abstract The study empirically investigates selected macroeconomic determinants of non-performing loans (NPLs) for a panel 8 South Asian Association Regional Cooperation countries (Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka), using annual data the period 2008–2019. To examine association, this study, primarily, conducted OLS model, fixed effect estimates, random estimates and, eventually, applied robust to resolve problem heteroscedasticity. empirical findings confirmed previous findings, indicating significant positive association with government budget balance inverse relationship GDP, sovereign debt, inflation rate, money supply. reduce aggregate NPLs in economy, respective country’s should identify financial sector’s vulnerabilities thereby, emphasize boosting economic growth, ensuring moderate level supply along rate. are useful formulating macro-prudential fiscal policies avoid subsequent shock countries.