The Effect of Banking Policies on Customer Loan Repayment in Retail Banking: A Case Study of Fidelity Bank, Benue State
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Background of the Study
Banking policies, including credit assessment criteria, interest rate guidelines, and repayment schedules, are instrumental in shaping customer loan repayment behavior. Fidelity Bank in Benue State has implemented structured policies aimed at ensuring timely loan repayment while balancing the need to support customer credit access. Clear policies facilitate predictable repayment schedules and help borrowers plan their finances accordingly, ultimately reducing the incidence of defaults (Okoro, 2023). Fidelity Bank’s approach includes regular monitoring of borrower performance, flexible repayment options, and targeted customer support to guide clients through financial difficulties. These measures contribute to creating a transparent credit environment where customers are aware of their obligations and the consequences of default. However, rigid policies may sometimes lead to borrower dissatisfaction, especially when economic hardships affect repayment capacity. As a result, finding the right balance in policy design is critical for maintaining both customer satisfaction and loan portfolio quality. This study investigates how Fidelity Bank’s policies affect customer loan repayment behavior, examining the relationship between policy structure and repayment outcomes while considering external economic influences and borrower financial literacy (Chinwe, 2024; Akinola, 2025).
Statement of the Problem
Fidelity Bank faces significant challenges in ensuring consistent loan repayment, largely due to the rigidity of its current banking policies. Many borrowers experience difficulty in meeting repayment schedules when faced with unexpected financial setbacks or economic downturns, leading to increased defaults and arrears. The inflexibility of repayment terms, coupled with a lack of personalized support, often results in borrower frustration and eventual default. Additionally, inadequate communication about policy details and repayment expectations exacerbates the problem, leaving customers unaware of their responsibilities. These challenges are further intensified by external economic factors such as inflation and market volatility, which strain borrowers’ financial capacities. The misalignment between rigid banking policies and the variable financial realities of customers creates a significant gap that undermines loan repayment efficiency. This study aims to identify the specific aspects of Fidelity Bank’s policies that contribute to repayment challenges and to propose adjustments that can lead to improved repayment rates and customer satisfaction.
Objectives of the Study
- To evaluate the impact of current banking policies on loan repayment behavior at Fidelity Bank.
- To identify policy-related factors that contribute to repayment defaults.
- To recommend policy adjustments that can improve repayment performance and customer satisfaction.
Research Questions
- How do existing banking policies influence customer loan repayment behavior?
- What policy factors contribute most to repayment defaults?
- What modifications can be made to enhance repayment compliance?
Research Hypotheses
- H₁: Rigid loan repayment policies are positively correlated with higher default rates.
- H₂: Flexible repayment options improve loan repayment performance.
- H₃: Enhanced communication of policy details reduces customer repayment defaults.
Scope and Limitations of the Study
This study focuses on Fidelity Bank’s loan repayment policies in Benue State. Limitations include external economic variables, differences in borrower financial literacy, and potential inaccuracies in self-reported repayment data.
Definitions of Terms
- Banking Policies: Rules and guidelines governing loan approval, repayment, and interest rates.
- Loan Repayment Behavior: Patterns in how borrowers meet their repayment obligations.
- Default Rates: The frequency at which borrowers fail to repay loans as scheduled.
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