Documente Academic
Documente Profesional
Documente Cultură
Contents
Acknowledgement …………………………………………………….I
Table of content……………………………………………………………II
List of table………………………………………………………………...III
Table of Contents
Chapter- one Page No.
1
1. Introduction 1
1.1. concept of banking 1
1.2. The banking in Nepal 2
1.3. List of commercial bank in Nepal 3
1.3.1. List of licensed commercial bank in Nepal 4
1.3.2. Functions of commercial bank 5
1.4. Overview of Nepal investment bank ltd. 5
1.4.1. Board of directors 6
1.4.2. Management team 7
1.4.3. Branches and Counters 8
1.4.4. Products and Services 8
1.5. Strategies and future plans of Nepal investment bank ltd. 9
1.6. Statement of problem 9
1.7. objectives of the study 10
1.8. Significance of the study 10
1.9. Limitations of the study 10
1.10. Scope and importance of the study
Chapter -two
2. Review of Literature 11
2.1. Conceptual framework 11
2.1.1. Liquid Assets 11
2.1.2. Cash Reserve ratio(CRR) 11
2.1.3. Statutory Liquidity ratio(SLR) 11
2.1.4. Importance of the liquidity for the bank 12
2.1.5. Need of the liquidity for the bank 12
2.1.6. Demand for the liquidity 12
2.1.7. Supply for the bank liquidity 12
2.1.8.Criteria of measuring the bank liquidity 12
2.1.9. Liquidity to be maintained with the central bank 12
2.1.10. penalty for non-compliances 13
2.1.11. Applicable penalty rates 13
2.1.12. Composition 13
2.1.13 Basis for the liquidity Requirement prediction 14
2.1.14Review of related study 14
Chapter three
3. Research methodology
3.1. Research design 15
3.2. Data collection techniques 15
3.3. Data analysis tools 15
3.3.1. Ratios
Chapter Four
4.Data presentation and analysis
4.1. Participation of all deposits in the total deposit liability 17
4.2. Liquidity Ratio 17
4.2.1. saving deposit to total deposit ratio 18
4.2.2. fixed deposit to total deposit ratio 19
4.2.3. Cash and bank balance to current deposit ratio 20
4.2.4. Cash and bank balance to total deposit ratio 20
4.2.5. Cash and bank balance to total deposit 21
(Excluding fixed deposit ) ratio
4.2.6. Balance with NRB to current and saving 22
deposit ratio
4.2.7. Balance with NRB to fixed deposit ratio 23
4.2.8. Total investment to total deposit ratio 24
4.2.9. Liquid asset to total deposit ratio 25
Chapter five
Bibliography
List of table
INTRODUCTION
Generally, bank is an institution which accepts deposits, makes business loans, and offers related
services. Commercial banks also allow for a variety of deposit accounts, such as checking, saving,
and time deposit. There institutions are run to make a profit and owned by a group of individuals, yet
some may be members of the Federal Reserve System. While commercial banks offer services to
individuals, they are primary concerned with receiving deposits and lending to businesses.
In an economy the bank is regarded as one of
the economic backbone of the country for its development. Bank is a financial institution that deals in
money. The basic function of bank is collecting deposit and granting the loans. It involves in credit
creation that in related to creation of deposit and loan. In the economy, the banks collects small
saving of general people, accumulative it and lends the productive sectors of the society for the
overall economic development.
Various writers have been defined the word “bank” in different ways.
According to Scholars, “The bank is defined as factory of money for credit where it does not
purchase goods and sells it rather produces credit inform of deposit and sells it inform of loans.”
According to C.R. Crowther,”A banks collects money from those who have it to spare or who are
saving it out of their income and lends this money to those who required it.”
Thus in conclusion, we can say that bank is an organization which deals with the monetary
transactions for the mobilization of idle money or deposits in productive sectors, is essentially
essential for the development of the whole net.
In the context of Nepal, like as in other country the goldsmiths and landlord was the
ancient banker. The Nepalese people were highly exploited by shahu mahajan by charging higher
interest rate that is compound interest rate and even by manipulating the principle amounts. If we try
to see the history of banking transaction in depth then evidence of money landing function are found
in practice before 8th century in 780 B.S.
1
gunakamdev the ruler of Kathmandu reconstructed Kathmandu valley by borrowing dept from the
people. In 14th century tankdhari system had been running in the period of ranodip shing
inKathmandu established and office called tejarath adda. From the office the government distributed
salary to their employees and provided loan to government employment @5% of interest against the
security gold, silver etc.
