You are on page 1of 128

INVESTMENT POLICY OF COMMERCIAL BANKS

(With reference to NABIL Bank Ltd and Nepal Investment Bank Ltd)

SUBMITTED BY: Niru Maya Rana Prithvi Narayan Campus Roll No !"#" Re$d" No

A THESIS SUBMITTED TO: %ffice of the dean &aculty of 'ana$ement !ri(hu)an #niversity In partial fulfillment of the requirement for the degree of Master of Business Studies (M.B.S) *athmandu+ Nepal ,une+ -../

RECOMMENDATION !his is to certify that the thesis 0u(mitted (y Niru Maya Rana 1ntitled INVESTMENT POLICY OF COMMERCIAL BANKS (With reference to NABIL Bank Ltd and Nepal Investment Bank Ltd) has been prepared as approved by this department in the prescribed format of the Faculty of Management. This thesis is forwarded for examination.

2222222" (Thesis supervisor)

222222222 (Thesis supervisor)

222222222 (Campus Chief)

VIVA-VOCE SHEET We have conducted the viva3voce e4amination of the thesis presented by: Niru Maya Rana

1ntitled INVESTMENT POLICY OF COMMERCIAL BANKS (With reference to NABIL Bank Ltd and Nepal Investment Bank Ltd) And found the thesis to be the original work of the student and written according to the prescribed format. We recommend the thesis to be accepted as partial fulfillment for the Degree of Master of Business Studies (M.B.S.) Viva-v !" C ##i$$""

5ead+ Research 6epartment 'em(er (!hesis supervisor) 'em(er (!hesis supervisor) 'em(er (14ternal 14pert)

22222"" 22222"" 22222"" 22222""

DECLARATION I here (y declare that the data and )ork presented in this study entitled % INVESTMENT POLICY OF COMMERCIAL BANKS &'i$( r")"r"n!" $ NABIL Ban* L$+ an+ N",a- Inv".$#"n$ Ban* L$+/% su(mitted to 0hanker 6ev Campus+ &aculty of 'ana$ement+ !ri(huvan #niversity is my ori$inal )ork done for the partial fulfillment of the re7uirement of the 6e$ree of 'aster of Business 0tudies ('"B"0) under the $uidance and supervision of 'rs Ruchila Pandey 8 'r" *iran !hapa Lecturers of 0hanker 6ev Campus"

Niru Maya Rana Researcher Prithvi Narayan Campus Roll No

Da$": 000011

ACKNO'LED2EMENT !his thesis has (een prepared for the partial fulfillment of the re7uirement of the 6e$ree of 'aster of Business 0tudies ('B0)" It )ould have (een almost impossi(le to complete this )ithout co3operation and help from different persons" At first+ I )ould like to e4press my sincere $ratitude and deep respect to honora(le 'rs" Ruchila Pandey and 'r+ *iran !hapa Lecturers of 0hanker 6ev Campus+ for his valua(le su$$estions+ $uidance and encoura$ement in the completion of this study" I )ould like to e4press thanks to all the li(rary and administrative staffs of 0hanker 6ev Campus for the necessary help in the preparation of this thesis" I must not for$et to thank my friends and collea$ues for the re$ular inspiration and support" 'any many thanks to my friends" I )ould like to e4tend my heart3felt $ratitude to my family mem(ers" !hey al)ays inspired me to complete my hi$her study and provided all the necessary lo$istic supports" Lastly+ I )ant to take all the responsi(ility and )elcome the comments from you all" !hanks Niru Maya Rana Researcher Prithvi Narayan Campus Roll No

Tab-" ) C n$"n$.
CHAPTER 3I 41 414 417 419 416 41< 41= In$r +u!$i n Ba!*5r un+ ) $(" .$u+y 41414 Ev -u$i n ) M n"y an+ Ban* S$a$"#"n$ ) ,r b-"# Ob:"!$iv". ) $(" .$u+y Si5ni)i!an!" ) $(" .$u+y Li#i$a$i n ) $(" .$u+y r5ani>a$i n ) $(" .$u+y CHAPTER II REVIE' OF LITERATURE 7 714 In$r +u!$i n C n!",$ua- Fra#" ' r* 71414 C ##"r!ia- Ban* 71417 Inv".$#"n$ 717 S #" I#, r$an$ T"r#. 71714 719 716 71< 71= A. v"rvi"? ) n NRB Ru-". r"5u-a$i n inv".$#"n$ ) C ##"r!ia- Ban*. R"vi"? ) B *. R"vi"? ) Ar$i!-" R"vi"? ) Ma.$"rA. D"5r"" T(".i. R"."ar!( 2a, CHAPTER -III R"."ar!( M"$( + - 5y 914 917 919 In$r +u!$i n R"."ar!( M"$( + - 5y R"."ar!( +".i5n 96 96 9< 7< 7@ 78 99 46 46 46 4< 48 77 4 4 6 8 4; 44 44 47

916 91< 91= 91@ 91C 91C14

S ur!". ) +a$a P ,u-a$i n B Sa#,-" Sa#,-in5 Pr !"+ur" Da$a Ana-y.i. Pr !"+ur" Da$a Ana-y.i. T -. D".!ri,$iv" Ana-y.i. 91C1414LiDui+i$y Ra$i 91C1417 A!$ivi$y Ra$i &A.."$. Mana5"#"n$ Ra$i / 91C1419 Ri.* Ra$i 91C1416 Pr )i$abi-i$y Ra$i C(a,$"r IV Da$a Pr"."n$a$i n an+ Ana-y.i.

9< 9= 9= 9@ 9@ 9@ 9C 9C 6; 64

614 617 619 616 61< 61= 61@

LiDui+i$y ra$i A!$ivi$y ra$i &A.."$. Mana5"#"n$ Ra$i / Ri.* ra$i Pr )i$abi-i$y ra$i C #,ari. n ) )inan!ia- ,"r) r#an!" ) Nabi- ban* an+ NIBL C #,ari. n ) Inv".$#"n$ , -i!y ) $(" ."-"!$"+ ban* 61=14 S"!$ r ?i." L an an+ a+van!". ) Nabi- Ban* an+ NIBL S$a$i.$i!a- Ana-y.i. 61@14 C rr"-a$i n ! "))i!i"n$ 61@1414 C "))i!i"n$ ) ! rr"-a$i n b"$?""n +", .i$ an+ - an B a+van!". 61@1417 C "))i!i"n$ ) ! rr"-a$i n b"$?""n +", .i$ an+ inv".$#"n$. 61@1419 C "))i!i"n$ ) ! rr"-a$i n b"$?""n u$.i+" assets an+ n"$ ,r )i$ 61@17 Tr"n+ ana-y.i. 61@1714 Tr"n+ ana-y.i. ) $ $a- +", .i$ 61@1717 Tr"n+ ana-y.i. ) L an an+ a+van!". 61@1719 Tr"n+ ana-y.i. ) $ $a- inv".$#"n$ 61@1716 Tr"n+ ana-y.i. ) n"$ ,r )i$

69 6= <C =; =< == =@ =C =C =8 @; @7 @9 @9 @< @@ @C C;

61C

Ma: r )in+in5. ) $(" .$u+y

618

Min r )in+in5. ) $(" .$u+y

C4

CHAPTER V Su##aryE C n!-u.i n an+ R"! ##"n+a$i n.


<141 <17 <191 Su##ary C n!-u.i n R"! ##"n+a$i n $ Nabi- Ban* L$+1 an+ NIBL C< C@ CC

Li.$ ) Tab-"
Tab-" N 1 41 71 91 61 <1 =1 @1 C1 81 S(ar" Ca,i$a- ) N",a- Inv".$#"n$ Ban* S(ar" !a,i$a- ) Nabi- Ban* -$+ &a. a$ Fu-y 7;;C/ NRB ba-an!" $ $ $a- +", .i$ ra$i T $a- -iDui+ )un+ $ $ $a- +", .i$ ra$i L an B a+van!". $ $ $a- +", .i$ ra$i T $a- inv".$#"n$ $ $ $a- +", .i$ ra$i Inv".$#"n$ n +",riv"+ ."!$ r $ $ $a- +", .i$ ra$i Inv".$#"n$ n ,ri ri$y ."!$ r $ $ $a- +", .i$ ra$i Inv".$#"n$ n )inan!ia- in.$i$u$i n $ $ $a- +", .i$ ra$i Pa5" N 1 C 8 69 6< 6@ 68 <4 <7 <6 <= <@ <8 =; =4 =7 =9 =6 == =8 @4

4;1 Inv".$#"n$ n .(ar".E +"b"n$ur". an+ b n+. $ $ $a- +", .i$ ra$i 441 L an - .. ra$i 471 In$"r".$ ra$" ri.* ra$i 491 Cr"+i$ ri.* ra$i 461 R"$urn n $ $a- ? r*in5 )un+ 4<1 R"$urn n $ $a- - an an+ a+van!". 4=1 R"$urn n "Dui$y ra$i 4@1 T $a- in$"r".$ "arn"+ $ $ $a- u$.i+" a.."$. ra$i 4C1 C #,ari. n ) Inv".$#"n$ , -i!y ) $(" ."-"!$"+ ban* 481 C "))i!i"n$ ) ! rr"-a$i n b"$?""n +", .i$ an+ - an B a+van!". 7;1 C "))i!i"n$ ) ! rr"-a$i n b"$?""n +", .i$ an+ inv".$#"n$.

741 C "))i!i"n$ ) ! rr"-a$i n b"$?""n u$.i+" assets an+ n"$ ,r )i$ 771 Tr"n+ ana-y.i. ) $ $a- +", .i$ 791 Tr"n+ ana-y.i. ) L an an+ a+van!". 761 Tr"n+ ana-y.i. ) $ $a- inv".$#"n$ 7<1 Tr"n+ ana-y.i. ) n"$ ,r )i$

@7 @9 @< @@ @8

Li.$ ) Fi5ur"
Fi5ur" N 1 41 71 91 61 <1 =1 L an B a+van!". $ $ $a- +", .i$ ra$i T $a- inv".$#"n$ $ $ $a- +", .i$ ra$i Tr"n+ ana-y.i. ) $ $a- +", .i$ Tr"n+ ana-y.i. ) L an an+ a+van!". Tr"n+ ana-y.i. ) $ $a- inv".$#"n$ Tr"n+ ana-y.i. ) n"$ ,r )i$ Pa5" N 1 6C <; @6 @@ @C C;

ABBREVIATIONS
B%* C"B C"9 CAR CRR &:; Inv" Int" L8A" LBL Ltd" ' NIBL NRB P"1 R R%A R%1 0"6 0BL 0CBNL 06C !#CL Bank of *athmandu Commercial Bank Coefficient of variation Capital ade7uacy ratio Cash Reserve Ratio &iscal ;ear Investment Interest Loan and Advances Lum(ini Bank Ltd" Limited 'illion Nepal Investment Bank Ltd" Nepal Rastra Bank Pro(a(le 1rror Correlation Return on Assets Return on 17uity 0tandard deviation 0iddhartha Bank Ltd" 0tandard Chartered Bank Nepal Limited 0hanker 6ev Campus !ri(huvan #niversity Central Li(rary

CHAPTER 3I 41
414

In$r +u!$i n
Ba!*5r un+ ) $(" .$u+y Investment in financial sense is placin$ of money in the other for their use e4pectin$ a return or the participation in e4pected profits" But for manufacturin$ and tradin$ firms the terms investment )ill (e lon$ term e4penditures that aim at increasin$ return of efficiency or at (uildin$ up $ood)ill there(y producin$ and increasin$ return over as period" Investment also seek to mana$e their )ealth effectively o(tainin$ the most from it+ )hile protectin$ it from inflation+ ta4es and other risks" Investment (y individuals+ (usiness and $overnment involves a present sacrifice of income to $et on e4pected on future (enefit as a result investment raises an economy of nations" Investment usually involves puttin$ money into a (et+ )hich is not necessarily marketa(le in order to en<oy a series of return the investment is e4pected to yield" %n the other hand speculation is usually a shorter run phenomenon" 0peculators tend to (uy assets )ith the e4pectin$ of a profit than can (e earned from su(se7uent price char$e and sale" Investment are usually made e4pectin$ a certain stream of income+ )hich has e4isted+ )ill not chan$e in the future" Accordin$ William &" 0hape" =ordon ," Ale4ander and ,effery 9" Baily >Investment in its (roadest sense means the sacrifice of current dollars for

future dollars" !)o different attri(utes are $enerally involved time and risk" !he sacrifice takes place in the present and its ma$nitude $enerally is certain> (0hape Ale4ander and Baily+ ?//@ ?) In the study of the financial institutions the investment and investment pro(lems )ill revolve around the concept of mana$in$ the surplus financial assets in such a )ay+ )hich )ill lead to the )ealth ma4imiAation and providin$ a si$nificant further source of income" !hus the investment is the mana$ement of the surplus recourses in such a )ay as to make it )ork for providin$ (enefits to the supplier of the funds (y lettin$ it to third party" 5o)ever+ the investment needs to (e a procedural task" It must follo) a definite investment process+ )hich definitely (ein$ the formulation of proper investment policy" >Investment as the sacrifice of money today for prospective money tomorro)>" >Investment in its (roadest sense means sacrifice of current rupees for future rupees> it is defined (y William , 0harpe and Ale4ander < =ordon for the term BInvestmentB" !herefore+ every investment entails some de$ree of risk" Investment Policy Investment policy is the proper mana$ement of any fund or )ealth to ma4imiAe value or to o(tain this hi$h or favora(le return )ith la) risk considerin$ the protection of Invest forms the inflation and other possi(le harms" Banks are dis(ursin$ their money as investment in trade (usiness and industry" 6ue to the $ro)n on (ankin$ sector in Nepal and hu$e

competition+ investment are comparatively losses" !herefore+ Banks should (e follo) the principle of investment for profit" An investment policy should ensure ma4imum profit and minimum Risk" Investment policy determines the investorBs o(<ective and the amount of its investa(le )ealth (ecause there is possi(le relation (et)een risk and return for sensi(le investment strate$ies" Bankin$ sector specially commercial (ank play a vital role in the Process of canaliAin$ the availa(le resources in the needed 0ectors" &inancial system contacts t)o component i"e" depositary financial institution and non3 depository financial institution" Commercial (anks are depositary financial institution )hereas employed providence fund+ development (ank insurance companies etc are non depositary financial institutions all the economic activities are directly or indirectly channeled throu$h (anks" Banks accept money as a deposit from pu(lic and invest it in form of loan and advances" &inancial institutions act as an intermediary role (et)een the persons )ho lend and )ho (orro)" Bank pools the scattered fund and mo(iliAes them in productive sector "(ank came into e4istence mainly )ith the o(<ective of collectin$ the idle &und+ mo(iles them into productive sector and causin$ an overall economic development" !he (ankers have the responsi(ility of safe$uardin$ the interest and deposited amount of depositor" !he )ord CA'1L0 can (e used to <ud$e the soundness of (ank" It stands for C A ' 1 L 0 Capital Ade7uacy Asset Cuality 'ana$ement Cuality 1arnin$ Li7uidity 0ensitivity for Risk

NRB 6irectives for Investment Policy ?" Investment on priority sector 3 NRB has pointed priority sector as a$riculture sector+ cotta$e and small industry sector+ service oriented sector+ corporative sector etc" In )hich the commercial (ank must invest ?.D of their total deposits" !he provision totally (ased on the o(<ectives for upliftin$ life style of people in remote and villa$e area" -" Investment on Co3operative sector (6eprived sector) Co3operative institutions+ rural development (anks etc )hich are licensed (y NRB are also to (e compulsory invest (y commercial (ank" In certain ratio determined to <oint3venture Banks as per such re$ulation" ,9BBs has invested ED of total outstandin$ credit of for co3 operative sector" 41414 Ev -u$i n ) M n"y an+ Ban* As a pu(lic enterprise (ankin$ made its first (e$innin$ around the middle of ?-th century in Italy and the (ank of 9enice" &ounded in ??FG )as the first pu(lic (ankin$ institution" &ollo)in$ if )ere esta(lished Bank of Barcelona and Bank of =enoa in ?H.? and ?H.G respectively" !he (ank of 9enice and the (ank of =enoa continued to operate until the ei$hteenth century" With the e4pansion of commercial activities in northern 1urope+ there sprun$ up a num(er of private (ankin$ houses in 1urope and slo)ly it spread throu$hout the )orld" In Nepal+ modern (ankin$ starts form the esta(lishment of Nepal Bank ltd"

