Banks should maintain good liquidity

Oct 13, 2025 by magicalceylontours.com 125 views

The Effect of Third Party Funds, Capital Adequacy, Problem Credit, Liquidity, and Bank Size on Credit Distribution to National Private Commercial Banks Listed on the Indonesia Stock Exchange for the 2018-2022 Period

Introduction

The banking sector plays a vital role in the economic growth of a country, and credit distribution is one of the key functions of commercial banks. In Indonesia, the National Private Commercial Banks (NPCBs) listed on the Indonesia Stock Exchange (IDX) are among the largest and most influential banks in the country. However, the distribution of credit to these banks is influenced by various factors, including third-party funds, capital adequacy, problem loans, liquidity, and bank size. This study aims to explore and determine the effect of these variables on credit distribution in NPCBs listed on the IDX for the 2018-2022 period.

Methodology

This study uses secondary data obtained from the financial statements available on the official website of the IDX (www.idx.co.id) and the website of each bank. The sample consists of 11 banks, and the sample selection method used is purposive sampling, which produces 55 observations. The analysis was carried out using multiple linear regression through SPSS software version 26.

Results

The results of this study show that partially, capital adequacy and problem loans have no significant effect on credit distribution. However, third-party funds, liquidity, and bank size have a positive and significant impact on credit distribution. Simultaneously, the five variables have a significant and interrelated influence in influencing credit distribution.

In-Depth Analysis

Third-Party Funds

Third-party funds (DPK) are the main source of funding for banks. This study shows that the DPK has a significant influence on credit distribution. This is in line with the principle of banking, which states that the greater the DPK owned by the bank, the more funds are available to be distributed in the form of credit to customers. With the increasing public confidence in storing money in banks, high DPK will provide more flexibility for banks in determining the amount of credit that can be channeled.

Capital Adequacy

Capital adequacy is closely related to the ability of banks to absorb risk. Although this research shows that capital adequacy does not have a significant effect on credit distribution, it is essential to understand that sufficient capital is a guarantee of bank stability. Adequate capital gives confidence to stakeholders that banks can face market fluctuations and losses that may occur. However, its insignificant influence may be caused by a tendency for banks to prioritize the fulfillment of liquidity needs rather than maintaining capital adequacy in lending.

Problem Credit

Problem loans become an indicator of bank credit portfolio health indicators. In this study, problem loans also did not show a significant effect on credit distribution. This indicates that although banks have problem loans, they are still able to carry out credit distribution operations, it is likely to do more careful management of new loans.

Liquidity

Liquidity is the ability of banks to meet short-term obligations. The results revealed that liquidity has a significant positive influence on credit distribution. Banks with good liquidity tend to be more willing to provide credit, because they have enough funds to meet customer demand. In this context, efficient liquidity management is the key for banks to support the growth of credit distribution.

Bank Size

The size of the bank, measured based on total assets, contributes positively to credit distribution. Larger banks often have better access to resources and have a wider network, which allows them to offer more diverse credit products. In other words, a large size provides significant competitive benefits in terms of credit distribution capacity.

Conclusion

Overall, this research confirms the importance of third-party funds, liquidity, and bank size in influencing lending in national private commercial banks. On the other hand, the adequacy of capital and problem loans does not seem to play a significant role in the process during the 2018-2022 period. By understanding the effect of these variables, banks can formulate more effective strategies in lending, thus contributing to the growth of the banking sector and the national economy.

Recommendations

Based on the findings of this study, the following recommendations are made:

Banks should prioritize the management of third-party funds: Banks should focus on increasing their DPK to provide more flexibility in determining the amount of credit that can be channeled.
Banks should maintain good liquidity: Banks should prioritize the management of liquidity to ensure that they have enough funds to meet customer demand.
Banks should focus on increasing their size: Larger banks have better access to resources and have a wider network, which allows them to offer more diverse credit products.
Banks should not prioritize the fulfillment of liquidity needs over capital adequacy: Banks should maintain sufficient capital to ensure bank stability and confidence to stakeholders.

