Abstract:

The  failure to repay loan in the credit period allocated by the Bank, leads to a decrease of performance in profit rates by preventing the efficient and effective use of resources. The non-performing loans problems of banks are particularly prevalent during times of credit crunch and financial instability. When these credits increase in general in the banking system, the banks can not fulfill the funding duties of the real markets, which paves the way for the strengthening of the recession tendencies in the economy. The 2000-2001 crisis experienced in Turkey, has led to the restructuring of banks and the regulation of non-performing loans. In this study, the effects of non-performing loans on the profitability of Turkish Banking Sector has been estimated using by Panel Data Models (POLS, FE and RE) for 2003Q1-2015Q4 period. According to the results of analysis it has been found that non-performing loans reduced profit rates of Banks both in line with expectations.

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