ANALYSIS OF FACTORS THAT INFLUENCE THE POTENTIAL OF NON-PERFORMING LOAN

Banks are financial service providers, raising funds from the public and redistribute them in the form of loans. The loan expansion carried out by banks have resulted risks that need to be managed properly. Non-performing loans (NPL) have the potential to cause substantial losses for the banks, thus managing credit risk efficiently is vital in reducing the number of NPL. This research examines the level of significance of Total Loan (LOAN) on Potential NPL (PNPL), and studies the role of credit quality indicators reflected in Credit Rating (CR) in moderating the effect of LOAN on PNPL of a bank. This research was conducted on one Indonesia’s private banks in 2018 and 2019, and base on the results of this study, LOAN has a significant positive effect on PNPL. Whereas, CR moderated the effect of LOAN on PNPL. Since CR reporting is subjective based on analysts’ considerations, it may not be in line with the actual condition of debtor’ credit quality, due to internal considerations of creditors both in terms of risk and business..