<![CDATA[The bankruptcy of a commercial bank can negatively impact the national economy, given that its closure can pose a systemic risk. Commercial banks are at greater risk of bankruptcy when the level of customer defaults, or Non-Performing Loans (NPLs), increases. Therefore, a literature review discussing the factors that contribute to lower or higher NPLs is needed. Macroeconomic fundamentals can be related to the state of the national economy which in turn can affect an individual's ability to repay their obligations. Therefore, this study aims to examine how macroeconomic factors influence NPLs in commercial banks in Indonesia. This study uses data from nine private commercial banks with the largest core capital, covering the period from 2021 to 2024. Therefore, the data is panel-based, and the VECM method is used, assisted by IRF and FEVD analysis. The results of this study find that macroeconomic factors such as exchange rates and GDP can negatively impact bank NPLs. Conversely, NPLs respond positively to shocks to inflation and reference interest rates. The inflation rate is the macroeconomic variable that has the most influence on NPLs compared to other macroeconomic variables. However, the largest factor influencing NPL fluctuations in the Indonesian banking industry is NPL itself. Therefore, internal management, such as credit divisions in commercial banks, is needed to manage credit disbursement effectively. Bank credit divisions must ensure that only a small portion of the total credit disbursed becomes non-performing loans.]]>
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