In Nepal development of (akin$ is relatively recent" !he record of (ankin$ system in Nepal $ives detail account of mi4ture of slo) and steady evolution in the financial and $lo(al economy of Nepalese life" In involvement of landlord+ rich merchants shopkeepers and other individual money holder has acted as fence to institutional credit in presence of unor$aniAed money market" In Nepalese chronicle it )as recorded that the ne) era kno)n as Nepal sam(at )as introduced (y shankhadhar+ a sudra merchant of *antipur in @G/ or @@. A"6 after havin$ paid all the outstandin$ de(ts in the country" !his sho)s the (asic of money lendin$ practice in ancient Nepal" !o)ards the end of @th century+ =unkamdev had (orro)ed money to re(uild the *athmandu valley" 'all re$ime )as an evidence of (ankin$ activities" It is (eloved that financin$ for forei$n trade )ith !i(et (ecame 7uite popular durin$ the re$ime of malla" 5o)ever the a(sence of re$ulatory measures money lenders )ere kno)n to have char$ed 5i$h rate of interest and e4tra on loans" When >!e<arath adda >esta(lished durin$ the year ?@GG A"6" it played viral role in (akin$ system as re$ulatory and promotional or$an" It helped the $eneral pu(lic to provide credit facilities at a very lo) rate of FD specially on the collateral of $old and silver" 5ence the esta(lishment of !e<arath adda could (e re$ard As pioneer foundation of (ankin$ in Nepal" !he man defect of this institution sou$hed as there )as no other financial institution set up and no effort to e4pand the services" A(ove all of defects the BaddaB didnIt accept Any deposit form pu(lic" After that a$ain for a lon$ time+ several unor$aniAed (ankers continued to flourish as the sole provide of credit and services to the $eneral pu(lic"

At the same time+ the $overnment started trade )ith India and !i(et and various (ankers handled even the trade (ecause transfer of money made only safe throu$h these (anker in the a(sence of modern (ankin$ institution" 5ence+ the need of (ankin$ institution realiAed" !his )as stron$ly supported (y the situation caused durin$ ?/EH A"6" earth Cuake )here there )as need of finance for reconstruction of *!'" 6urin$ the year ?/EH A6+ first commercial (ank of Nepal" Nepal (ank ltd esta(lished )ith the imperial Bank of India into e4istence under Nepal Bank act ?/EG inau$urated (y kin$ !ri(hu)an Novem(er ?/EG" Nepal Rastra Bank+ the central Bank of Nepal came into e4istence in ?/FJ under the Nepal Rastra Bank act ?/FF" Rastriya Bani<ya Bank the second commercial (ank )as esta(lished in?/JF+ RBB (ein$ a lar$est commercial (ank plays a ma<or role in the economy+ and the financial shapes of t)o old (anks have a tremendous impact on the economy" !hat is reason )hy these (anks still e4ist in spite of there (ad position" %n the lon$ run commercial (ank act )as felt" Accordin$ it )as esta(lished in ?/GH A6" Accordin$ to sectional - (a) of commercial (ank act ?/GH A"6" )ith openin$ of Na(il Bank in ?/@F the door of openin$ commercial (ank )as opened to the private sector as the commercial (ank $re) up they stopped entertainin$ small pro<ect" !hus+ scope of finance company emer$ed" !hou$h in -.H-B0 finance company act passed (ut private sector remained stonely silent tIn -.H/ B"0" Nepal 5ousin$ and development finance company (roke up the stoney silence on shra)on -.H/ B"0" !he second came in poush of same year"Nepal finance and savin$ company" alto$ether there are -F commercial (ank+ F@ development (ank G/ financial

institute ?J cooperative (limited (ank transaction only) ?- micro financial dev" Bank HJ N=%( micro credit trans" only) as at ashad -.JF" Nepal Investment (ank ltd (NIBL) Nepal Investment Bank Ltd (NIBL)+ previously Nepal IndosueA (ank ltd )as esta(lished in ?/@J as a <oint venture (et)een Nepalese and &rench partners" !he &rench partner (holdin$ F.D of the capital of NIBL) )as credit A$ricole IndosueA+a su(sidiary of one the lar$est (ankin$ =roup in the )orld")ith the decision of credit A$ricole induosueA to divest a $roup of companyBs comprisin$ of (ankers+ professionals industrialists and (usinessmen has ac7uired on April -..- the F.D shareholdin$ of credit a$ricole IndosueA in Nepal IndosueA (ank ltd" !he name of the (ank has (een chan$ed to Nepal investment Bank ltd" #pon approval of (ankBs annual =eneral meetin$+ Nepal Rastra Bank and company Re$istrarBs office )ith the follo)in$ shareholdin$ structure" A $roup of companies holdin$ F.D of capital" Rastra Bani<ya (ank holdin$ ?FD of capital" Rastriya Bima sansthan holdin$ ?FD of capital" Remainin$ -.D (ein$ held (y =eneral pu(lic" NIBL mana$ed (y a team of e4perienced (ankers+ professional and (usinessmen" Can offer people )hat they are lookin$ for" NIBL sures that customerBs choice (e $uided amon$ other thin$s (y its relia(ility and professionalism" NIBLBs vision is to (e the most preferred provider of financial services in Nepal"

A (anker+ a premier financial <ournal pu(lished (y financial times of London has announced NIBL as the )hiner of >Bank of the year> -..E+ -..F and -..@"not only it +NIBL also a)arded (y ICAN> Best presented accounts a)ards >-..J" !he share capital of NIBL as at ,uly -..@ is mentioned (elo)K S(ar" Ca,i$a- ) N",a- Inv".$#"n$ Ban* (as at ?F ,uly -..@) Tab-" 4 S(ar" Ca,i$aA# un$ &NR./ AuthoriAed Capital -.......L?.. -......... Issued Capital ?-.E/?FHL?.. ?-.E/?FH.. Paid up Capital ?-.E/?FHL?.. Nabi- Ban* Li#i$"+ Na(il Bank limited is the first <oint venture (ank of Nepal" It started operations in ,uly ?/@H+ Na(il )as incorporated )ith the o(<ective of e4tendin$ international standard modern (ankin$ services to various sector of the society pursuin$ its o(<ective+ Na(il provides a full ran$e of commercial (ankin$ services throu$h its ?/ points of representation across the kin$dom and over ?G. reputed correspondent (anks across the $lo(e" Na(il is come as a pioneer in introducin$ many innovative products and marketin$ concepts in the domestic (ankin$ sector+ represents a milestone in the (ankin$ In story of Nepal" It started an era of modern (ankin$ )ith customer satisfaction+ measured as a focal o(<ective )hile doin$ (usiness" ?-.E/?FH..

%peration of the (ank includin$ day to day operations and risk mana$ement are mana$ed (y hi$hly 7ualified and e4perienced mana$ement team" Bank is fully e7uipped (y modern technolo$y )hich includes A!'s+ credit Card+ state of art+ and )orld reno)ned soft)are from Infosys technolo$ies system" Ban$alore+ India+ Inter (ankin$ system and tele3(ankin$ system" &inancial times of London have announced Na(il Bank Ltd as the )hiner of the >Bank of !he ;ear> -..H" S(ar" !a,i$a- ) Nabi- Ban* -$+ &a. a$ Fu-y 7;;C/ Tab-" 7 S(ar" Ca,i$aA# un$ &NR./ AuthoriAed Capital ?J......L?.. ?J........ Issued Capital J@/-?J.L?.. J@/-?J... Paid up Capital J@/-?J.L?.. 417 S$a$"#"n$ ) ,r b-"# After -.HJB"0"+ privatiAation and li(eraliAation adopted (y !he $overnment of Nepal" 6ue to that policy+ in these days commercial (ank+ developments (ank and financial company are operatin$ )ith 5i$hly competition" !he fast $ro)th of such or$aniAations has made pro3rata increment in collectin$ deposit and their investment" !hey collected the hu$e amount from pu(lic (ut couldnBt allocate in ne) investment sectors" !he increasin$ rate of li7uidity has pulled in a do)n)ard trend in investment" It has ensured (ad impact on interest to the depositors+ lo)er market value of shares" J@/-?J...

!hou$h several commercial (anks have (een esta(lished in short period+ (ut sufficient return has not (een earned" 0tron$+ sta(le and appropriate investment policy has not (een follo)ed" A hu$e collection and investment policy plays vital role for the economic development of )hole country" A very unhealthy activity is happenin$ in the (ankin$ (usiness" After the loan is provided (y the (ank+ re$ular inspection and monitorin$ are not made to kno) )hether the de(tor has used the loan in productive or not" 6ue to !his reasons+ there is $reat amount of unrecovered (ank loan" Banks only depend upon the direction and $uidelines of Nepal Rastra Bank (ut they donBt have clear vie) and have not formulated their o)n or$aniAed investment policy" !he main focus of !his study )ill (e to)ards the investment practices of the (anks" !hey are Na(il Banks Ltd and Nepal Investment Bank Ltd" !his study (asically deals )ith the follo)in$ issues of <oint venture (anks" a" (" c" 419 Are the availa(le fund properly utiliAed or notM What is the relationship (et)een investment on loan and advance and deposit+ net profit and net profitM What is the investment portfolio (ehavior of the (anksM

Ob:"!$iv". ) $(" .$u+y !he main o(<ective of the study is to assess the investment policy and strate$y follo)ed (y the (ank )ith reference to Na(il Bank ltd and NIBL" !he main o(<ectives of this study mentioned (elo) a" !o analyAe the deposit utiliAation for five years of NABIL 8 NIBL"

("

!o find out relationship (et)een total investment+ deposit+ loan 8 advance and net profit"

c" d" e" 416

!o evaluate the li7uidity+ efficiency+ risk position and profita(ility of the selected (anks" !o analyAe the financial position of NABIL and NIBL in terms of deposit collection and investment procedure" !o su$$est and recommend on the investment policy of sample (anks"

Si5ni)i!an!" ) $(" .$u+y 0uita(le strate$y plays vital role in a (ank for their sustain e4istence" !he study )ill (e helpful to a)are the shareholder re$ardin$ investment policies of their (anks" !he study su$$ests to the mana$ement ho) they can improve their mana$in$ po)er and recommends )hat is the clue to raise the profit" !hou$h+ this is only study (ut it $ives feed(ack to policy makers+ )ill useful them )ho formulate the policy for re$ulation" All stakeholders can identify )hich (ank is the (est and to )hom have to invest"

41<

Li#i$a$i n ) $(" .$u+y ?) -) E) H) F) J) !his study is mainly concerned to only t)o (anks i"e" Na(il Bank ltd and Nepal investment (ank ltd" !he )hole study is (ased on secondary data from the respective (anks and )e(sites on net+ article+ ne)spapers" !he study )ill (ase only on the latest five year data" Lack of sufficient time and resources" In !his study only selected tools and techni7ue are used" !his study is conducted only for su$$estion not for directin$"

41=

r5ani>a$i n ) $(" .$u+y !he study )ill (e or$aniAed into five chapters Chapter ? Introduction !his chapter deals )ith the su(<ects matters of the study consistill$ (ack$round of the study+ statement of the pro(lem+ o(<ective of the study+ si$nificance of the study and limitation of the study" Chapter Revie) of literature !his chapter deals )ith revie) of the different literature of the study field" !herefore+ it includes conceptual frame)ork alon$ )ith the revie) of ma<or (ooks+ <ournal+ research )ork and thesis etc" Chapter E Research methodolo$y !his chapter deals )ith research methodolo$y and it includes research desi$n+ population and sample+ source and techni7ue of data collection+ data analysis tools and limitation of the methodolo$y Chapter H 6ata presentation and analysis !his chapter deals )ith analysis and interpretation of the data usin$ financial and statistical tools descri(e in chapter three" 0imilarly !his chapter also includes the ma<or findin$s of the study"

Chapter F 0ummary+ &indin$s+ Conclusion and Recommendations !his chapter deals )ith summary of the study held+ the conclusion made ultimately and the possi(le su$$estion"

CHAPTER II REVIE' OF LITERATURE


7 In$r +u!$i n !he past on historical kno) led$e parody the (ase therefore the literature is (ased on the previous kno)led$e" !he effort has (een to cover as much literature+ articles+ thesis 8 research paper as possi(le to make the study in informative 8 (road" !his chapter has (een divided into t)o main sections !he four sector of the chapter implores )ith the can capital frame )ork of study" 0econd sectored implores the implores the revie) of previous studies" 714 C n!",$ua- Fra#" ' r* Commercial (ank =et ?/GF A"6" defended >A commercial (ank is one )hich e4chan$e money deposits accepts deposits+ $rant loans 8 per forms commercial (ankin$ function 8 Co3operatives+ a$riculture 8 industries for such specific purpose> Commercial (ank is a corporation )hich accepts demand deposits su(<ect to check 8 makes short term loans to (us mess enterprises+ re$ardless of the scope of its other service ((ankin$ #0A ?G-)" >A (ank is one )ho in the or diary covers of !his (us mess recovers money )hich he repays (y honorin$ chives of persons from )hich of one )hose account it receives it> (Bardford+ HFE3HFH)

71414 C ##"r!ia- Ban*

Commercial (ank has main role in the economic development" &or economic development+ commercial (ank should mo(iliAe then collection to)ards the profita(le+ secured 8 marketa(le sectors" !he income 8 profit of the (ank depend upon the lendin$ procedure applied (y the (ank as )ell as lendin$ policy 8 investment in different securities also affect the income 8 profit in the investment procedures 8 policies it is al)ays taken in ''6 that Nthe $reater the credit created (y the (ank35i$her )ill (e the profita(ility"O 0ound policies help commercial (anks to ma4imiAe 7uality 8 7uantity of investment and there(y achieve the o)n o(<ective of profit ma4imiAation 8 social )elfare" 71417 Inv".$#"n$ Investment can (e defined as sacrifice of present consumption )ith e4pectation of return in future" Investment takes place at present (ut return can (e e4pected in future (ut return in uncertain too" #ncertainty is measured (y risk that )hy there is al)ays involvement of risk in investment" Investment usually involves puttin$ money into a(et+ )hich is not necessarily marketa(le in order to en<oy a series of return the investment is e4pected to yield" %n the other tend speculation is usually a shorter than phenomena" 0peculators tend to (uy assets )ith e4pectin$ of a profit that can (e earned from su(se7uent price chan$e 8 sale" Investments are usually made e4pectin$ a certain stream of income+ )hich has e4isted+ )ill not chan$e in the future"

NInvestment is made in assets" Assets in all are of t)o types real assets (land+ (uildin$+ factures etc") and financial assets (stock+ (ond+ t3(In etc")" !hese t)o investments are not competitive (ut complementary" 5i$hly developed institutions for financial $reatly facilitate real investment"O (Bhattarai+ -..H ?H-) Investment is nothin$ (ut deployin$ our savin$ in manner that ensures safety of our money 8 provides a sustained return to supplement our re$ular income (6elhi 0tock e4chan$e -..-)" !he term investment covers a possi(le )here there are a devour savin$" If all the income 8 savin$ are consumed to solve the pro(lems of hand to month and to other (asis needs then there is non e4istence of in investment are interrelated" &eatures of sound investment policy !he commercial (anks are inspired )ith the $oal of earnin$ profit" !here are many reasons after the $oals of $ainin$ profit" In order to reach their desired $oals+ they profit must invest the resources" It is not (etter to keep the availa(le resources idle" !he (ank should (e a(le to clear the policy of its investment (y makin$ a deep study on the su(<ects that )hich sector )ould (e the trust )orthier 8 dependa(le to invest the funds collected in the (ank+ they should have the a(ility to use the policy of (ankin$ investment in its $oal" !he income and profit of the (ank depends upon its investment policy 8 term Landry procedure of its funds in different securities" !he $reater the credit created (y the (ank the 5i$her )ill (e the profita(ility" A sound (endin$ 8 investment policy is not only prere7uisite for the (ankBs profita(ility (ut also crucially si$nificant for the promotion of commercial savin$ of a (ack)ard country like Nepal" !here fore+ the follo)in$

principles or features of investment policy must (e a(ided (y the commercial (anks in order to achieve the $oals" A1 Sa)"$y an+ S"!uri$y Commercial (anks must pay a special attention to the principle safety and security" !here )ill (e a loss )hether it is small or (i$+ if the (ank has not invested in secure and safe sectors+ Investment in unsafe and insecure sectors )ith the hope of $ettin$ more return is to accept the security of la) 7uality" !he condition of unsafe arise )hen a (ank invest in lar$e loan a$ainst less securities (y receivin$ commission+ invests in ne) places )ithout careful o(servation+ landin$ to lon$3 term (orro)ers etc" All these unsafe conditions should (e avoided as much as possi(le" A (ank should (e very much conscious in investin$ procedures and profita(le sectors" It should never invest its fund on those securities+ )hich are su(<ected to too much for volatility (6epreciation are fluctuation) (ecause a little alternation may cause a $reat loss" It must not invest its fund into speculative (usinessman+ )ho may (e (ankrupt at once and )ho may earn millions in minute also" %nly Commercial dura(le+ marketa(le and hi$h market valued securities should (e accepted" &or !his purpose >'A0!> should (e follo)ed+ )here 'A0! stands for ' A 0 ! B1 3 3 3 3 'arketa(le Ascertaina(le 0ta(ility !ransfera(ility

