Classification of whether recovery of non-performing loans NPL is zero or positive is not only important in management of non-performing loans, but also is essential for estimating recovery rate and implementing the new Basel Capital Accord. Based on the largest database of NPL�s recovering information in China, this paper tries to establish discriminant models to predict the loan with zero recovery.We first use Step-wise discrimination method to select variables; then give an in-depth analysis on why the selected variables are important factors influencing whether a loan is zero or positive recovery rate. Using the selected variables, we establish two-type discriminant\r\nmodels to classify the NPLs. Empirical results show that both models achieve high prediction accuracy, and the characteristics of obligors are the most important factors in determining whether a NPL is positively recovered or zero recovered.
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