Because of the development of economy activities in Nepal the above institutions could
not be fulfilled the need of people. So in kartik 30, 1994 B.S. Nepal bank was established as one of
the semi government commercial bank which had 10 million authorized capital and 842000 paid of
capital. it has done the pioneering function in function spreading the banking habits among the
people. Having felt a need of central bank to control and direct the commercial bank and help the
government for making monitory polices Nepal rastra bank was set up in 14 baishakht, 2013 B.S.
To fulfill the growing credit requirement of the country. The commercial bank i.e. Rastraya Banijya
bank was establishes in 10th bhadra 2022 B.S. this bank also provides facility for the economy
welfare of the general public. Nepal is an agricultural country to develop agriculture system. Industry
agriculture development bank and Nepal industrial development corporation was established in 2024
B.S. 2016 B.S. respectively.
The initiation of the financial sector; liberalization policy by Nepal rastra bank, a board of
joint venture banks entered with the view to accelerate the race of development of nation. At
present, there are many joint venture banks which are running successfully in a competitive
environment. His majesty government deliberates policy of allowing foreign joint venture banks to
operate in Nepal basically targeted, to encourage local tradition commercial bank to enhance their
capacity through competitor’s efficiencies mechanization modernization prompt customer
service. Nepal Arab bank ltd was established in 2041 as a first foreign joint venture bank.
Now in our country there are 31 commercial bank, 87 development bank, 79 finance company
and 21 micro credit development banks after mid July 2011(licensed by NRB)
2
After that the first commercial bank of Nepal, Nepal bank
Limited (NBL) was lunched with the cooperation of imperial bank of India in November 1937. holding
51% government equity. The second commercial bank, Rastriya Banijya bank come into existence in
1966 A.D. with 100% government ownership. In early 1980, to meet the need of health completion in
the financial system, Nepal allowed to entry of foreign banks as joint ventures with up to maximum of
50% equity participation.
Nepal arab bank limited was the first joint venture bank which was established with the joint
venture of arab bank emirates in 1984. in 1986, Nepal grind lays bank limited (now chartered bank
limited) entered in nepali financial market as a joint venture with ANZ-Grind lays.
Although profit maximization is a major objective of commercial bank, to achieve this objectives
commercial bank performs various functions under the mandatory rules and registrations and
directives of NRB and commercial Bank Act 2031(1974) which are:
Primary functions
a) accepting Deposits:
Accepting deposits is the main function of commercial banks. Commercial banks collects money
from those who want to deposit in different types of deposits accounts such as:
Fixed deposit account
Current deposit account
Saving deposit account
b) Advancing of Loans:
Commercial banks provide the required loan or credit to various sectors of economy such as
industry, trade, agriculture, business deprived sector etc. in this way bank creates facilities. It
provides loans from various procedures in different form such as:
Overdraft
Cash credit
Direct loan with collateral
Discounting bill of exchange
Loans of money at call and notice
Agency Functions
Apart from the above function, commercial banks also perform agency functions for which they act
as agent and claim commission on some facilities such as:
Nepal investment Bank Ltd. (NIBL), previously Nepal Indosuez bank Ltd., was established in 1986
as a joint venture between neplise and French partners. The French partner (holing 50% of the
capital of NIBL) was credit agricole Indosuez, a subsidiary of one the largest banking group in the
world.
With the decision of credit agricole Indosuez to divest, a group of companies comprising of
bankers, professionals, industrialists and business man, had acquired on april 2002 the 50% share
holding of credit agricole Indosuez in Nepal Indosuez bank Ltd.
The name of the bank has been change to Nepal investment bank Ltd.Upon approval of bank’s
annual general meeting, Nepal rastra bank and company register’s office with the following share
holding structure.
7
WALING BRANCH , SYANJA
Deposit
Saving deposit
Current deposit
Fixed deposit
Call deposit
Lending
Documentary credits
Guarantee
Collections (agency functions)
Credit card
Safe deposit locker
Fund transfer
Remittance
SWIFT member
ATM
Fast cash
Withdrawal
Pin change
Enquiry
1.5. STRATEGIES AND FUTURE PLANS OF THE NEPAL INVESTMENT BANK LTD.
The Nepal investment Bank Ltd.’s mission is to be the “Bank of the first choice” to attain the goal to
be the “Bank of the first choice”, bank is concerting into the service of its customers and social
issues. So Nepal investment is the customer focus and goal oriented.
