The Impact of Credit Growth on Non-Performing Loans in Indonesian Commercial Banks

Abstract

This study analyzes the impact of credit growth on Non-Performing Loan (NPL) levels in Indonesian commercial banks during the 2020–2021 period, a time marked by economic recovery following the COVID-19 pandemic. Employing a quantitative research design with a simple linear regression model, secondary data were obtained from the Indonesian Financial Services Authority (Otoritas Jasa Keuangan). The analysis reveals that credit growth exerts a positive and significant effect on NPL ratios. The correlation coefficient (R = 0.814) and determination coefficient (R² = 0.663) indicate that 66.3% of NPL variation can be explained by changes in credit growth, while the remaining portion is influenced by other macroeconomic and internal banking factors. These findings highlight that aggressive credit expansion without effective risk management mechanisms can increase the incidence of defaulted loans, ultimately threatening financial stability. The study emphasizes that maintaining sustainable banking performance requires balancing credit expansion with prudential banking principles, rigorous monitoring of asset quality, and enhanced macroprudential supervision to mitigate systemic risks and preserve the resilience of the Indonesian banking sector.