Pr )i$abi-i$y

!he profit of commercial (ank mainly depends on the interest rate+ volume of loan and its time period and nature of investment in different securities" It is a fact that a commercial (ank can ma4imiAe its volume of )ealth throu$h ma4imiAation of return on their investment and lendin$ so+ they must invest their funds )here they $ain ma4imum profit" Am(ition of profit to commercial (ank seem reasona(le as the (ank has to corer all the e4penses and make payment in the forms dividend to the shareholder )ho contri(ute to (uild up to (ankBs capital and interest to the depositors" &or !his the (ank calculates the cost of fund and likely return+ if the spread is enou$h irrespective of risk involved and a(sor(s its li7uidity" %(li$ation+ it )ill $o a head for investment $ood (ank is one )ho invest more of its fund in different earnin$ assets standin$" 0afety from the pro(lem of li7uidity+ i"e" keepin$ cash resurvey to meet day to day re7uirements of the depositors" C1 LiDui+i$y It is the position of the firm to meet current or short3term o(li$ations" =eneral pu(lic or customers deposit their savin$ at the (anks in different accounts havin$ full confidence of repayment (y the (anks )henever thEey re7uire" !o sho) a $ood current position and maintain the confidence of the customers+ every firm must keep proper cash (alance )ith then )hile investin$ in difference securities and $rantin$ loan from e4cess fund" D1 Pur, ." ) L an

!his is very important 7uestion for any (anker is that+ )hy a customer is in need for loan" If (orro)er misused the loan $ranted (y the (ank+ he can never repay" !herefore+ in order to avoid !his situation each and every (ank should demand all the essential detailed information a(out the scheme of the pro<ect or activities )ould (e e4amined (efore lendin$" E1 Div"r.i)i!a$i n >A (ank should not lay all its e$$s on the same (askets"> !his sayin$ is very important to the (ank and it should (e al)ays careful not to $rant loan in only one sector" !o minimiAe risk+ a (ank must diversify its investment on different sectors" 6iversification of loan helps to sustain loss accordin$ to the lo) of avera$e+ if a security of a company is divided of there may (e an appreciation in the securities of other companies" In !his )ay+ the loss can (e recovered" F1 Tan5ibi-i$y A commercial (ank should proper tan$i(le security to an intan$i(le one" !hou$ht it may (e considered that tan$i(le property does not yield an income apart from intan$i(le securities+ )hich have lost their value due to price level inflation" 21 L"5a-i$y A commercial (ank must follo) the rules and re$ulation as )ell as different directions issued (y Nepal Rastra Bank+ 'inistry of &inance+ 'inistry of la) and other )hile mo(iliAin$ its funds" hie$al secretes )ill (rin$ out any pro(lems to investors"

717

S #" I#, r$an$ T"r#. !he various sections in !his study comprise some important (ankin$ terms" !he efforts have (een made to clarify the meanin$+ )hich are fre7uently used in !his study are $iven (elo)" A1 L an an+ A+van!". Loan+ advances and overdraft are the main source of income for a (ank" Bank deposit can cross (eyond a desired level (ut the level of loans+ advances and overdraft )ill never cross it" B1 Inv".$#"n$ n 2 v"rn#"n$ S"!uri$i".E S(ar". an+ D"b"n$ur". !hou$h a commercial (ank can earn some interest and dividend from the investment on $overnment securities+ shares and de(entures+ it is not the ma<or portion of income+ (ut it is treated as a second source of income of (ankin$ (usiness" A commercial (ank may e4tend credit (y purchasin$ $overnment securities (ond and shares for several reasons" S #" ) $("# ar" 5iv"n a.: It my )ant to spare+ its maturity so that the inflo) of cash coincide+ )ith e4pected )ithdra)als (y depositors or lar$e loan demands of it customers" 3 3 It may also (e forced to invest (ecause the demand for loans of it decreased or is not sufficient to a(sor( its e4cess reserves" It may )ish to have $rade marketa(le securities to li7uidate if its primary reserve (ecomes inade7uate"

5o)ever+ investment portfolio of commercial (ank is esta(lished and maintained primarily )ith a vie) of nature of (ank lia(ilities that since depositors+ may demands fund in $reat volume )ithout previous notice to (anks" !he investment must (e of a type that can (e marketed 7uickly )ith little or no shrinka$e in value" C1 D", .i$. &inancial institution collect deposits from the customers in various accounts+ like current account+ savin$ account and fi4ed account" !herefore+ the sums of money collected (y the financial institutions from the depositors in various accounts are called deposits" 6eposit is the main source of fund of the financial institutions" D1 Inv".$#"n$ n O$("r C #,anyA. S(ar" an+ D"b"n$ur" 6ue to e4cess funds and least opportunity to invest these funds in much more profita(le sector and to meet the re7uirement of Nepal Rastra (ankBs directives many commercial (anks have to utiliAe their funds to purchase shares and de(entures of other financial and non3 financial companies" No)3a3 days most of the commercial (anks purchase shares and de(entures of re$ional development (ank+ NI60 and other development (ankBs 0hares" E1 O$("r U." ) Fun+ A commercial (ank must maintain the minimum (ank (alance )ith NRB i"e" JD for fi4ed deposits and @D for each of current and savin$ deposit account in local currency" 0imilarly ED cash (alance and local

case (alance+ in local currency accounts must (e maintained in the vault of the (ank" A$ain a part of the fund should (e sued for (ank (alance in forei$n (ank and to purchase fi4ed assets like land+ (uildin$+ furniture+ computers and stationary etc" F1 O))-ba-an!" S(""$ A!$ivi$i". %ff3(alance sheet activities involve contracts for future purchase sale of assets and all these activities are contin$ent o(li$ations" !hese are not reco$niAed+ as assets are lia(ilities on (alance sheet" 0ome $ood e4amples of these items are letter of credit (L:C)+ letter of $uarantee+ (ins of collection etc" No) days+ some economist and finance specialists to e4pand the modern+ transaction of a (ank stressfully 5i$hli$ht su( activities" 71714 A. v"rvi"? ) n NRB Ru-". r"5u-a$i n inv".$#"n$ ) Ban*. NRB esta(lished in -.?E B0 is the central (anks of Nepal" Its determine role in economic plans and implementation in the country is ma<or" !he main o(<ective of NRB are to mana$e the economic and financial transaction over the country" 0ystematically allocation and mana$ement and implementation economic factor over the sate is $overned (y NRB as a centralK (ank" All economic plans pro$ress" Policy+ strate$ies+ implementation+ evaluation made (y $overnment are performed under the direction of NRB" 0o+ NRB is the (ank of $overnment )orks for the )elfare of nation" 0imilarly NRB direct the (ank and other financial institution too Plans+ policies+ direction+ rules+ re$ulations from NRB as a representative of $overnment" !o allocate and mo(iliAed the deposits collected (y commercial (ank in different C ##"r!ia-

sectorsB of different policies etc" In fact NRB controls the over the overall activities made (y the commercial (ank as )ell as esta(lishment or operation or dissolution of (anks" &or so NRB has formulated commercial (ank act -F.E? for the esta(lishment and operation of commercial (ank" 5ere the directions+ rules+ re$ulation+ directed (y NRB in terms of investment made (y commercial (ank are (riefly mentioned (elo)" (NRB Rules -.J?) ?" 1sta(lishment of Ne) Commercial Banks NRB has enhanced li(eral policy for esta(lishment of ne) commercial (ank in Nepal" &or such o(<ectives of NRB has re$ulated the follo)in$ direction" A minimum of Rs" -.. million of paid up capital is re7uired for openin$ a ne) (ank inside the *athmandu 9alley" 0imilarly+ as per directions (y NRB Rs" ?-. million necessary for startin$ (ankin$ (usiness out of *athmandu" Rs" F. million paid up capital are necessary for openin$ central office of (ank out of *athmandu" Commonly for esta(lishin$ the commercial (ank in rural areas NRB has directed Rs" E. million as compulsory paid up capital" !he investor can invest Ins:her its can (e invested ma4imum up to G.D of total paid up to capital if the (ank is promoted (y domestic investor and E.D of paid up to capital should (e as li7uidity mar$in for repayment for certain deposits" &or <oint venture (ank+ forei$n investor can invest minimum H.D of paid up capital and F.D as ma4imum" 0uch (ank

should mana$e E.D of paid up capital as floatation for $eneral pu(lic" Individually+ firm or company or $roups of company can incest up to ??.D of paid up capital" Application for the esta(lishment of ne) (anks are to (e adopted )ith in the stipulated times fi4ed (y NRB" 41 Dir"!$i n ) r Rai.in5 Fun+ Commercial (anks are directed to raise the capital fund at minimum level of Rs" F.. million" &or !his re7uirement" 71 Dir"!$iv". ) r Sin5-" B rr ?"r Li#i$ NRB has (eard the sin$le (orro)er limit as EFD in the case of fund (ased credit and F.D in the case of non fund (ased such letter of credit+ acceptance latter etc" 91 R"5u-a$i n ) r EG,an.i n ) C ##"r!ia- Ban* &or openin$ of a (ranch )ith the area of *athmandu+ Latipur+ Pokhara+ Bir<un$+ Biratna$ar+ Narayan$hat ,oint venture (anks need to open firstly at least t)o (ranch in ad<oinin$ semi3ur(an area and secondary at least one (ranch in rural area not ad<oin to any municipalities" + Commercial (ank can include paid up capital and dedication made loss for meetin$ such

Banks are not re7uired to open their ne) (ranch in semi3ur(an or rural area it they open ne) (ranch outside the seven municipalities" &or the permission of esta(lishment of ne) (ranch commercial (anks ha to specify the )hole details a(out the ne) (ranch+ they must open a (ranch in a rural or semi3ur(an area (efore openin$ in ur(an area"

61

Dir"!$i n ) r EG$"n.i n C un$"r. ) F in$ V"n$ur" Ban*. Commercial (anks canBt open e4tension in metropolitan area e4cept durin$ trade fairs+ festive+ ceremonies+ cele(rations etc" as a directed (y NRB such e4tension must (e converted and a (ranch )itInn t)o years other)ise must (e closed" !he e4tension opened can accept deposit and made payment as )ell as e4chan$e of forei$n currencies after the permission for 'RB" If the e4tension is open in the area of royal palace+ hospitals+ forei$n diplomatic offices+ those e4tension are not allo)ed to operate as a (ranch as mentioned in (II)"

<1

Cr"+i$ ) r S(ar"( -+"r. !he individual or $roup )ho holds more than ?D of shares of the commercial (anks canBt (orro) from same (ank under the directions from NRB -.J? B"0"

=1

F-u!$ua$i n in In$"r".$

!he a$reement can (e made (et)een (ank and customer for makin$ chan$e in (ank loan interest rate up to ."FD in no) cancelled (y NRB to (e effective from -.J?:.J- B"0" 719 R"vi"? ) B *.

William &" 0harp+ ," Ale4ander and ,effery Bailey ,ack Clark &roncishare said in Ins (ook NInvestment analysis and mana$ementO that investment in its (roadest since+ means that sacrifices of current dollars for future dollars" !)o different ar(utus are $enerally involved !ime 8 Risk" !he sacrifice takes place in the present 8 is certain" !he re)ard comes later of at all and the ma$nitude is $enerally uncertain" ?" -" Real Investment =enerally+ if involves some kind of tan$i(le assets such as land+ machinery 8 factories" &inancially Investment Involves contract has )ritten on prece of paper such as common stocks 8 (onds" ,erome B" Chome+ 1d)ord 6" Pin(an$ 8 Arthur Peiked defined the )orld Investment as NInvestment has many &actors" If may involve money into (onds" !3(Ins or notes or common stocks or real state or mort$a$e or oil venture or cattle or the theater" In may involve specially in (ull market or sellin$ short in (ear markets" It may involve options+ straddles+ silver mutual funds+ money market fund+ inde4 funds 8 result in accumulation of )ealth or dissipation of resources" 6iversity and challen$e characteriAed the field" &or the a(le or lackey the uninformed result can (e disastrous"O Cross 8 5empal ?/@.+ NCommercial (anks (rin$ into (ein$ the moot important in$redient of the money supply demand deposits throu$h the

creation of credit in the form of loans 8 investment" Banks are the custodians of the communityBs money as )ell as the suppliers of its li7uidity+ since the study is concerted )ith the investment activities of commercial in Nepal+ )e take in to consideration e4clusively the sector that are re7uired for 8 relented to the same"O Chancy+ ,ohn '" 8 'oses+ 1dulard A" &ocuses on the individual investment" !hey states+ it is important that the investor set the appropriate investment o(<ectives 8 the accompanyin$ investment horiAon" In addition+ in developin$ investment strate$ies to achieve the o(<ectives+ the investor must understand the ta4 conservancies and e4pected risk 8 return associated )ith the various investment alternatives per haves most importantly the investor should reco$niAe that acInevin$ 8 investment o(<ective involves the creation of a portfolio of assets and not a collection of individual assets" !hey further states that+ individual assets may (e very risk" Com(inin$ these assets into a portfolio of other assets may actually reduce the risk of the overall risk" &rank *" Rainy in Ins (ook NInvestment analysis mana$ement 8 portfolio mana$ementO has defined the term investment+ NInvestment is the current commitment of funds for a period of time to o(tain a future flo) of funds that )ill compensate the investment unit for the time the funds are committed for the e4pected rate of inflation 8 also for the uncertainly involved in the future flo) of fundO (Investment+ ,apan the oryden Press+ CB0 Pu(lisher Ltd")

0hrestha+ 6r" 0unity (?//F)+ e4plains in her (ook+ NPortfolio (ehavior of commercial (anks sector of the economy includin$ a$riculture+ industry+ commercial 8 social service sectors" !he lendin$ policy of commercial is (ased on the profit ma4imiAin$ of the institution as )ell as the economic enhancement of the country"O &rom a(ove definition+ it is clear that an investment means to trade a kno) rupee amount for some e4pected future steam of payment or (enefits that )ill e4ceed currently outlay (y an amount that )ill compensate the investor for the time of uncertainly involved in e4pected future cash flo)s" !his investment is the most important function of commercial (anks" It is very challen$in$ task for commercial (anks" 0o+ a (ank has to (e very cautions )hile investin$ their funds in various sectors" !he success of a (ank heavily depends upon the proper mana$ement of its investa(le funds" 716 R"vi"? ) Ar$i!-" 0hrestha (?///)+ in Ins article+ NA study on deposit 8 credit of commercial (ank in NepalO concluded that the credit deposit ratio )ould (e F?"E.D other thin$s remainin$ same in -..H A"6" )hich )as the lo)est under the period of revie)" 0o+ it is stron$ly recommended that the commercial (anks should try to $ive more credit earnin$ field as far as possi(le" %ther)ise+ they mi$ht not (e a(le to a(sor( even its total e4penses" 0harma+ '"P" 8 Bhatt+ '"P" (-..-)+ in their article NPriority receiver sectorO has present N!he commercial (anks should take care of (oard national interest 8 they sho)ed not confine their lendin$ activities only to commercial area providin$ 7uick interest if some proportion could (e

directed to the area conclusive to (uild economic infrastructures of the country it )ould create atmosphere conductive to their investment in future" In our society )here i$norance 8 literacy is in )ild scale+ it is necessary that the (anks search entrepreneurs instead of entrepreneurs searchin$ (ook" 0o+ they have opinioned that the priority sector pro$ram is a timely 8 opportunities there (y increasin$ production 8 the $eneral livin$ standard or rural poor" But the success of the lar$ely depends upon the interpreted operation )ith other pro$ram desi$n for rural development" &urther they a$ree that various pro$rammers Rural development land reform+ (ack to the villa$e national+ champion audit literacy etc" couldnBt materials their o(<ectives despite their some theoretically philosophy 8 food o(<ectives"O Pradhan (-..E)+ in his research paper NRole of savin$+ Investment 8 capital formation in economic development a case of NepalO has studied a(out the stron$ role 8 impact of savin$+ investment 8 capital formation on economic development of Nepal" !his study is (ased on secondary data only" !he necessary data on savin$+ investment+ capital formation and $ross domestic product has (een collected for the period of ?/GH:GF to -...:.?" !he role 8 impact of savin$+ investment and capital formation on economic development )ere analyAed (y usin$ various re$ression models" !he re$ression e7uation used in !his study have (een estimated at current prices as )ell as in real term )ith the entire study period divided into different su(3 period" !he results presented in !his paper su$$est that in all cases+ =%P is si$nificantly associated )ith savin$" Investment and capital formation (oth at current prices and in real terms" !he result of the empirical analysis led to

three important conclusions first+ savin$+ investment 8 capital formation have positive impact on economic development" 0econd+ the current values 8 past values of savin$+ investment 8 capital formation have positive impact on economic development (ut the current values have the lar$est impact" !hird+ there is a stron$ role played (y savin$ 8 capital formation on economic development )hile )eak role3played (y investment" 71< R"vi"? ) Ma.$"rA. D"5r"" T(".i. %n the topic NInvestment PolicyO have pu(lished (y many researchers in their research article" !he mentioned theses )ere revie)ed as they are relevant to the present research" 'r" Prasanna 0hrestha in her study NA comparative study on investment policy of <oint venture (anksO has studied primarily of four commercial (anks i"e" 5imalayan Bank Ltd"+ Nepal 0BI Bank Ltd"+ 1verest Bank Ltd" 8 Bank of *athmandu Ltd" !he main o(<ectives of her studies are as follo)s !o compare+ analysis 8 evaluate the investment policy of these four commercial (anks" !o evaluate+ li7uidity+ activity 8 portfolio ratios of these (anks" !o find out the deposit collection 8 the effectiveness of fund mo(iliAation" !he Conclusion of the research study is as follo)s 5BL is more successful in mo(iliAin$ the fund in proper )ay in comparison to other three commercial (anks"

