The Effect of Non-Performing Loan and Loan to Deposit Ratio on Capital Adequacy Ratio in Indonesian Commercial Banks

Abstract

This study aims to analyze the effect of Non-Performing Loans and the loan-to-deposit ratio on the Capital Adequacy Ratio in commercial banks in Indonesia in 2021. The research method is quantitative, with multiple linear regression analysis conducted in SPSS. Secondary data was obtained from the financial statements of five major banks in Indonesia in 2021. The results of the study show that partially, Non-Performing Loans have a significant effect on the Capital Adequacy Ratio, while the Loan to Deposit Ratio does not have a significant effect. However, simultaneously, Non-Performing Loan and Loan to Deposit Ratio have a significant influence on the Capital Adequacy Ratio. A determination coefficient value (R²) of 0.953 indicates that the two variables explain 95.3% variation in the Capital Adequacy Ratio. These findings confirm that credit risk management has an important role in maintaining banking capital adequacy and national financial stability.