Overdues Ratio

The Overdues Ratio, also known as the Delinquency Ratio, is a financial metric used to assess the percentage of loans in a lender’s portfolio that are delinquent, meaning the borrower is late in making payments. Overdues can apply to any type of debt, such as credit card debt, mortgages, or corporate loans.

The Overdues Ratio is calculated as follows:

Overdues Ratio = (Total Overdue Loans / Total Loans) * 100%

This ratio is significant for financial institutions, particularly banks, as it helps them assess the quality of their loan portfolio and the efficiency of their credit screening process. A higher Overdues Ratio might indicate that the bank has a greater number of high-risk borrowers, and may face more defaults, which could negatively impact their financial status.

However, it’s essential to compare this ratio with industry standards and similar institutions, as what constitutes a high or low ratio can vary depending on the type of lending institution, the nature of the loans, and other economic factors.

Additionally, one should consider this ratio in conjunction with other financial metrics, like the provision for loan losses, to gain a comprehensive understanding of a lending institution’s financial health.