Limitations

This study has several limitations, including:

Limited sample size: The sample size of this study is limited to 11 banks, which may not be representative of all NPCBs listed on the IDX.
Limited time period: The study only covers the 2018-2022 period, which may not be representative of the entire period of the banking sector in Indonesia.
Limited data availability: The study relies on secondary data, which may not be comprehensive or accurate.

Future Research Directions

Future research should focus on:

Examining the effect of other variables on credit distribution: Other variables, such as interest rates, inflation, and economic growth, may also influence credit distribution.
Investigating the impact of credit distribution on the banking sector and the national economy: The impact of credit distribution on the banking sector and the national economy should be further investigated.
Analyzing the effect of credit distribution on different types of banks: The effect of credit distribution on different types of banks, such as commercial banks, Islamic banks, and rural banks, should be further investigated.
Frequently Asked Questions (FAQs) on the Effect of Third Party Funds, Capital Adequacy, Problem Credit, Liquidity, and Bank Size on Credit Distribution to National Private Commercial Banks Listed on the Indonesia Stock Exchange for the 2018-2022 Period

Q: What is the main objective of this study? A: The main objective of this study is to explore and determine the effect of third-party funds, capital adequacy, problem loans, liquidity, and bank size on credit distribution in National Private Commercial Banks (NPCBs) listed on the Indonesia Stock Exchange (IDX) for the 2018-2022 period.

Q: What is the sample size of this study? A: The sample size of this study is 11 banks, which produces 55 observations.

Q: What is the method of analysis used in this study? A: The analysis was carried out using multiple linear regression through SPSS software version 26.

Q: What are the findings of this study? A: The findings of this study show that partially, capital adequacy and problem loans have no significant effect on credit distribution. However, third-party funds, liquidity, and bank size have a positive and significant impact on credit distribution.

Q: What is the significance of third-party funds in credit distribution? A: Third-party funds (DPK) are the main source of funding for banks. This study shows that the DPK has a significant influence on credit distribution. This is in line with the principle of banking, which states that the greater the DPK owned by the bank, the more funds are available to be distributed in the form of credit to customers.

Q: What is the significance of liquidity in credit distribution? A: Liquidity is the ability of banks to meet short-term obligations. The results revealed that liquidity has a significant positive influence on credit distribution. Banks with good liquidity tend to be more willing to provide credit, because they have enough funds to meet customer demand.

Q: What is the significance of bank size in credit distribution? A: The size of the bank, measured based on total assets, contributes positively to credit distribution. Larger banks often have better access to resources and have a wider network, which allows them to offer more diverse credit products.

Q: What are the implications of this study? A: The findings of this study have implications for banks, policymakers, and regulators. Banks should prioritize the management of third-party funds, maintain good liquidity, and focus on increasing their size to improve credit distribution. Policymakers and regulators should consider the findings of this study when making decisions related to the banking sector.

Q: What are the limitations of this study? A: This study has several limitations, including limited sample size, limited time period, and limited data availability.

Q: What are the future research directions? A: Future research should focus on examining the effect of other variables on credit distribution, investigating the impact of credit distribution on the banking sector and the national economy, and analyzing the effect of credit distribution on different types of banks.

Q: What are the recommendations of this study? A: Based on the findings of this study, the following recommendations are made:

Banks should prioritize the management of third-party funds: Banks should focus on increasing their DPK to provide more flexibility in determining the amount of credit that can be channeled.
Banks should maintain good liquidity: Banks should prioritize the management of liquidity to ensure that they have enough funds to meet customer demand.
Banks should focus on increasing their size: Larger banks have better access to resources and have a wider network, which allows them to offer more diverse credit products.
Banks should not prioritize the fulfillment of liquidity needs over capital adequacy: Banks should maintain sufficient capital to ensure bank stability and confidence to stakeholders.