All these (anks should have to increase the deposit collection+ investment in securities shares 8 de(entures" All (anks should (e in rural areas 8 have to take effectives marketin$ strate$y for their promotion" Ne) technolo$y have to (e introduce so to develop ne) (ankin$ system"

0hrestha (-..H) conducted a study on NNepal Rastra Bank =uidelines on Investment policy of commercial (anks in Nepal (A case study of Nepal Investment Bank)O" !he main findin$s of the study are Bank is in $ood position to meet the daily cash re7uirement as (ank has maintained the avera$e cash 8 (ank (alance in respect to total deposit" !he performance of NIBL re$ardin$ deposit collection $rantin$ loan 8 advance 8 investment is 7uite satisfactory (ut doesnBt seem to follo) definite policy" NIBL has not efficiently utiliAed its e7uity capital hence return on e7uity is not satisfactory (ecause of lack of sound investment policy for mo(iliAation of its e7uity capital" Interest earned to total operatin$ income of NIBL is 5i$h" 5o)ever (ank failed to maintain net profit on the study" &rom the analysis of coefficient of correlation" !here is positive 8 si$nificant relation (et)een total deposit 8 loan and advances and current assets and current lia(ilities and loan and advances (ut there is ne$ative and no si$nificant relationship (et)een outside assets 8 her profit"

,oshi (-..F) conducted a study on NInvestment policy of commercial (anks in Nepal A comparative study of 1verest Bank Limited+ Na(il Bank Limited 8 Bank of *athmanduO has presented research findin$ of the study are !he li7uidity position of the 1BL is comparatively (etter than NABIL 8 B%*" 1BL has the 5i$hest cash 8 (ank (alance to total deposit+ cash 8 (ank (alance to current assets ratio" Na(il has lo)est li7uidity position than that of other t)o (anks" 1BL has $ood deposit collection 8 has made enou$h investment on $overnment securities (ut it is maintained moderate investment policy on loan 8 advances" &rom the analysis of assets mana$ement ratio or activity ratio+ it can (e concluded that 1BL is comparatively avera$e or in (et)een successful in compared to Na(il 8 B%*" !he total investment of 1BL is in (et)een in compared to other t)o (anks" In analysis of profita(ility+ total interest earned to total outside assets of 1BL is lo)est at all" But overall analysis of profita(ility ratios" 1BL is avera$e profita(ility ratios" 1BL is avera$e profita(le in comparison to other compared (anks i"e" Na(il 8 B%*" &rom the vie) point of risk ratio+ 1BL has 5i$her capital risk (ut avera$e of credit risk ratio in compared to Na(il 8 B%*" 'r" Arya Amatya+ in Ins research study entitled+ NA comparative study on investment policy of commercial (ank 8 finance companies of NepalO has pointed out the follo)in$ o(<ectives

!o find out the relationship (et)een profita(ility 8 assets structure of the (anks 8 finance i"e"+ 0tandard Charted Bank Ltd" 8 B%* Ltd" 8 finance companies i"e" international leasin$ 8 finance company+ standard finance company 8 universal finance company"

!o pro<ect the deposit utiliAation 8 investment of the (anks in companion to finance companies" !o commend the polices to (e adopted (y sample (anks 8 finance (ased (y sample (anks 8 finance (ased on financial analysis for its future development"

!he study is (ased on secondary data 8 time period is limited of / years from ?//J:/G to -..H:.F" this study has mentioned only three (anks 8 three finance companies" !he conclusions of the study are as follo)s &inance company has successfully invested their deposit collection as loan 8 advance in comparison to commercial (ank as they hve hi$her loan 8 advance to total deposit ratio" Profita(ility position of the commercial (anks e4cept B%* Ltd" is (etter than that of fiancQ companies" !rend value of net profit is increasin$ trend 8 commercial (anks have comparatively hi$her value than finance companies" 5e has made the follo)in$ recommendation !he sampled firms havenBt properly analyAed the causes 8 effects of the varia(les so they are recommended to prepare future investment policies 8 plan after detail analysis of causes 8 effect of the varia(les"

1valuate the investment opportunities 8 alternatives usin$ statistical+ capital (ud$etin$ 8 other financial tools to avoid the lar$e amount of dou(tful 8 risks as they have main trends a lar$e amount of loan loss provision"

Commercial (anks 8 finance companies need to add e4tra amount or investment on $overnment securities as they are less risk investment 8 are considered as li7uid assets"

71=

R"."ar!( 2a, !he purpose of the research )ork is 7uite different from the studies made (y the a(ove persons (related to commercial (ank)" !his study focuses in effectiveness in investment" Policy analysis of Ni(il Bank 8 NIBL Bank Ltd" (ankin$ comprehensive manner considerin$ the ma<or items" 6ifferent financial 8 statistical tools have (een used in !his study" Amon$ them+ ratio analysis+ re$ression analysis are the stron$ financial tools" !his study is a little (it different than previous studies" It may (e one of them research study of investment policy in fe) research )ork )ith reference to Na(il 8 NIBL Bank" !his study tires to indicate the effectiveness of investment policy of concerned (anks"

CHAPTER -III R"."ar!( M"$( + - 5y


914 In$r +u!$i n 5avin$ stated a(out introduction 8 revie)in$ of literature in chapter I 8 II+ no) the task has come to make decisive choice of research methods to support the in realistic term )ith sound empirical analysis" !he study )ith try to come at conclusion re$ardin$ )ith )hat position Na(il 8 NIBL has $ot in the Commercial (ankin$ sectors in Nepal" !hen these chapters )ill deals the research methodolo$y used in the study for analysis of the t)o sampled Commercial Bank" 917 R"."ar!( M"$( + - 5y Research methodolo$y refers to the various se7uential steps to (e adopted (y a researcher in studyin$ a pro(lem )ith certain o(<ectives in vie)" (C"R" *othari+ ?/@/) in other )ords+ research methodolo$y descri(es the method 8 process applied in the entire aspect of the study" It is a )ay to solve the research pro(lem systematically 8 scientifically" A fact research methodolo$y is much va$ue than research methods i"e" research method is <ust a part of research methodolo$y" It considers the lo$ic (ehind the use of the methods in the conte4t of research study 8 e4plains )hy a particular method or techni7ues is used" !hus research methodolo$y is concerned not only a(out the different types of methods used (ut also a(out various other facts like )hat data have (een collected+ )hat are the purpose 8 pro(lem of research etc" so+ to up the research methodolo$y that has (een adopted for

the study is mentioned in !his chapter+ )hich deals )ith the research desi$n+ sources of data+ data collection+ population 8 sample+ processin$ 8 ta(ulatin$ procedures" 919 R"."ar!( +".i5n Research desi$n means an overall frame)ork for the activities to (e taken durin$ the course of a research study" It ena(les the )ay of research providin$ the tools 8 techni7ues for the data collection 8 analysis 8 samplin$ plan to (e follo)ed" =enerally research desi$n descri(es the $eneral plan for collectin$ analyAin$ 8 evaluatin$ data after identifyin$" It is an inte$rated system that $uides the researcher in formulatin$+ implementin$ 8 controllin$ the study conceived so as to o(tain ans)ers to research 7uestions 8 to control variance" Both analytical 8 descriptive methods have (een used to attain the overall o(<ectives" &irstly+ it specifies the sources 8 type of information relevant to research 7uestion+ secondly it specifiesK the data" !hus+ a research desi$n specifies various methods 8 procedures for ac7uirin$ the information includin$ from )hich sources 8 (y )hat procedure it is o(tained" 916 S ur!". ) +a$a After definin$ the research desi$n+ ho) the )ork comes to define the sources of relevant data for the research study" =enerally+ 0econdary data are sources of this study" %n the other hand secondary data are those data that are collected (y someone else or used already 8 made availa(le to other in the form of pu(lished statistics such as annual reports+ periodicals+ ne)spapers+

ma$aAines etc" once a primary data is used+ it losses its ori$inality 8 (ecomes secondary" !his study is mainly depends on the use of secondary data that consists of annual reports of the concerned (ank" 5o)ever (esides the annual reports various other sources of data have also (een used for the purpose of the study plan documents+ ne)spaper+ ma$aAine+ economic <ournals+ NRB reports etc" similarly+ a structured intervie) 7uestionnaire also has (een 91< P ,u-a$i n B Sa#,-" Population or universe refers to the industries of the same3nature of its service 8 product" It is the collection or the a$$re$ate of o(<ects or the set of results of an operation" %n the other hand sample means the representative parts of population selected from it )ith the o(<ectives of investi$atin$ its properties" !hus+ a sample is <ust a portion of the population selected )ith a vie) to dra) conclusions a(out the population under study" In conte4t of Nepal+ -F commercial (anks are in operation In data" !hese t)enty five (anks are re$arded as population" But+ it is not possi(le to study all data related )ith these t)enty five (anks" 5ence t)o (anks have (een taken as sample from the )hole population i"e" t)enty five (anks" !he sample (anks are as follo)s 3 Na(il Bank Ltd" Nepal Investment Bank Ltd" 91= Sa#,-in5 Pr !"+ur"

!he selection procedure of the sample is purposive it is not random" !he key assumptions for the section are as follo)s ?" !)o (anks )ere esta(lished in around the same date" 0o+ it is )ould (e interested to kno) )hich (anks performed )ell as compared to another on their e7ual operation period" -" 0hare capital structure of these t)o (anks are same" !his factor also helps to select theses (anks as sample (ank to kno) ho) the performance of the (anks affects (y forei$n investment" 91@ Da$a Ana-y.i. Pr !"+ur" !o achieve the o(<ectives of the study+ the collected data are cate$oriAed+ ta(ulated+ processed 8 analyAed usin$ different financial tools like li7uidity+ assets mana$ement+ risk ratio+ profita(ility alon$ )ith statistical tools like mean+ standard deviation+ coefficient of variation+ *arl PearsonBs coefficient of correlation are adopted in the study" Calculated results )ere ta(ulated under different headin$s the o(<ectives to compare )ith each other 8 their si$nificance carried out to interpret the result" 91C Da$a Ana-y.i. T -. 6ata analysis refers to the analyAin$ the data in order to determine the inherent facts or meanin$s from the ta(ulated data+ presentation 8 analysis of data is the care of the research )ork" 6ata that has (een collected are first presented in systematic manner in ta(ular forms 8 then analyAed (y applyin$ different financial 8 statistical tools to achieve the o(<ectives of the study" !he tools applied are as follo)s 91C14 D".!ri,$iv" Ana-y.i.

In !his analysis the relationship (et)een accountin$ fi$ure is analyAed" !o compare a firmBs financial performance 8 status to that of other firmBs+ or itself over time of period 8 to trace out the stren$th 8 )eaknesses" &ollo)in$ financial ratios are calculated 8 analyAed" 91C1414LiDui+i$y Ra$i Li7uidity ratios are used to <ud$e a firmBs a(ility to meet short3tern o(li$ation if a company" #nder this ratio the follo)in$ ratios are calculated" a1 NRB ba-an!" $ total +", .i$: NRB has made the Commercial Banks to deposit certain fund of the Commercial Bank in the central (ank )hich is chan$in$ time to time as the demand of the time" !he ratio is calculated as follo)ed NRB (alance to total deposit ratio R NRB deposit : total deposit b1 T $a- -iDui+ )un+ $ $ $a- +", .i$: !otal li7uid fund to total deposit ratio is the indication of the short term o(li$ation capacity of the demand of the depositor money" hi$her ratio sho)s the hi$her capacity of payment on demand of the money and vice versa" )e have+ !otal li7uid fluid to total deposit R total li7uid fund : total deposit 91C1417 A!$ivi$y Ra$i &A.."$. Mana5"#"n$ Ra$i / Activity ratio measures the efficiency of the (ank to mana$e its asset in profita(le and satisfactory manner" A commercial Bank must mana$e its asset properly to earn hi$h profit" #nder in this research study+ deposit collection and investment procedure of the selected (ank is also e4plained )ith the help of activity ratio" #nder in this chapter follo)in$ ratios are analyAed" a1 L an B a+van!". $ $ $a- +", .i$:

!his ratio measures the e4tent to )hich the (anks are successful to mo(iliAe their total deposit on loan and advances" Loan and advances are outside asset )hich yield profit to the (ank" Increment of loan and advances is the main tar$et of all Commercial Banks" 0o hi$her the ratio (etter is the mo(iliAation of the funds" We have+ Credit to total deposit R loan and advances : total deposit b1 T $a- Inv".$#"n$ $ A Commercial $ $a- +", .i$: Bank mo(iliAes its deposits (y investin$ its funds in

different securities issued (y $overnment and other financial institution" in this ratio is calculated to kno) ho) the (anks are mo(iliAin$ their deposit in the investment of the various securities" A hi$h ratio indicates the success in mo(iliAin$ the funds in securities" We have+ !otal investment to total deposit R total investment : total deposit !1 Inv".$#"n$ n +",riv"+ sector to $ $a- +", .i$ ra$i : NRB has directed all the commercial (anks to e4tend minimum 3 sector in order to contri(ute to the national economy" We have+ Investment in deprived sector to total deposit ratioRInvestment in deprived sector: total deposit +1 Inv".$#"n$ n ,ri ri$y ."!$ r $ $ $a- +", .i$ ra$i : 1ffective from -..G:.@+ investment in priority sector shall not (e compulsory for the commercial (anks" But the CBs should continue investin$ in those sectors for providin$ (ankin$ service to poor communities of total loan and advances (includin$ (ills purchased and discounted) to the deprived

and (ack)ard areas for overall economic We have+

development

(y

channelin$

credit to more productive and employment oriented areas" Investment in priority sector to total deposit ratioR Investment in priority 0ector: total deposit "1 Inv".$#"n$ n )inan!ia- in.$i$u$i n $ $ $a- +", .i$ ra$i : Commercial Banks have various options to mo(iliAe their funds" Credit to financial institution is one of them" But from the vie) point of profit commercial (anks avoid to e4tent loan on this area" 5o)ever it has to invest certain portion of their total credit outstandin$ to this sector" We have+ Inv" on financial institution to institution:total deposit )1 Inv".$#"n$ n .(ar".E +"b"n$ur". an+ b n+. $ $ $a- +", .i$ Ratio Commercial (anks use their fund (y makin$ investment in different sector" !hey make investment in $overnment securities+ de(entures and (onds" It is the total amount that the (ank mo(iliAes" !his is the asset that the commercial (ank mo(iliAes in order to $et the profit" We have+ Investment on shares+ de(entures and (onds to total deposit ratio R Inv" on shares+ de(entures 8 (onds: total deposit 51 L an - .. ra$i : Loss of loan is occurred )hen the de(torBs fail to pay their loan" Loss of loan is not only the default of de(torBs (ut it is (ecause of the failure of recovery of loan (y the (ank" Ne$li$ence in its part makes a ne$ative impact on the earnin$s and capital of a (ank very (adly" =reater loan loss provision is made hi$h income statement if hi$h loss is e4pected" But this )ill lead to total deposit ratioR Inv" on financial

lo) profit and possi(le losses that produce lo) increase or decrease in capital" !he loan loss ratio sho)s ho) efficiently the (ank mana$es its loan and advances and+ makes effort for timely recovery of loan" We have+ Loan loss ratio R loan loss provision : loan and advance" 91C1419Ri.* Ra$i Risk ratio measures the risk associated )ith the (ankin$ varia(les" A (ank raise capital accepts deposit and filially $rant loan" !hese entire thin$s come alon$ )ith the risk" A (ank must consider the risk associated )ith it" 5i$her the ratio hi$her )ill (e the profit and vice versa" #nder this ratio follo)in$ ratios are analyAed a1 Cr"+i$ ri.* ra$i : !his ratio measures the possi(ilities that loan )ill not (e repaid or that investment )ill deteriorate in 7uality of $oin$ into default )ith conse7uently loss to the (ank" Accordin$ to definition+ credit risk ratio is e4pressed as the percenta$e of non3performin$ loan to total loan and advances" We have+ Credit risk ratio R total loan and advances : total assets b1 In$"r".$ ri.* ra$i : !he possi(ility of loss due to chan$e in interest rate is kno)n interest rate risk" !here is hi$her de$ree of risk related )ith interest rate" We have+ Interest rate risk ratio R interest sensitive asset : interest sensitive lia(ilities !1 Ca,i$a- ri.* ra$i : Capital risk ratio measures (anks ? a(ility to attract deposits and inter (ank funds" It also determines the level of profit a (ank can earn if (anks choose to take hi$h capital risk and its R%1 )ill (e hi$her and vice versa" We have+

Capital risk ratio R share capital : risk )ei$hted assets 91C1416 Pr )i$abi-i$y Ra$i Profita(ility ratio measures the overall (ankin$ operation of the company in re$ards to the profit" Profita(ility ratio is determined (y the financial institution to find out their profit earnin$ capacity on various kinds of fundss they employed" Profit indicates the efficiency of the (ank" A (ank can make the profit throu$h the sound lendin$ policy and the 7uality of service it provides" 5i$her is the profit ratio hi$her )ill (e the efficiency of the (ank" &ollo)in$ are the some profita(ility ratio studied in this report" a1 R"$urn n - an an+ a+van!".: Return on loan and advance ratio indicates ho) efficiently the (ank has utiliAed its resources in form of loan and advances" !his ratio is calculated as Return on loan and advances R Net profit : Loan and advances b1 R"$urn n $ $a- ? r*in5 )un+ ra$i : !his ratio sho)s the overall profita(ility of all )orkin$ fund i"e" total assets+ it is also kno)n as Return on Assets (R%A)" A firm has to earn satisfactory return on assets of )orkin$ fund in order to provide lon$3term service" !his ratio is calculated as R"$urn n $ $a- ? r*in5 )un+. ra$i R Net profit : total )orkin$ fund !1 T $a- In$"r".$ "arn"+ $ $ $a- u$.i+" a.."$.: !his ratio measures the capacity of the firm for earnin$ interest throu$h proper utiliAation of outside assets" 5i$her ratio sho)s die efficiency of usin$ outside assets to earn interest" !his ratio can (e calculated as T $a- In$"r".$ "arn"+ $ $ $a- u$.i+" a.."$. R total interest earned : !otal %utside assets

C(a,$"r IV Da$a Pr"."n$a$i n an+ Ana-y.i.


