Factors Influencing the Lending Decision of Commercial Banks in Bangladesh

Lending money is risky and for that reason banks do not want to grant credit to those borrowers who are not able to repay the loan. Credit risk depends on some factors. To identify these factors banks make a preliminary analysis of the credit worthiness and solvency of the borrower. The current study is an attempt to bring out the concerned factors that have great affect on the banker's perception about loan decision. For achieving this objective, sample size of 47 individual respondents (Bankers) has been taken and the analysis was carried out using Factor Analysis in order to capture the Bankers perception as to take a loan decision. The result of the analysis has discovered nine underlying factors such as Project's Potentiality, Experience, Viability of Project, Guarantee, Risk, Repayment History, Priority Sector, Age and Relationship with the Bank on the basis of which Bankers make the decision about the loan approval. The study has suggested that the loan applicant should be aware of the preferences of the bankers in case of loan decision making.