Bank needs to maintenance some seasonable level of liquidity to fulfill different commitments
such as provide money to depositors when they demand for administrative expenses, for
maintaining cash reserve ratio in the central bank etc. so, liquidity is defined as the bank’s capacity
to pay cash in exchange of deposits. Liquidity is crucial in the business like banking. Because if the
bank has the high liquidity it can no on a desired profit and if the bank has the shortfall of the liquidity
it can not satisfy its customers. Inadequate liquidity may lead to collapse of the bank while excess
liquidity is determinant to bank’s profitability in order to remove demerits associated with maintaining
inadequate and excess liquidity, bank should maintained and optimum level of liquidity. This possible
only when bank’s liquidity needs is correctly predicted. Prediction covers inflows and outflows of
liquidity. If prediction shows more outflows, bank should be prepared to cover the shortfall by
borrowing or by liquidating assets. If inflow is greater than outflows, bank should plan where to invest
so that income can be increase. Banks attach great importance short terms and long terms
predictions. Prediction of liquidity need should be in the form of primary and secondary reserve so
that bank generates income and at the same time does not compromise to liquidity. Banks got failure
because of wrongly analyzed liquidity position and wrongly predicated liquidity requirement and
management policy of liquidity. Thus to gain the trust of the customers and be success on the
operation, the bank should maintain and forecast the liquidity need for the period and optimum level
of liquidity based on the past liquidity position.
Review of Literature
This chapter deals with the theoretical aspects of the topic of financial analysis
of Nepal investment bank Ltd. in more detail and descriptive manner. For this study, journals,
articles, and some research reports related with this topic have been reviewed. This study has to
refer almost all books related with this topic published. Some of the prior reports by students of BBS
regarding this topic have also been reviewed.
2.1.1. Liquidity assets: the assets which can be converted into cash immediately with or without a
nominal loss of value. Liquidity can be in the firm of treasury bills, investments in government
securities, gold and silvers, inventories and marketable securities etc.
2.1.2. Cash reserve Ratio (CRR): Central banks the world over make banks maintains the certain
level of liquidity to total deposit liabilities in the form of the cash and bank balance. This ratio is
known as the cash reserve ratio or primary reserve.
2.1.3. Statutory liquidity ratio (SLR): Central bank orders to the banks to maintain the certain level
of liquidity to total deposit liabilities in the form of the cash and bank
11
balance and treasury bills and government securities and bonds. Such liquidity requirement is called
the statutory liquidity ratio.
2.1.4. Importance of liquidity for the bank: The liquidity is important for the bank for the motives
cited as follow:
Transaction motive
Speculative motive
Precautionary motive
2.1.5. Need of liquidity for the bank:
a) To meet the expenses for the bank’s administrative works
b) To pay all sorts of deposit on demand
c) To repay the dept
d) To gain trust or faith
e) To provide the security to the bank
12
Balance at Nepal Rastra bank – 7% current and saving deposit liabilities. 4.5% of fixed
deposit liabilities.
Cash in vault – 2 % of deposit liabilities
2.1.12. Composition:
a. Total deposit means current, saving and fixed deposit account as well as call money
deposit and certificate of deposit. For the purpose, deposits held in convertible foreign
currency, employees guarantee amount and margin account will not be included.
b. Fixed deposit means a deposit in local currency accepted under the condition to repay on
completion so stipulated time period.
c. Current and saving deposit means all deposit accounts other than the fixed deposits.
d. Cash in vault shall include only the local currency and foreign currency (except clearing
cheque etc.)
e. Balance held with Nepal rastra bank in ordinary account only will be eligible for liquidity
calculation. Special accounts opened with Nepal rastra bank for specific purpose and foreign
currency designated accounts will not be included for the purpose.
f. For the purpose of liquidity examination, all branches of the bank shall constitute one unit.
13
International federation of accountants has recommended the measuring the liquidity of bank by:
CHAPTER – THREE
Research Methodology
The method which is use in the research is called research methodology. How the data is
collected and which source the research use for getting the data is under the research methodology.
Research methodology covers the data analysis tools as well.
3.3.1. Ratios:
An arithmetical relationship between two figures is called ratio. It is the most useful and
analytical tools to evaluate in respect to one variable over another. Here, for our purpose, only the
liquidity related ratios are calculated.