!his chapter >6ata presentation and Analysis> is an important part of the study" 5ere+ the calculated data are interpreted and analyAed to fulfill the o(<ectives of this research" #nder !his chapter various financial ratios are used )hich are related to analyAe the investment policy of the selected (anks" !he financial indicators of selected (anks are compared )ith the help of statistical tools i"e" mean+ 0"6+ C"9 etc" 614 LiDui+i$y ra$i Li7uidity ratio measures the a(ility of (anks to meet the investment purposes" A commercial (ank must maintain its satisfactory li7uidity positron to meet the credit need of the customer also" Banks have to maintain enou$h li7uidity (ecause they have to meet the demand of deposits+ )ithdra)als+ pay maturity etc" 61414 NRB ba-an!" $ $ $a- +", .i$ ra$i NRB has directed all the commercial (anks to deposit certain percenta$e of total deposit In NRB (alance" !he ratio is calculated as NRB (alance to total deposit R NRB deposit: total deposit Tab-" 9

NRB (alance to total deposit ratio ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 C"9D Na(il Bank J"JE/ H"?F/ -"GJ. ?"JHF H"GG. E"//F ?"/?F HG"/E Investment Bank F"J@J H"GEH F"HGH @".JE F"JH? F"/?/ ?"-F@ -?"-F (0ource anne4ure Al) In the a(ove ta(le the ratio of t)o commercial (anks are o(tained from anne4ure Al" !hrou$h !his ta(le it is analyAed the short term o(li$ation capacity of t)o (anks" NRB has directed all the commercial (anks to deposit certain percenta$e of total deposit in the NRB (alance" 6ue to the chan$es in directives from time to time it seems fluctuatin$ to maintain the li7uidity position of the selected (anks" &rom the a(ove ta(le it has found that Na(il Bank has maintained avera$e E"//FD as NRB (alance out of its total deposit" It has fluctuatin$ trend of li7uidity position" It has maintained hi$hest ratio of J"JE/D In the year -..H and lo)est ratio of ?"JHFD in the year -..G" !he 0"6 of Na(il Bank is ?"/?F and C"9 is HG"/ED" Investment (ank has maintained an avera$e ratio of F"/?/D as NRB (alance" It also has fluctuatin$ trend of li7uidity position" It has maintained 5i$hest ratio of @".JED in the year -..G and lo)est ratio of H"GEHD in the year -..F" !he 0"6 of NIBL is ?"-F@ and C"9 is -?"-FD" It is clear from the a(ove ta(le that the selected (anks have follo)ed the NRB re7uirement" !he mean ratio of NIBL is hi$her than that of Na(il Bank" It indicates that NIBL has maintained more li7uidity in NRB (alance than that of Na(il Bank" NIBL has more consistency and uniformity to maintain li7uidity position as it has lo)er ratio of C"9" i"e" -?"-FD"

61417 T $a- -iDui+ )un+ $ $ $a- +", .i$ ra$i !he capacity of short term o(li$ation of the (ank is measured (y the ratio of total li7uid fund to total deposit" 5i$her ratio sho)s the hi$her capacity of payment on demand of money and vice versa" !he ratio is calculated asK !otal li7uid fund to total deposit R total li7uid fund : total deposit Tab-" 6 Calculation of mean+ 0"6 and C"9 of !otal li7uid fund to !otal deposit !otal li7uid fund !o !otal deposit ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 C"9D Na(il Bank ?H".H/ @"FH? ?."??E ?-"--F @"H?? ?."JJ@ -"HE@ --"@J Investment Bank ?-"?// ?E"EEJ ?."E@J ?-"G?F ??"HF- ?-".?@ ?"?HH /"F(0ource anne4ure A-) Li7uid fund is the amount kept (y (ank )hich is e7uivalent to the cash" Li7uid fluids are re7uired to meet the short !erm o(li$ation and to $ain the ima$e and satisfaction of the customers" NRB has directed all the commercial (anks to maintain minimum FD CRR )hich is chan$in$ from time to time" NRB has decreased its minimum re7uirement from GD to FD" 5ence+ the selected (anks have decreased the li7uidity ratio so as to increase the amount of loan and advances" &rom the a(ove ta(le it has found that Na(il Bank has maintained avera$e ?."JJ@D as li7uid fund of its total deposit" It has fluctuatin$ trend of li7uidity position" It has maintained hi$hest ratio of ?H".H/D in the year -..H and lo)est ratio of @"H??D in the year -..@" !he 0"6 of Na(il Bank is -"HE@ and C"9 is --"@JD"

Investment (ank has maintained an avera$e ratio of ?-".?@D as li7uid fund" It also has fluctuatin$ trend of li7uidity position" It has maintained hi$hest ratio of ?-"?//D in the year -..H and lo)est ratio of ?."E@JD in the year -..J" !he 0"6 of N!BL is ?"?HH and C"9 is /"F-D" It is clear from the a(ove ta(le that the selected (anks have maintained the minimum re7uirement set (y the NRB" !he mean ratio of Na(il Bank is ?."JJ@D and that of NIBL is ?-".?@D" !hat mean NIBL has maintained hi$her level of li7uidity position than that of Na(il Bank" C"9 of NIBL is lo)er than !hat of Na(il Bank )hich represents more consistency and uniformity in li7uidity purposes than that of Na(il Bank" 617 A!$ivi$y ra$i &A.."$. Mana5"#"n$ Ra$i / A commercial (ank must (e a(le to mana$e its assets very )ell to earn 5i$h profit+ to satisfy its customers and for its o)n e4istence" Assets mana$ement ratio measures ho) efficiently the (ank mana$es the resources it mo(iliAes" #nder !his research study deposit collection and investment procedure of the selected (ank is also e4plained )ith the help of activity ratio" !he follo)in$ ratios measured the assets mana$ement a(ility of the NIBL and Na(il Bank in comparisons" 61714 L an B a+van!". $ $ $a- +", .i$ ra$i !his ratio measures the a(ility of the (ank to mo(iliAe theirB total deposit on loan and advances" Increase in loan and advances results increase in profit of the (anks" 5ence+ commercial (anks tar$et to

increase the loan and advances to yield hi$her profit" 5i$her ratio indicates (etter utiliAation of fund" !he ratio is calculated asK Loan 8 advances to total deposit Rloan advances: total deposit Tab-" < !otal Loan 8 advances to total deposit ;ear (mid -..H -..F -..J -..G -..@ mean 0"6 C"9D

,uly) Na(il Bank F@".JE FJ"/JF GJ"JJ. JG"EJH JG".@@ JF"--@ @".EJ ?-"EInvestment GH"GHH JE"JGG GE"EE- J/"J-F G-"FJ. G."G@@ H"E/E J"-? (ank (0ource anne4ure AE) !he ta(le sho)s that Na(il Bank has an avera$e mean ratio of JF"--@D" 6urin$ F years of period the hi$htest investment of Na(il Bank in loan and advances is GJ"JJ.D in &; -..J and lo)est ratio is FJ"/JFD in the year -..F" 0"6 of !his (ank is @".EJ and C"9 is ?-"E-D" N!BL has an avera$e mean ratio of G."G@@D" It has hi$hest ratio of Loan and advances is GH"GHHD in the year -..H and lo)est ratio of JE"JGGD in the year -..F" 0"6 of the concern (ank is H"E/E and C"9 is J"-?D" It is clear from the ta(le that NIBL has invested more deposits in loan and advances than that of Na(il Bank" It sho)s that C"9 of Na(il Bank is ?-"E-D and that of NIBL is J"-?D" 0ince NIBL has lo)er ratio of C"9 it indicates more consistency in !his re$ard" NIBL seems stron$er than Na(il Bank to advance loan to the market" &rom this )e can conclude that NIBL has accepted 5i$her risk to survive in the market"

By the end of mid3,uly -..@+ loan and advances to total deposit ratio of overall commercial (anks increased to JG"@HD from F/"FED in the last year" 5i$her $ro)th rate of loans and advances compared to deposit mo(iliAation contri(ution to increase in this ratio"

L an an+ a+van!". $ $ $a- +", .i$ ) Nabi- Ban*

25,000

s n o l i M

20,000

15,000 Loan & advances 10,000 Total deposit

5,000

0 2003/04 2004/05 2005/06 2006/07 2007/08

L an an+ a+van!". $ $ $a- +", .i$ ) NIBL Ban*

61717 T $a- inv".$#"n$ $ $ $a- +", .i$ ra$i !he main o(<ective of the commercial (anks is to make more profit" !hey make investments in different securities issued (y $overnment and other financial institutions" !he ratio is calculated to kno) the efficiency of the commercial (anks in utiliAin$ the availa(le deposits in different investment alternatives" !he ratio is calculated asK !otal investment to total deposit R total investment : total deposit

Tab-" = Ca-!u-a$i n ) #"anE S1D an+ C1V ) T $a- inv".$#"n$ $ $ $a- +", .i$

!otal investment to total deposit ;ear (mid -..H -..F -..J

-..G

-..@

mean

0"6

C"9D

,uly) Na(il Bank HH"@H/ H.".?. E."-H. E?"/HJ E@"EJ/ EG".@E F"//F ?J"?G Investment -?"F-E EE"F?F -G"F// -/"J.- -J"FJJ -G"GJ? H"E@E ?F"G/ Bank (0ource anne4ure AH) !he a(ove ta(le sho)s that the ratio of Na(il Bank is in decreasin$ trend from -..H to -..G (ut it has increased durin$ &; -..@" !he mean ratio of Na(il Bank is EG".@ED" !he 0"6 is F"//F and C"9 is ?J"?GD" It has the 5i$hest ratio of investment of HH"@H/D In the year -..H and lo)est ratio of investment of E."-H.D in the year -..J" !he mean ratio of NIBL is only -G"GJ?D and ratios are also in fluctuatin$ trend durin$ F years of period" It has the hi$hest ratio of investment of EE"F?FD in the year -..F and lo)est ratio of investment of -?"F-E.D in the year -..H" It is clear from the a(ove ta(le that Na(il Bank has 5i$her mean ratio than that of NIBL" C"9 of NIBL is lo)er than that of Na(il Bank !his represents more consistency of investment procedure of NIBL" It seems that NIBL is more uniform in investment procedure (ut on the other hand Na(il Bank has more investment alternative that that of NIBL as it has hi$her mean ratio" Inv".$#"n$ $ $ $a- +", .i$ ) Nabi- Ban*

Inv".$#"n$ $ $ $a- +", .i$ ) NIBL

61719 Inv".$#"n$ n +",riv"+ ."!$ r $ $ $a- +", .i$ ra$i

!he (anks are operated not only for profit motive (ut also for social )elfare" An effoit is made to find out ho) much of amount the selected (anks have invested in the deprived sector" !he 5i$her ratio sho)s the hi$her social concern of the selected (anks" !he ratio is calculated as+ Investment in deprived sector to total deposit ratioR Investment in deprived sector:total deposit Tab-" @ Investment on deprived sector to total deposit ratio ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 c"v D Na(il Bank ?"/@. ?"@J- -"-.E ?"@G? ?"@HE ?"/F- ."?F. G"G? NIBL ?"@G- ?"FJJ ?"/@F ?"/E? -"?.? ?"@/? ."-.. ?."F/ (0ource anne4ure AF) With re$ards to direct lendin$ to the deprived sector NRB has (een chan$in$ the directives from time to time (y issuin$ various circulars" As per the NRB directives+ commercial (anks )ere re7uired to direct G percent of total loan portfolio in the deprived sector for the year -..E:.H+ JD for the year -..H:.F+ HD for the year -..F:.J+ ED for the year -..J:.G+ ED for the year -..G:.@" from the year -..@:./ on)ards commercial (anks are re7uired to e4tend minimum ED of total loan and advances (includin$ (ills purchased and discounted) to the deprived sector" 6ue to the chan$es in NRB directives+ the a(ove comparative ta(le reveals that the selected (anks have fluctuatin$ trend of investment in deprived sector" Na(il Bank has the 5i$hest ratio of -"-.E in &AB -..J and the lo)est ratio of ?"@HE In &:; -..@" 0imilarly+ the ratio is not

found consistent in any year of study period" NIBL has hi$hest ratio of -"?.? in &:; -..@ and the lo)est ratio of ?"FJJ in &:; -..F" Comparin$ the mean ratio of investment on deprived sector of total deposit Na(il Bank has mo(iliAed hi$her ratio of deposits in deprived sector than that of NIBL" Na(il Bank has mean ratio of ?"/F- and that of NIBL has ?"@/?" C"9 of Na(il Bank is G"G?D )hich is less than that of NIBL i"e" ?."F/D" !he lo)er percenta$e of C"9 of Na(il Bank sho)s consistency and uniformity in investment purposes than that of NIBL" 5i$her mean ratio of Na(il Bank sho)s that it has accepted the risk and i$nored the profit and also $iven priority to social )elfare" !he deprived sector credit of overall commercial (anks increased (y E."-.D and reached to Rs" J@H-". million in mid ,uly -..@ as compared to Rs" F-FF"?E million in mid3,uly -..@" !he ratio of deprived sector credit to total credit recorded at E"-HD in the current fiscal year" Last year it )as -"/GD" 61716 Inv".$#"n$ n ,ri ri$y ."!$ r $ $ $a- +", .i$ ra$i Commercial (anks have various options to mo(iliAe their fluids" Credit to priority sector is one of them" But from vie) point of profit commercial (anks avoids to e4tent loan on this sector" 5o)ever+ they make certain portion of their investment in this sector" !he ratio is calculated as" Inv" in priority sector to total deposit ratioR Inv" in priority sector : total deposit Tab-" C

Investment on priority sector to total deposit ratio ;ear (mid -..H -..F -..J -..G -..@

mean 0"6

C"9D

,uly) Na(il Bank -"G?J J".-F F"J@/ E"/F- E"@E@ H"HHH ?"E@E E?"?? NIBL J"-EH H"@J/ H"/FF E"JJ? ?"/@E H"EH. ?"J.? EJ"/. (0ource anne4ure AJ) As per the NRB directives+ commercial (anks )ere re7uired to direct G percent of total loan portfolio in the priority sector for the year -..E:.H+ JD for the year -..H:.F+ HD for the year -..F:.J+ -D for the year -..J:.G+ -D for the year3 -..G:.@" 1ffective from -..@:./+ investment in priority sector shall not (e compulsory for the commercial (anks" 6ue to the decreasin$ trend of minimum percenta$e re7uirement set (y the NRB in investment policy of priority sector lendin$+ the selected (anks have decreasin$ trend of investment in such areas" !he a(ove comparative ta(le reveals that Na(il Bank has the hi$hest ratio of J"-.F In &:; -..F and the lo)est ratio of -"G?J in &:; -..H" NIBL has hi$hest ratio of J"-EH in &:; -..H arid the lo)est ratio of ?"/@E in &:; -..@" Comparin$ the mean ratio of investment on priority sector of total deposit+ Na(il Bank has mo(iliAed hi$her ratio of deposits in priority sector than that of NIBL" Na(il Bank has mean ratio of H"HHH and that of NIBL has H"EH." C"9 of Na(il Bank is E?"??D )hich is less than that of NIBL i"e" EJ"/.D" !he lo)er percenta$e of C"9 of Na(il Bank sho)s hi$her consistency and uniformity in investment purposes than that of NIBL"

