Ability to Repay Loans to the Banks in Hooghly District

Abstract

This paper investigates the determinants of the borrower's ability to repay loans to the banks in Hooghly district in West Bengal. We have collected the primary data from 400 sample borrowers who have taken loans from commercial, regional rural and co-operative banks. The probit and logit models are employed to identify the main determinants that influence ability to repay loans of the borrowers. The study shows that the ability to repay loans of the borrowers is influenced by the growth rate of income, worker population ratio, productive use of loans, shortfall of desired investment, interest rate differential and education. The ability to repay loans to the banks varies directly with the level of income.