1) Liquidity ratio
2) Cash and bank balance to current deposit ratio
3) Saving deposit to total deposit ratio
4) Cash and bank to total deposit ratio
5) Fixed deposit to total deposit ratio
6) Cash and bank balance to total deposit ratio(excluding fixed deposit)
7) NRB balance to total deposit(excluding fixed deposit)
8) NRB balance to fixed deposit ratio
9) Deposit to investment ratio
15
CHAPTER – FOUR
Presentation means the presentation of the collected data through table; figure etc. presentation is
the process of understanding the study or the report and calculating the opinion. An analysis of a
data means the process where the statement or the report gets resolve by breaking them into simple
statement. Analysis means to find out something and give opinion about the presented data.
4.1. PARTCIPATION OF THE ALL THE DEPOSIT IN THE TOTAL DEPOSIT LIABILITY:
Fiscal year Current deposit Saving deposit Fixed deposit Total deposit
2005/06 1705668495 8081980512 5412969595 15200618592
2006/07 2175020657 10742331625 7516686866 20424048148
2007/08 3138669428 13688766549 7944232558 24771668535
2008/09 3756570350 17066252467 11633380218 32456203035
2009/10 4025820180 14324255897 16825148284 35175224361
Source: - “annual report of Nepal investment bank ltd.”
17
In the above table and chart, we see that, in fiscal year 2005/06, the current deposit account
occupied 11%, saving deposit account 53%, fixed deposit account 37%.in fiscal year 2006/7 the
current deposit account occupied 10%, saving deposit account53%, fixed deposit account 36%
occupied. In fiscal year 2007/08 the saving deposit account occupied 13%, saving deposit account
53%, fixed deposit account 37% occupied. In fiscal year 2008/09 the current deposit account
occupied 13% saving deposit account55%, fixed deposit account32% occupied. In fiscal year
2009/10 the current deposit account occupied 11%, saving deposit account42%, fixed deposit
account occupied 48%.
Fiscal year
From the above table and trend line chart, the ratio is fluctuating state. In the fiscal year 2005/06, the
bank has the saving deposit of 0.53 times of total deposit liability. And 0.53, 0.55, 0.53, 0.41 times of
total deposit liability in fiscal year 2006/07, 2007/08, 2008/09, 2009/
10 respectively.
18
Fiscal year
From the above table and trend line chart, the ratio is fluctuating in increasing and decreasing trend.
The highest ratio is 0.48 times in year 2009/10 and lowest ratio is 0.32 times in fiscal year 2007/08.
And 0.36 times, 0.37 times and 0.35 times in year 2005/06, 2006/07, and 2008/09 respectively.
19
4.2.3 CASH AND BANK BALANCE TO CURRENT DEPOSIT RATIO:
Fiscal year
From the above table and trend line chart, the ratio is fluctuating in not normally. In fiscal year
2005/06, the bank has the liquidity against current deposit is 0.48 times. And the bank has the
liquidity against current deposit are0.49, 0.62, 0.95, 0.87times in year 2006/07, 2007/08, 2008/09,
2009/10 respectively.
20
Fiscal year
From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2005/06, the bank
has the liquidity for total deposit in the ratio of 0.05 times. And in fiscal year 2006/07, 2007/08,
2008/09, and 2009/10, the bank has the liquidity for the total deposit in ratio of 0.05, 0.08, 0.11 and
0.10 times respectively.
4.2.5. CASH AND BANK BALANCE TO TOTAL DEPOSIT (EXCLUDING FIXED DEPOSIT)
RATIO:
Fiscal year
From the above table and trend line chart, the ratio is fluctuating in increasing state. In fiscal year
2005/06, the bank has the liquidity against current and saving deposit account deposit account
liability in the ratio of 0.08 times. And in fiscal year 2006/07, 2007/08, 2008/09, and 2009/10, the
bank has the liquidity against current and saving deposit account liability in the ratio of 0.08 times,
0.11 times, 0.17 times and 0.19 times respectively.
22
Fiscal year
From the above table and trend line chart, the ratio has been maintained in fiscal year 2005/06 by
0.16 times. And the bank has been maintained its ratio in fiscal year 2006/07, 2007/08, 2008/09,
2009/10 by 0.11 times, 0.11 times, 0.16 times and 0.18 times respectively.
23
Fiscal year
From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2005/06, the bank
has the balance with NRB against fixed deposit liability in the ratio of 0.28 times. And in fiscal year
2006/07, 2007/08, 2008/09, 2009/10, the bank has the balance with NRB against fixed deposit
liability in the ratio of 0.18 times, 0.23 times, 0.38 times and 0.19 times respectively.
24
Fiscal year
From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2005/06, the bank
has invested 37% of the deposit in investment. In fiscal years 2006/07, 2007/08, 2008/09, 2009/10,
the bank has invested 32%, 28%, 23% and 25% of the deposit in investment respectively.