It is clear from the a(ove ta(le that Na(il Bank is socially concerned as it has i$nored the profit and accepted risk (y lendin$ hi$her amount to the priority sector than that of NIBL" 0u(se7uent decision of NRB to phase out priority sector lendin$+ it )ill not (e compulsory to provide such loan from fiscal year -..@:/" By the end of mid ,uly -..@+ total priority sector credit of overall commercial (anks reached to Rs" -J/F"H. million" !he inclusion of financial fi$ures of A6B:N in commercial (ank resulted to increase si$nificant proportion of priority sector credit to total credit in the current fiscal year" Conse7uently+ it is recorded a ?-"GFD of total outstandin$ loan" 6171< Inv".$#"n$ n )inan!ia- in.$i$u$i n $ $ $a- +", .i$ ra$i !he ratio reveals that the (anks are successful in mo(iliAin$ their total deposits on different types of financial institutions to ma4imiAe the income" 5i$h ratio indicates the (etter mo(iliAation of fund as investment on financial institution" !he ratio is calculated as+ Inv" on financial institution to total deposit ratioR Inv on financial institution:total deposit" Tab-" 8 Investment on financial institution to total deposit ratio ;ear(mid ,uly) -..H -..F -..J -..G Na(il Bank -"JGG F/".GE ."... ?"@J? NIBL ?."J.- JE"JGG ."... ."HHH (0ource anne4ure AG) -..@ ."... ."EHE mean 0"6 C"9D ?-"G-- -F"/EG -.E"@@ ?F".?E -G"FG? ?@E"JH

!he central (ank has not made any strict rules to the CBs to make investment in financial institutions" 5ence+ loans to private sector al)ays dominated on the overall outstandin$ fi$ure of loans 8 advances" %f the total outstandin$ loan 8 advances of Rs" -?.EE?"J '+ claim on private sector re$istered /H"G?D follo)ed (y -"J?D to financial institutions and -"J.D to $overnment or$aniAations" !he selected (anks are free to make decision )hether to make investment in financial institutions or not" !hat is )hy the investment pattern of the selected (anks seem fluctuatin$" !he a(ove comparative ta(le reveals that Na(il Bank has fluctuatin$ trend of investment in financial institution" It has not made investment in these sectors durin$ &:; -..J and &:; -..@" !he 5i$hest portion it has invested in these sectors is F/".GE in &:; -..F" 0imilarly NIBL has not made investment in &:; -..J and the hi$hest portion it has invested in these sectors is JE"JGG In &:; -..F" !he avera$e mean ratio of Na(il Bank is ?-"G-- and that of NIBL is ?F".?E" It sho)s that in an avera$e NIBL has made hi$her investments in financial institutions than that of Na(il Bank" C"9 of Na(il Bank is -.E"@@D and that of NIBL is ?@E"JHD" !he lo)er C"9 of NIBL indicates that NIBL is more consistent in investment policy than that of Na(il Bank" 6171= Inv".$#"n$ n .(ar".E +"b"n$ur". an+ b n+. $ $ $a- +", .i$ ra$i Investment on shares+ de(entures and (onds to total deposit reflects the e4tent to )hich the selected (anks are successful to mo(iliAe their total

deposit on purchase of shares and de(entures of other companies to $enerate income and to utiliAe the e4cess fund" 5i$her ratio indicates more portion of investment on shares and de(entures out of total deposit" !he ratio is calculated as+ Investment on shares+ de(entures and (onds to total deposit ratioRInv" on shares+ de(entures 8 (onds: total deposit" Tab-" 4; Investment on shares+ de(entures and (onds to total deposit ;ear (mid -..H -..F -..J -..G -..@ mean 0"6

C"9D

,uly) Na(il Bank ?"JF- ?"F-E E"??@ ."FE/ ?"--/ ?"J?- ."/HJ F@"JF NIBL ."?GF ."?-? ."?-H ."?@J .".G- ."?EJ .".HJ EE"/(0ource anne4ure A@) !he a(ove comparative ta(le sho)s fluctuatin$ trend of ratios of selected (anks" Na(il Bank has hi$hest ratio of E"??@ in &:; -..J and the lo)est ratio of ."FE/ in &:; -..G" !he avera$e mean ratio of Na(il Bank is ?"J?E" 0"6 of the same (ank is ."/HJ and C"9 is F@"JFD" N!BL has the hi$hest ratio of ."?@J in &:; -..G and the lo)est ratio of .".G- in &:; -..@" !he avera$e mean ratio of the (ank is ."?EJ" 0"6 of NIBL is .".HJ and C"9 is EE"/-D" !he a(ove comparative ta(le sho)s that the mean ratio of Na(il Bank is hi$her than that of NIBL" It has hi$her ratio of C"9 of F@"JFD than that of NIBL" !he

Lo)er C"9 of NIBL sho)s more consistency of investment procedure of the (ank than that of Na(il Bank" !he selected (anks have made more investment only on $overnment securities durin$ the F years of study period" !hey have Aero investment of $overnment (ond+ $overnment non3financial institution and other non3financial institutions" !he ma<or portion of investment of selected (anks includes the risk free assets like $overnment securities+ treasury (ills and some investments in forei$n (anks+ local (anks and mutual fluids" Investment on shares+ de(entures and (ond of other companies is not satisfactory due to 5i$h risk factor and some re$ulations of NRB" Like NRB has prohi(ited (anks from investin$ in shares and securities not listed in stock e4chan$e" &urther+ (anks are prohi(ited from investin$ in shares and securities of other (anks and financial institutions licensed (y NRB" 6171@ L an - .. ra$i When the de(tors are una(le to pay the loan the loss of loan occurred" It occurs not only (ecause of de(tors? failure (ut also (ecause of failure of recovery of loan (y (ank" If hi$her loss is e4pected then $reater loan loss provision is made" 5i$her ratio leads to lo) profit and indicates lo) efficiency of the (ank" !he ratio is calculated asK Loan loss ratio R loan loss provision : loan and advances Tab-" 44

Ca-!u-a$i n ) #"anE S1D an+ C1V ) L an - .. ra$i Loan loss ratio ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 C"9D Na(il Bank H"FE- H"-G@ E"E?? -"GEE -"-J? E"H-E ."/GF -@"HG Investment (ank -"F.J -"@H. E"?-/ E".F. -"G?J -"@H@ ."-F- @"@F (0ource anne4ure A/) NRB has directed all the commercial (ank to classify loan into four different cate$ories on the (asis of loan overdue period and as per the present norms of NRB C"Bs need to maintain loan loss provision of ?D for pass loan" -FD for su(3standard+ F.D for dou(tful and ?..D for loss on the (asis classification of loan" !he ta(le sho)s that Na(il Bank has an avera$e mean ratio of E"H-ED" !he ratios are in decreasin$ trend throu$h out the years" !he 5i$hest loan loss ratio of the (ank is H"FE-D in the year3 -..H" 0"6 of the (ank is ."/GF and C"9 is -@"HGD" N!BL has an avera$e mean ratio of -"@H@D" !he ratios are in increasin$ trend from &; -..H to &; -..G and it decreased in the year -..@" It has hi$hest loan loss ratio of E"?-/D in the year -..J" 0"6 of the (ank is ."-Fand C"9 is @"@FD" It is clear from the a(ove comparative ta(le that Na(il Bank has hi$her mean ratio man mat of NIBL" It means Na(il Bank can earn more profit than NIBL" Na(il Bank has hi$her percenta$e of C"9" 619 Ri.* ra$i

Risk ratio measures the level of risk" Risk al)ays sticks )ith return" 5i$her the risk+ 5i$her )ill (e the return" Bank has to take 5i$h risk if it e4pects 5i$h return on its investment" 5ence+ (ank has to accept and mana$e 5i$h risk so as to achieve 5i$h return" 61914 In$"r".$ ra$" ri.* ra$i !he possi(ility of loss due to chan$e in interest rate is kno)n as interest rate risk" !here e4ists hi$her de$ree of risk related )ith interest rate" !his ratio is calculated asK Interest rate risk ratio R interest sensitive assets:Interest sensitive lia(ilities Tab-" 47 Ca-!u-a$i n ) #"anE S1D an+ C1V ) In$"r".$ ra$" ri.* ra$i Interest rate risk ratio ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 C"9D Na(il Bank ?..". .. ?.."JJH ?.E"?E J F@"-?J FG"@@- @E"/@. -E"G.? -@"-Investment (ank @E".H F J@"GG. GG"GJH GH"?@G GG"HG. GJ"-HG F"-H@ J"@@ (0ource anne4ure A?.) !he (ank has removed the provision of maintainin$ avera$e interest rate spread (elo) ! percent since -..E:.H" In the conte4t of the (e$innin$ of institutional reform pro$ramme of the $overnment o)ned commercial (anks+ the provision of interest rate spread )as phased out in order to let the market forces determine it competitively" 5o)ever+ the spread rate has not come do)n as e4pected despite the competition amon$ the commercial (anks"

!he a(ove ta(le sho)s that the mean ratio of Na(il Bank is @E"/@.D "It has fluctuatin$ trend of interest risk ratio" 0"6 and C"9 of the (ank is -E"G.? and -@"--D respectively" !he avera$e mean ratio of NIBL is GJ"-HGD" !he trend of ratio of the (anks is iii fluctuatin$ trend" NIBL has 0"6 of F"-H@ and C"9 of J"@@D" !he avera$e ratio of Na(il Bank is hi$her than that of NIBL" Na(il has ?..D interest rate risk in the &; -..H and more than ?.. percent in the year -..F and -..J" !his indicates that Na(il Bank has hi$her de$ree of interest rate risk and NIBL has moderate level of interest rate risk" 61917 Cr"+i$ ri.* ra$i !he risk (ehind makin$ investment or $rantin$ loan is measured (y credit risk ratio" Actually credit risk ratio sho)s the proportion of non performin$ assets in total loan and advances of a (ank" But due to unavaila(ility of related data+ the ratio is calculated )ith the help of loan and advances and total assets" !he ratio is calculated asK Credit risk ratio R total loan and advances : total assets Tab-" 49 Ca-!u-a$i n ) #"anE S1D an+ C1V ) Cr"+i$ ri.* ra$i Credit risk ratio ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 C"9D Na(il Bank HG"?HE H/"J-? JE"H-/ F@"EJG FG"HJ? FF"-.H J"J@@ ?-"?? Investment (ank JF"J/H FF"EJ- JH"-E- J?"G@- JH"H.- J-"-/H H"?-F J"J(0ource anne4ure A??)

!he a(ove ta(le sho)s the mean ratio of Na(il is FF"-.HD and the same of NIBL is J-"-/HD" Comparatively+ NABIL BAN* has lo)er risk ratio than that of NIBL In each year durin$ F years of period" It indicates that NABIL BAN* has lo) possi(ility of loss than that of NIBL" 616 Pr )i$abi-i$y ra$i Profita(ility ratio measures the overall (ankin$ operation of the company in re$ards to the profit" Profita(ility ratio is determined (y the financial institution to find out their profit earnin$ capacity on various kinds of funds they employed" A (ank can make the profit throu$h the sound lendin$ policy and the 7uality of service it provides" 5i$her is the profit ratio 5i$her )ill (e the efficiency of the (ank" &ollo)in$ are the some profita(ility ratio studied in !his report" 61614 R"$urn n $ $a- ? r*in5 )un+ Return on total )orkin$ fund measures the relationship (et)een the )orkin$ fluid and the profit of the (ank" Workin$ fund includes the total deposit of the (anks and other (orro)ill$s )hich are taken (y (anks to $ive loan to the customer" !he ratio is calculated asK Return on total )orkin$ mud R net profit : )orkin$ fund Tab-" 46 Ca-!u-a$i n ) #"anE S1D an+ C1V ) R"$urn n $ $a- ? r*in5 )-ui+ Return on total )orkin$ fluid ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean 0"6 C"9D Na(il Bank -"@@/ /"/F/ ?."EHF E"-FH -"G@- F"@HJ E"/EG JG"EF Investment (ank ?"HGE ?"-@H ?"F/. ?"@F- -".@H ?"JFG ."E?F ?/".E (0ource anne4ure A?-)

!he a(ove ta(le sho)s that Na(il Bank has hi$her profit earnin$ capacity than that of NIBL" !he mean ratio of Na(il Bank is F"@HJD and the same of N!BL is only ?"JFGD" It indicates that Na(il Bank has stron$ reputation in the market than that of NIBL" !he trend of ratio of (oth (anks is in fluctuatin$ trend" Na(il Bank has the hi$hest ratio of ?."EHFD in the year -..J and mat of NIBL is only -".@HD in the year -..@" It is clear that Na(il Bank has stron$ earnin$ capacity than NIBL" 61617 R"$urn n $ $a- - an an+ a+van!". Net profit of commercial (anks depends on loan and advances" 0o+ calculation of r Return on total loan and advances is very important to find out the financial condition of the (anks" !he ratio is calculated asK Return on total loan and advances R net profit : loan and advances

Tab-" 4< Ca-!u-a$i n ) #"anE S1D an+ C1V ) R"$urn n $ $a- - an an+ a+van!". Return on total loan and advances ;ear (mid -..H -..F -..J ,uly) Na(il Bank Investment (ank -..G -..@ mean 0"6 C"9D

F"EE? ?G"?/@ ?E"/FG H"@GH H"E.H /"?EE J"..F JF"GF ?"/GE -".@. -"--? -"JJ. -"@G- -"EJ? ."E@G ?J"H.

(0ource anne4ure A?E) !he a(ove ta(le sho)s that Na(il Bank is in $ood condition than that of NIBL as it has hi$her level of mean ratio" !he mean ratio of Na(il Bank is /"?EED and that of NIBL is only -"EJ?D" Althou$h+ amount of loan and advances $ranted and mean ratio of loan and advances to total deposit of NIBL is hi$her return on total loan and advances of Na(il Bank is 5I=51R" 61619 R"$urn n "Dui$y ra$i !he (ank can earn more profit if they mo(iliAe the e7uity capital properly" !he return on e7uity capital measures the e4tent to )hich a (ank is successful to mo(iliAe its capital" !he ratio is calculated asK Return on e7uity ratio R net profit : total e7uity capital

Tab-" 4= Ca-!u-a$i n ) #"anE S1D an+ C1V ) R"$urn n "Dui$y ra$i Return on e7uity ratio ;ear (mid ,uly) -..H -..F -..J -..G -..@ mean Na(il Bank @H"JJ. -/."JJ- E.G"-J F ?-/"-. / ?EG".@ . ?@/"GG Investuieu t (ank E/"FJ. F?"G.- E/"H/@ (0ource anne4ure A?H) F/"EFH JE"J/F F."GJ? 0"6 C"9D ?.?"@- / FE"JJ ??"??J -?"/.

!he a(ove ta(le sho)s that Na(il Bank has an avera$e mean ratio of ?@/"GGFD and the same of NIBL is only F."GJ?D" It indicates that Na(il Bank is more successful in mo(iliAin$ its capital than that of NIBL" It is clear that Na(il Bank has more earnin$ po)er than that of NIBL" Na(il Bank has ma4imum return on earnin$ )hich is pleasin$ to the shareholders and in the case of NIBL it is <ust accepta(le" 61616 T $a- in$"r".$ "arn"+ $ $ $a- u$.i+" a.."$. ra$i !otal interest earned to total outside assets ratio is calculated to kno) the e4tent to )hich the (ank is successful to earn interest income on total outside assets" 5i$her ratio is favora(le as hi$her ratio indicates 5i$her earnin$ po)er of total outside assets of the (anks" !he ratio is calculated asK !otal interest earned to total outside assets ratio R total interest earned : total outside assets

Tab-" 4@ Ca-!u-a$i n ) #"an S1D an+ C1V ) T $a- in$"r".$ "arn"+ $ $ $a- u$.i+" a.."$. ra$i !otal interest earned to total outside assets ratio ;ear (mid -..H -..F -..J -..G -..@ ,uly) Na(il Bank Investment (ank mean 0"6 C"9D

."?E. G"?H? G"?/? J"@F@ J"H@E F"FJ? E".H/ FH"@E J"?HF J"JFH J"E.G J"E@? J"JJ- J"HE. ."--F E"F.

(0ource anne4ure A?F) !he a(ove ta(le sho)s that the mean ratio of Na(il Bank is F"FJ?D and of N!BL is J"HE.D" In an avera$e NIBL has 5i$her earnin$ po)er than that of Na(il Bank" Both (anks have fluctuatin$ trend of ratios (ut NIBL has remained at the same level of JD durin$ F years of period and Na(il Bank has up and do)n ratios" !he 5i$hest ratio of Na(il Bank is G"?/?D in the -..J and that of NIBL is J"JJ-D in the year -..@

61<

C #,ari. n ) )inan!ia- ,"r) r#an!" ) Nabi- ban* an+ NIBL Na(il Bank NIBL Na(il (ank has $iven NIBL has more priority Investment maintain hi$her li7uidity" It has avera$e mean ratio of oil than maintained than

?" Li7uidity ratio

5i$her li7uidity

to Na(il Bank" It has $iven priority to (oth li7uidity

lo)er maintenance and Investment procedure"

-" Activity ratio

li7uidity" It is seen that Na(il NIBL seems more Bank has lo)er avera$e successful in mean ratio deposit mean Investment and ratio to of and advances to total not $ra((ed $rantin$ more loan loan and advances" It has 5i$her investment of opportunities as it has total lo)er avera$e mean ratio of investment to total deposit"

deposit+ from !his )e can conclude that Na(il Bank has $iven more emphasis on Investment than to $rant loan and advances" E" Risk ratio

Interest rate risk of Na(il Loan and advances of (ank is 5i$her (ut it has NIBL is 5i$her hence it lo)er credit risk ratio" has 5i$her credit risk ratio" But it has

lo)er Interest risk ratio"

H" Profita(ility ratio

Return on loan and 6espite of 5i$her ratio advances of Na(il Bank of L8A N!BL has is 5i$her althou$h it has lo)er ratio of return on lo)er ratio of L8A" It is L 8A" clear> that Na(il Bank has adpoted sound investment policy"

In overall NIBL seems stron$ in financial performance than Na(il Bank" But profit earnin$ capacity of Na(il Bank is 5i$her" It sho)s that investment policy of Na(il Bank is more efficient than that of NIBL" Tab-" 4C 61= C #,ari. n ) Inv".$#"n$ , -i!y ) $(" ."-"!$"+ ban* (Rs" in million) Bank 0ector:;ear 6eprived Priority &inancial institution Na(il -..H -JJ"EJF"EJ.". -..F -G?"J @G@"/ @J?J" G ---"?H-/ NIBL -..J -..G -..@ -..H E??"? EJ?"/ HE."- ?H@"E @.E"- GJH"G @/F"@ H/E"/ .". EJ.". .". @H.". -..F -..J ?@."F -@-"/ FJ?"? G.J"E GEE@"J .". -..G EJF"H J/E". @H". -..@ F?H"J H@F"G @E"/

0hares+ de(entures and ---"(onds Profit H?J"-

HH."E ?.H"- -@J"/ ?E"/@ ?E"/@ ?G"GH EF"-F ?G"GH ?F?."G JEF"E JGH ??J"@ ?F-"G -E-"? EF."F F?."H

D",riv"+ ."!$ r: NRB has decreased minimum percenta$e re7uirement of deprived sector lendin$ to ED" But+ it is seen that there is increasin$ trend of investment of the selected (anks" Investment policy of Na(il Bank has

$iven more priority to invest in deprived sector as it has invested hi$her amount in !his sector than NIBL durin$ F years of the study period Pri ri$y ."!$ r: Althou$h NRB has phased out priority sector lendin$ the selected (anks have continued investin$ in this sector" But the ratio of investment in this field of Na(il Bank is hi$her than that of NIBL" It sho)s that Na(il BankBs investment policy is hi$hly concerned to)ard social and economic development of the country" Finan!ia- In.$i$u$i n: Investment in financial institution of the selected (ank is in fluctuatin$ trend" !hey have not made investment durin$ -..J" It sho)s that investment policy of the selected (ank has not $iven emphasis to make investment in this sector" S(ar".E D"b"n$ur". B B n+.: Na(il Bank has $iven more emphasis on investin$ in !his sector than NIBL" Pr )i$ i#,a!$: Investment in each sector of Na(il Bank durin$ F years of the study period is hi$her than NIBL" 5ence+ Profit of the Na(il Bank is comparatively hi$her in each year durin$ F years of the study period than that of NIBL" &rom this )e can conclude that investment policy adopted (y Na(il Bank is more efficient and favora(le from profit point of vie)" 61=14 S"!$ r ?i." L an an+ a+van!". ) Nabi- Ban* an+ NIBL &rom the a(ove ta(le it is clear that Na(il Bank has decreasin$ trend of $rantin$ loan and advances to the a$riculture sector (ut on the contrary NIBL has increasin$ trend of $rantin$ loan" !his concludes that NIBL has

adopted li(eral lendin$ policy to develop the a$ricultural sector so as to contri(ute to develop national economy" NRB has phased out priority sector lendin$ re7uirement (ut Na(il Bank has still continued to $rant loan and advances to minin$ (ut on the contrary NIBL has not sho)n interest to lend to !his sector" It sho)s that Na(il Bank is socially concerned to develop priority sector and enhancin$ national economic development" It is seen from the a(ove ta(le that (oth (anks have $iven more priority to production and service industries as they have $ranted 5i$hest amount as loan and advance to these sectors durin$ five years of study period" &rom !his )e can conclude that the selected (anks have $iven emphasis to earn more profit (y lendin$ more amounts on less risky sectors" !heir motive is to earn profit than to develop (ack)ard communities and to push priority sector" !he investment policy of the selected (ank $ives more emphasis to make more investment on productive sector and to earn more profit from their investment includin$ pu(lic )elfare" 61@ S$a$i.$i!a- Ana-y.i. #nder !his topic follo)in$ statistical tools are calculated ?" -" profit Correlation coefficient (et)een different ratios !rend analysis of deposit+ loan 8 advances+ investments and net

61@14 C rr"-a$i n ! "))i!i"n$ *arl PearsonBs coefficient of correlation is used to find out the relationship (et)een deposit and loan 8 advances+ deposit and total investment+ outside assets and net profit" !he coefficient of correlation is directly calculated in the >'icrosoft 14cel> and Pro(a(le 1rror (P"1r) is calculated usin$ 0tandard 1rror (0"1)" !he pro(a(le error is used to measure the relia(ility and test of si$nificance of correlation coefficient" It is calculated as under

P"1r R ."JGHF40"1" (r) JP"1r RJ4 P" 1r 61@1414 C "))i!i"n$ ) ! rr"-a$i n b"$?""n +", .i$ an+ - an B a+van!". 6eposits and loan and advances are the life (lood of any commercial (anks" !he e4istence of die commercial (anks depends upon the total deposit collected and the total amount $ranted as loan and advances" !he relationship (et)een deposit and loan and advances should (e optimum to $ain profit" Correlation coefficient measures the de$ree of relationship (et)een to varia(les i"e" deposit and loan and advances" In !his analysis deposit is independent varia(le (S) and loan and advances is dependent varia(le (;)" !he main reason of findin$ out of correlation ( r ) (et)een these t)o varia(les is to <ustify )hether deposits are si$nificantly used as loan and advances or not" !he ta(le (elo) sho)s the value of BrB+ Br -B+ Pro(a(le 1rror (P"1r) and J P"1r (et)een deposit and loan and advances of Na(il Bank and NIBL" Tab-" 48 Bank r rP"1r J P"1r

Na(il Bank ."/H?E-E-@- ."@@J.@/F-- .".EHEJ? ."-.J?JH NIBL ."//H./E/-E ."/@@--E ."..EFFE .".-?E?FEG!he a(ove ta(le sho)s that the correlation coefficient of NIBL is ."//H./E/-E and it sho)s positive relationship (et)een deposit and loan and advances" !here is si$nificant relationship (et)een these t)o varia(les" !he coefficient of determination (r-) is ."/@@--E )hich depicts that the dependent varia(le (loan and advances) is e4plained (y the independent varia(le (deposits) a(out /@"@-D" 0imilarly+ the pro(a(le error (P"1r) of NIBL is ."..EFFE" 0ince+ the o(tained value of r T P"1r the value of BrB is si$nificant and the value of r T J P"1r sho)s that it is definitely si$nificant" In the case of Na(il Bank the correlation coefficient is ."/H?E-E-@- and it sho)s positive relationship (et)een deposit and loan and advances" !here is si$nificant relationship (et)een these t)o varia(les" !he coefficient of determination (r-) is ."@@J.@/F-- )hich depicts that the dependent varia(le (loan and advances) is e4plained (y the independent varia(le (deposits) a(out @@"H?D" 0imilarly+ the pro(a(le error (P"1r) of Na(il Bank is .".EHEJ?" 0ince+ the o(tained value of r T P"1r the value of 9 is si$nificant and the value of r T J P"1r sho)s it is definitely si$nificant" In conclusion+ )e can say that there is positive relationship (et)een deposit and loan and advances of t)o (anks" !his means if deposit increases then loan 8 advances definitely increases" 61@1417 C "))i!i"n$ ) ! rr"-a$i n b"$?""n +", .i$ an+ inv".$#"n$.

Coefficient of correlation (et)een deposit and investment measures the de$ree of relationship (et)een these t)o varia(les" In !his analysis deposit is independent varia(le (S) and investment is dependent varia(le (;)" !he main reason of findin$ out of correlation ( r) (et)een these t)o varia(les is to <ustifyB )hether deposits are si$nificantly invested or not" !he ta(le (elo) sho)s the value of BrB+ Br-B+ Pro(a(le 1rror (P"1r) and J P"1r (et)een deposit and investments of Na(il Bank and NIBL" Tab-" 7; Bank r rP"1r J P"1r Na(il Bank ."@H/-.-JHE ."G-??HF .".@H??F ."F.HJ/-.?@ NIBL ."/JG.E@HH? ."/EF?JE .".?/FF@ ."??GEHJ?EJ !he a(ove ta(le sho)s that the correlation coefficient of NIBL is ."/JG.E@HH? and it sho)s positive relationship (et)een deposit and investment" !here is si$nificant relationship (et)een these t)o varia(les" !he coefficient of determination (r -) is ."/EF?JE )hich depicts that the dependent varia(le (investment) is e4plained (y the independent varia(le (deposits) a(out /E"F?D" 0imilarly+ the pro(a(le error (P"1r) of NIBL is .".?/FF@" 0ince+ the o(tained value of r T P"1r the value of BrB is si$nificant and the value of r T J P"1r sho)s that it is definitely si$nificant" In the case of Na(il Bank the correlation coefficient is ."@H/-.-JHE and it sho)s positive relationship (et)een deposit and investment" !here is si$nificant relationship (et)een these t)o varia(les" !he coefficient of determination (r-" is ."G-??HF )hich depicts mat the dependent varia(le (investment) is e4plained (y the independent varia(le (deposits) a(out G-"??D" 0imilarly+ the pro(a(le error (P"1r) of Na(il Bank is .".@H??F" 0ince+ the

o(tained value of r T P"1r the value of 9 is si$nificant and the value of r T J P"1r sho)s it is definitely si$nificant" In conclusion+ )e can say that there is positive relationship (et)een deposit and investment of t)o (anks" !his means if deposit increases then investment of the (ank also increases" It is clear from the ta(le that correlation of coefficient and coefficient of determinant of NIBL is hi$her than that of Na(il Bank" !his sho)s that NIBL has made $reater investment out of deposit than that of Na(il Bank" 61@1419 C "))i!i"n$ ) ! rr"-a$i n b"$?""n u$.i+" assets an+ n"$ ,r )i$ Coefficient of correlation (et)een outside assets and net profit measures the de$ree of relationship (et)een these t)o varia(les" In this analysis outside assets is independent varia(le (S) and net profit is dependent varia(le (;)" !he main reason of findin$ out of correlation ( r) (et)een these t)o varia(les is to <ustify )hether net profit is si$nificantly correlated )ith respect to outside assets or not" !he ta(le (elo) sho)s the value of BrB+ Br -B Pro(a(le 1rror (P"1r) and J P"1r (et)een other side assets and net profit of Na(il Bank and NIBL"

Tab-" 74 Bank r rP"1r J P"1r Na(il Bank 3."E/H-.?/F- ."?FFE/F ."-FHGG? ?"F-@J-G@?G NIBL ."/@/@JH.F/ ."/G/@E? ."..J.@H .".EJF.EF// !he a(ove ta(le sho)s that the correlation coefficient of NIBL is ."/@/@JH.F/ and it sho)s positive relationship (et)een outside assets and net profit" !here is si$nificant relationship (et)een these t)o varia(les" !he coefficient of

determination (r -) is ."/G/@E? )hich depicts that the dependent varia(le (net profit) is e4plained (y the independent varia(le (outside assets) a(out /G"/@D" 0imilarly+ the pro(a(le error (P"1r) of NIBL is ."..J.@H" 0ince+ the o(tained value of r T P"1r the value of BrB is si$nificant and the value of r T J P"1r sho)s that it is definitely si$nificant" In the case of Na(il Bank the correlation coefficient is 3."E/H-.?/F- and it sho)s ne$ative relationship (et)een outside assets and net profit" !here is lo) de$ree of relationship (et)een these t)o varia(les" !he coefficient of determination (r U) is ."?FFE/F)hich depicts that the dependent varia(le (net profit) is e4plained (y the independent varia(le (other side assets) a(out ?F"FED" 0imilarly+ the pro(a(le error (P"1r) of Na(il Bank is ."..J.@H" 0ince+ the o(tained value of r T P"1r and r T J P"1r the value of BrB is si$nificant (ut it is ne$atively correlated" In conclusion+ )e can say that NIBL has positive relationship (et)een outside assets and net profit (ut Na(il Bank has ne$ative relationship (et)een these t)o varia(les"

61@17 Tr"n+ ana-y.i. 61@1714 Tr"n+ ana-y.i. ) $ $a- +", .i$ !he trend value of total deposit of Na(il Bank and NIBL is calculated under !his section" An effort has (een made to forecast for ne4t five years from mid3,uly -../ to mid3,uly -.?E on the (asis past data of total deposit of Na(il Bank and NIBL from mid3,uly -..H to mid3,uly -..@" Tab-" 77

E.$i#a$i n ) $(" +", .i$ ) r $(" y"ar 7;;8 $ 7;49 years 6eposits (Rs" In million) Na(il Bank NIBL -..H ?E+HH@ G+/-E -..F ?H+F@G ??+F-F -..J ?H+??/ ?H+-FF -..G ?/+EHG ?@+/-G -..@ -E+EH-H+H@/ -../ -HEEE"J -GF@H"? -.?. -JG@@"J E?JEG"J -.?? -/-HE"J EFJ/?"? -.?- E?J/@"J E/GHH"J -.?E EH?FE"J HEG/@"? (0ource Annual reports) (0ource anne4ure B? and B?"?) !he a(ove ta(le sho)s the total deposit of the (anks is in increasin$ trend" If other thin$s remain constant the total deposit of Na(il Bank )ill (e R0" EH?FE"J million in the &; -.?E and that of NIBL )ill (e Rs" HEG/@"? million" It is forecasted that NIBL )ill (e more successful to collect more deposit from die market" E.$i#a$i n ) $(" +", .i$ ) r $(" y"ar 7;;8 $ 7;49

61@1717 Tr"n+ ana-y.i. ) L an an+ a+van!". An effort has (een made to forecast the amount of loan 8 advances of Na(il Bank and NIBL for the ne4t F years from mid3,uly -..@ to mid3 ,uly -.?-"

Tab-" 79 E.$i#a$i n ) $(" - an an+ a+van!". ) r $(" y"ar 7;;8 $ 7;49 years Loan and advances (Rs" In million) NABIL BAN* NIBL G+@.@ @+E./ ?.+@-H ?E+.EE F"/-G+EE/ ?.+HFE ?E+?G@

-..H -..F -..J -..G

-..@ ?FJJ. ?G+GJ/ -../ ?G-FG"/ HGFJE"/ -.?. ?/E.."G F.F?G"H -.?? -?EHE"F FEHG."/ -.?-EE@J"E FJH-H"H -.?E -FH-/"? F/EGG"/ (0ource anne4ure B- and B-"?) (0ource Annual reports) !he a(ove ta(le sho)s that Na(il Bank has increasin$ trend of loan and advances and same of NIBL is in fluctuatin$ trend" It is forecasted that (oth of (anks )ill have increasin$ trend of loan and advances" !he possi(le capacity of $rantin$ loan and advances of NIBL seems hi$her than that of Na(il Bank" NIBL seems to (e more successful in the future to earn more profit than that of Na(il Bank (ecause the e4pected future value of loan 8 advances of NIBL in the year -.?E is Rs" F/EGG"/ million and the same of Na(il Bank is only Rs" -FH-"/ million"

E.$i#a$i n ) $(" $ $a- - an an+ a+van!". ) r $(" y"ar 7;;8 $ 7;49

61@1719 Tr"n+ ana-y.i. ) $ $a- inv".$#"n$ #nder !his topic+ the trend values of total investment for F years from midV ,uly -..H to mid3,uly -..@ is calculated and forecasted for ne4t five years from mid3,uly -../ to mid3,uly -.?E"

Tab-" 76 E.$i#a$i n ) inv".$#"n$ ) r $(" y"ar 7;;8 $ 7;49 years Investments (Rs" In million) NABIL BAN* NIBL -..H J+.E? -..F F+@EJ ?+G.F E+@J-

-..J H-+J/G -..G J+?@? -..@ @+/FJ -../ ?FG/@"G -.?. ?JH?@"-.?? ?G.EG"G -.?- ?GJFG"-.?E ?@-GJ"G (0ource Annual reports) (0ource

E+/EH F+J.E J+F.J GG-H"J @@F@"@ ///E ???-G"?--J?"H anne4ure BE and BE"?)