25
Fiscal year
From the above table and trend line chart, the ratio is fluctuating slightly except fiscal year 2005/06
in fiscal year 2005/06; the bank has invested 26% of the deposit in the liquid assets. In fiscal year
2006/07, the bank has invested 51% of deposit in liquid assets. In fiscal year 2007/08, 2008/09 and
2009/10, the bank has invested 51%, 50%, and 48% of the deposit in the liquid assets respectively.
CHAPTER – FIVE
5.1. SUMMARY
Nepal is one of the least developed countries of the world. For most of the developing
process, it is financially depending upon the foreign countries. It is economically too weak. Thus, the
economic condition of the people is weak. In Nepal 85% of the people are depended upon
agricultural sector which is unable to provide full employment to the people. Nepal government has
to activate people in the nation’s development through overall industrialization of nation. For this
purpose, development of sound banking system is essential.
In neplese banking sector, commercial banks including ventures banks are operating at
present. In the absences of modern banking any country cannot develop the economic activity.
Therefore, it is essential to find out whether or not the banks are serving an important contribution to
develop sectors of economy. Liquidity is said to be general business of fund, which shows the bank
ability to meet cash requirement. In this record, this study has been based upon the objective to
evaluate the liquidity position of Nepal investment bank ltd.
5.2. CONCLUSION
a) The saving deposit account is nearly constant trend. The highest ratio is 0.55 times in fiscal year
2007/08 and the lowest ratio is 0.41 times in fiscal year 2009/10. But the ratio is not satisfactory due
to the last year ratio was decline.
b) Fixed deposit is fluctuated. The lowest ratio is 0.32 times and highest ratio is 0.48 times. It is
decrease up to fiscal year 2007/08 and grows up then. And it is 0.48 times on 2009/10. It is
satisfactory. Bank made good ratio after 2007/08.
c) From the cash and bank balance to current deposit liability is fluctuating. The ratio is moving around
between 0.48 times to 0.95 times. It is satisfactory.
d) Cash and bank balance to total deposit ratio is fluctuating. But the ratio is somehow satisfactory
even though the ratio is higher than the central banks prescription. The ratio is moving around the
between 0.05 times to 0.11 times.
e) Cash and bank balance to total deposit (excluding fixed deposit) ratio is fluctuating in increasing
state. The ratio is satisfactory. It is moving around between 0.08 times to 0.19 times.
f) The ratio of balance with the NRB to current and saving deposit has been fluctuating. The ratio is
declined in year 2006/07 and constant in 2007/08 and then it is grow up. so, the ratio is satisfactory.
g) The balance with the NRB to fixed deposit ratio is fluctuating. It is moving around between 0.18
times to 0.39 times.
h) The investment to total deposit ratio is fluctuating adversely. Since the ratio is fluctuating the bank
has unsatisfactory result. However the investment from source of deposit is
27
higher. It will give a higher return without risk only if the ratio is stabilized.
i) The liquid assets to total deposit ratio is fluctuating slightly except fiscal year 2005/06. However the
ratio is higher and somehow may be considered satisfactory.
5.3 RECOMMENDATION
a) The overall results are satisfactory. But in some case the Nepal investment Bank should take
certain steps to improve the bank current financial condition. Therefore some recommendations are
being put forward for its improvement along with its development of the country.
b) The proportion of the saving deposit account is high in total deposit liability. So, it is recommended
that the bank should utilize the amount collected from the saving deposit account carefully. It should
be invested in the higher yielding areas.
c) The cash and bank balance in the Nepal investment bank is satisfactory. It is higher a bit though.
Bank should analyze the opportunities for short term investment.
d) Balance with NRB to current plus saving deposit should be maintained at the below than 0.11 times.
e) Investment to deposit ratio is fluctuating adversely. It may harm the operation of the bank. So, the
investment from the deposit source should always be aware of liquidity need and keep in mind to
maintain the optimum liquidity.
f) Bank should not spend too much in the fixed assets because it yields only a nominal portion, almost
no yield.
28
BIBLIOGRAPHY
Bajracharya, B.C. (2053), Business statistics & mathematics, M.K. publishers and Wistributors.
Brigham, Weston, Essentials of Managerial Finance”, Eleventh Edition, University Publishers, USA.
Kothari, C.R., Research Methodology”, Mc. Grow Hill Company, second Edition.
Shekhar and Shekhar “Banking Theory & Practice”, Eighteenth Revised Edition, 1996.