!he a(ove ta(le sho)s that investment capacity of Na(il Bank is in fluctuatin$ trend" In the year3 -..H it has investment of Rs"J.E? million and it has decreased to Rs"F@EJ million in the year -..F" But in the year -..J it has a$ain increased its investment upto Rs" H-+J/G million )hich is the hi$hest amount Na(il Bank has invested durin$ ! yearB of period" But in the case of NIBL it has increasin$ trend of investments" It is also clear from the ta(le that of (ank )ill have increasin$ trend of investment in the future"

E.$i#a$i n ) $(" $ $a- Inv".$#"n$. ) r $(" y"ar 7;;8 $ 7;49

61@1716 Tr"n+ ana-y.i. ) n"$ ,r )i$ #nder !his topic+ the trend values of net profit for F years from mid3,uly -..H to mid3,uly -..@ is calculated and forecasted for ne4t five years from mid3 ,uly -../ to mid 3 ,uly -.?E" Tab-" 7< E.$i#a$i n ) n"$ ,r )i$ ) r $(" y"ar 7;;8 $ 7;49 years Net profit (Rs" In million) NABIL BAN* NIBL -..H -..F -..J -..G -..@ -../ -.?. -.?H?J ?+H-/ ?F?? JEF JGH @H/"J @-?"@ G/H ??G ?FE -EEF? F?. ??J. ?-F@"J ?EFG"-

-.?- GJJ"?HFF"@ -.?E GE@"H ?FFH"H (0ource Annual reports) (0ource anne4ureBH andBH"?) It is clear from the a(ove ta(le that NIBL has increasin$ trend of net profit" But in the case of Na(il Bank it has fluctuatin$ trend of net profit" It has earned Rs" H?J million in the year -..H+ Rs" ?H-/ 'illion in the year -..F+ Rs" ?F?? million in the year -..J and decreased to Rs" JEF million in the year -..G" !he t)o yearBs -..F and -..J seem financially stron$ period for Na(il Bank as it has earned ma4imum profit" But it is forecasted that Na(il Bank )ill have decreasin$ trend of net profit and NIBL )ill have still increasin$ trend of net profit" E.$i#a$i n ) N"$ Pr )i$ ) r $(" y"ar 7;;C $ 7;47

61C

Ma: r )in+in5. ) $(" .$u+y ?" It is found from the study that the amount of total deposit collected (y Na(il Bank in each year durin$ F years of the study period is hi$her than that of NIBL" 0imilarly+ investment to total deposit ratio and the amount of total Investment made (y Na(il Bank for the same period is also hi$her" Beside total deposit collected and total investment made+ total loan and advances of Na(il Bank is also 5i$her durin$ first three years (ut after)ard it is lo)er than that of NIBL" It is clear that Investment policy adopted (y Na(il Bank is sound from profit point of vie)" -" Na(il Bank has $iven more priority on investment and loan and advances" 5ence it has maintained lo)er li7uidity than NIBL" Na(il Bank has accepted hi$her level of interest rate risk rather than credit risk" %verall profita(ility ratio of Na(il Bank sho)s that it has earned 5i$her profit than NIBL" It is clear that Na(il Bank has $iven more emphasis on profit (ut NIBL has $iven priority (oth on li7uidity and profit as )ell" E" !he study has found that total deposit and loan and advances and investment of the selected (ank )ill (e in increasin$ trend if other thin$s remain constant" But it is also found that Net profit of the Na(il Bank )ill (e in decreasin$ trend from -.?. on)ard" H" !here is positive relationship (et)een deposit and loan 8 advances and deposit and investment of the selected (ank" !he study also found that increase in net profit of Na(il Bank is not caused (y the increase in outside assets as it has ne$ative relationship (et)een outside assets and net profit (ut in the case of NIBL increase in net profit depends upon increase in outside assets"

614; W

Min r )in+in5. ) $(" .$u+y LiDui+i$y ra$i NRB has directed all the commercial (anks to keep minimum FD of total deposit in the NRB (alance so as to maintain the li7uidity position" Na(il Bank has an avera$e mean ratio of E"//FD and the same of NIBL is F"/?/D" W !he mean ratio of li7uid fund to total deposit ratio of (oth (anks su$$ests that they are sound in !his re$ard" !he overall analysis of li7uidity ratio has found that Investment (ank is more consistent to maintain li7uidity position than that of Na(il Bank" Na(il Bank and NIBL (oth have $iven more priority to increase investment than to maintain li7uidity"

A!$ivi$y ra$i W Loan 8 advances to total deposit ratio of NIBL is hi$her than that of Na(il Bank" An avera$e mean ratio of NIBL is G."G@@D and that of Na(il Bank is JF"--@D" It sho)s that NIBL is more successful in advancin$ loans" W W Investment to total deposit ratio of (oth (anks is in increasin$ trend" An avera$e mean ratio of Na(il Bank is 5i$her than that of NIBL" Investment on deprived sector to total deposit ratio of the selected (ank is in fluctuatin$ trend" !he avera$e mean ratio of Na(il Bank is link (it 5i$her than NIBL and Na(il Bank seem more consistent to make investment in deprived sector than that of NIBL" W Investment on priority sector to total deposit ratio of NIBL is in fluctuatin$ trend" But that of Na(il Bank increased to J".-F from -"G?J durin$ the year -..H and after -..H on)ards it is also in

decreasin$ trend" W Investment on financial institution to total deposit ratio of the selected (ank is fluctuatin$ drastically" An avera$e mean ratio of NIBL is hi$her than that of Na(il Bank" W !he loan loss ratio sho)s that NIBL has mana$ed loan 8 advances soundly as it has lo)er ratio than that of Na(il Bank" !he overall study of this ratio reveals that NIBL is in (etter position to $rant loan and advances (ut in terms of investment purposed Na(il Bank is more capa(le to make investment out of total deposit" It sho)s that NIBL is ready to (ear more risk than that of Na(il Bank" Ri.* ra$i W W Na(il Bank has hi$her interest rate risk than that of NIBL and also has hi$her varia(ility ratio" Credit risk ratio measures the risk (eInnd makin$ investment or $rantin$ loan" NIBL seems risk seeker since its credit risk ratio is hi$her than that of Na(il Bank"

Pr )i$abi-i$y ra$i W Return on total )orkin$ fluid of NIBL is less than Na(il Bank althou$h it has accepted hi$her level of risk" C"9 of Na(il Bank is hi$her than that of NIBL" It is clear that Na(il Bank is in (etter position to earn hi$her profit out of its )orkin$ fund" W Return on Loan 8 advance of Na(il Bank is hi$her than that of N5,L" !hat means Na(il Bank has achieved the net profit from loan 8 advances four times more than that of NIBL" W Return on e7uity of Na(il Bank is more than mat of NIBL" 5ence+ Na(il (ank is earnin$ more profit from the e7uity capital" In overall+ )e can conclude that Na(il Bank has 5i$her earnin$ capacity than that of NIBL" 5ence+ Na(il Bank is performin$ )ell to achieve the hi$her percenta$e of profit" C rr"-a$i n ! "))i!i"n$ !he calculation of correlation reveals that W Correlation of coefficient (et)een deposit and loan 8 advances found that there is positive relationship (et)een deposit and the loan 8 advances of the (ank" It indicates that the increase in deposit tends to increase in loan and advances" !he study also su$$ests that the dependent varia(le i"e" loan 8 advances of (oth (ank is hi$hly dependent upon the total deposit" W Correlation of coefficient of deposit and investment of (oth (anks is positive" It is found from the study that the dependent varia(le (i"e" investment) of NIBL is 5i$hly dependent upon independent varia(le (i"e" deposit) )here as in the case of Na(il Bank it is dependent not

only on deposit (ut also on other varia(les as )ell" W Correlation coefficient (et)een outside assets and net profit of Na(il (ank is ne$ative )hereas that of NIBL is positive" It indicates that increase in net profit of Na(il Bank is not caused (y the increase in outside assets of the (ank" But in the case of NIBL it sho)s that increase in net profit depends upon increase in outside assets and vice versa" Tr"n+ ana-y.i. W !he trend analysis of total deposit of (oth (anks sho) that the deposit of Na(il Bank in ne4t F year )ill (e Rs" EH?FE"J ' and that of NIBL )ill (e Rs" HEG/@" I'" 6eposit collection on N!BL )ill (e 5i$her than that of Na(il Bank " W It is forecasted that (oth of (anks )ill have increasin$ trend of loan and advances" !he possi(le capacity of $rantin$ loan and advances of N!BL seems hi$her than that of Na(il Bank" !otal loan and advances of Na(il (ank in ne4t F year is forecasted to (e Rs" -FH-/"? ' and that of NIBL is Rs" F/EGG"/ '" !he total investment of Na(il Bank In &; -.?E is forecasted to (e Rs" ?@-GJ"G ' and that of NIBL is Rs"?--J?"H '" Na(il Bank )ill (e more capa(le to increase investment in the future than that of NIBL" It is forecasted that net profit of Na(il Bank )ill (e decreased (ut same of NIBL )ill (e increased" !he trend of net profit of Na(il Bank is in decreasin$ trend and the same of NIBL is in increasin$ trend" !he net profit of Na(il Bank in &; -.?E is e4pected to (e Rs" GE@"H ' and that of NIBL is e4pected to (e Rs" ?FFH"H '"

CHAPTER V Su##aryE C n!-u.i n an+ R"! ##"n+a$i n.


<141 Su##ary Investment simply means an assets or item that is purchased )ith the hope that it )ill $enerate income or appreciate in the future" In $eneral sense+ investment means to pay out money to $et more" It involves the commitment of resources that have (een saved or put a)ay from current consumption to the future" Investment policy comprises the set of $uidelines and procedures that direct the lon$3term mana$ement of the investorBs assets" !his research study has (een conducted to find out the impact of NRB directives in Investment policy of CB" NRB (ein$ central (ank of Nepal directs+ supervise+ controls and $uides CB to move" Althou$h the investments policies are formulated (y the concerned (anks ho) far the rules and re$ulations of investment policy of CB are affected (y NRB directives is the main focus of !his research )ork" All the CBs need to comply )ith the NRB directives and the violation or non compliance of directives may lead to fine or penalty to the (ank" In &:; -..J:.G NIBL has (een penaliAed Rs" --?E-"F.' for non compliance of direct lendin$ to the priority sector" 5ence+ NRB $uidelines are o(li$atory to all the (ankin$ and financial institutions operatin$ in the country" A CB need to keep optimum relation (et)een deposit collection procedure and loan policy" !he idle money collected (y the commercial (anks as deposits should (e properly utiliAed either (y $rantin$ loan to the needy parties or (y makin$ investment in the productive sector to earn more

profit" CB should have sound investment policy for mo(iliAation of the availa(le fund" A deposit is that lia(ilities of CB )hich is returna(le in demand at any time" 0o+ sound investment policy has appeared to (e very necessary to CB" A CB mainly focuses on its t)o functions i"e" collection of deposit throu$h various scheme and $rantin$ those amount as loan to the customers (y providin$ various facilities" 6ifferent ne) clause and acts are added in directives and some old re$ulations are also amended in different phase of time to uplift (ankin$ system in Nepal and to cope )ith the international standard" !o reduce the cost of fund and enhance investment and credit e4posure NRB has decreased the CRR to FD" In order to safe$uard the (ank from (ein$ (ankruptcy NRB has directed CBs to make provision of sin$le (orro)er credit limit of -FD on fund (ased and F.D on non fund (ased" No) a day+ there is stron$ competition amon$ the CB" !o attract more customers depends upon the facilities and services provided (y the (anks" In this research NIBL seems performin$ )ell enou$h to attract its customer" It has collected Rs" -HH@@"/ as total deposit and e4tended Rs"?GGJ/"l' as loan and advances" It has invested Rs" JF.F"G' and earn total profit of Rs" F?."H' durin$ the year -..@" In the case of Na(il Bank+ it has collected total deposit Rs" -EEH-"-/'+ e4tended loan and advances Rs" ?FJF/"/'+ out of total deposit it has invested Rs" @/FJ"E' and made total profit of Rs" JGE"/F' in the year -..@" It is clear3 that Investment (ank has hi$her amount of deposit collection and loan and advances than that of Na(il Bank" But Na(il Bank is more capa(le to $ra( the investment opportunities and it has invested 5i$her amount that that of NIBL" Althou$h the amount of

deposit and loan and advances of NIBL is hi$her than that of Na(il Bank the profit of Na(il Bank is more" 5ence+ investment policy of the concerned (ank plays vital role to survive in the market )ith di$nity and ima$e" <17 C n!-u.i n #nder !his research study+ different financial and statistical tools are used to measure the Investment policy of the selected (anks" It is found that (oth selected (anks have stron$ financial performance (ut comparatively Na(il Bank is in (etter position" 6espite of social contri(ution Na(il Bank has hi$her profit earnin$s" It is concluded that Na(il Bank has adopted (etter investment policy than that of NIBL" In conclusion+ it can (e said that central (anks are re7uired to direct the commercial (anks" C"B" should move as per the direction $iven (y the central (ank" Banks should have optimum policy to collect the deposit in various accounts" 6eposit is the ma<or or$an of commercial (ank to live in the industry" 5i$her the deposit 5i$her )ill (e the chance of mo(iliAation of )orkin$ fund and profit thereto" Banks should not invest theirB fund haphaAardly" It should (e careful )hile advancin$ loan (ecause loan is the (lood of the C"B" for survival" If C"B" does not apply sound investment policy it )ill (e in $reat trou(le in future to collect it in time+ hence the possi(ility of (ankruptcy thereto" Banks should invest their fund in various portfolios after the deep study of the pro<ect to (e safe from (ein$ (ankruptcy" If (anks concentrate the investment in fe) or$aniAations there is a hi$h chance of default risk" 6iversification is needed to all the (usiness houses (ut it has seen immense importance to C"B" 5ence+ the C"B" should

implement the investment policy considerin$ the directives issued (y NRB" CBs should not cross the (oundary level set (y central (ank to make investment policy" In overall+ it can (e concluded that the role of NRB in investment policy of commercial (ank has (oth positive and ne$ative impacts" <191 R"! ##"n+a$i n $ Nabi- Ban* L$+1 an+ NIBL 6iversification of investment is hi$hly su$$ested to the selected (ank as they have $iven priority to invest in $overnment securities only" Both of the (anks seem risk avoider as they have invested hi$hest amount in risk free securities" 5i$her the risk 5i$her )ill (e the profit" 5ence+ Na(il Bank and NIBL are recommended to diversify their investment in NRB (ond+ $ovt" non financial institution+ other non3financial institution etc" !o (e a successful (anker a (ank must utiliAe depositorsB money as loan and advances" Loan and advances is the lar$est item of the (ank in the asset side of (alance sheet )hich is risky and more profita(le too" Loan and advances of Na(il Bank is lo)er man NIBL" It has $iven more priority on the private sector lendin$" Loan and advances to the $overnment sector and other financial institutions is too lo)" 5ence+ Na(il Bank and NIBL are recommended to follo) the li(eral lendin$ policy to increase their total loan and advances in order to earn more profit"

!otal investment made (y the selected (ank is in fluctuatin$ trend" 0o (oth (ank must seek ne) places or sectors for investment+ )ith potentiality of hi$h return and lo) risk and should make rational investment"

!here is sli$ht $ro)th in priority and deprived sector investment of (oth (anks durin$ the study period of F years" Althou$h NRB has lessened the criteria to -D for priority and deprived sector credit+ (oth (ank should continue to e4tend priority and deprived sector lendin$ to access (ankin$ service to the poor and (ack)ard communities"

!he 5i$hest portion of (ankBs earnin$ is contri(uted (y interest income $ained from loan and advances" 0o+ for (etter income+ the (ank must properly utiliAe depositorBs money in the form of loan and advances" &rom the study it has (een found that Na(il Bank has utiliAed an avera$e of JFD of total deposit on loan and advances in five years of period )hile NIBL has used almost G.D of total deposit for lendin$" But an avera$e mean ratio of return on loan and advances of Na(il Bank is hi$her than that of NIBL (i"e F"@JT ?"JFG)" 5ence+ Investment (ank is hi$hly recommended to follo) the li(eral lendin$ policy so as to en<oy the more interest income"

Profit is the life (lood of any or$aniAation" Profit ma4imiAation is the main o(<ectives of any (ankin$ industries" !he $ro)th ratio of net profit of Na(il Bank is too lo) in comparison to NIBL" 0o+ Na(il

Bank is recommended to diversify its investment on more profita(le sector and adopt sound investment policy" Li7uidity and profita(ility are like t)o )heels of the same cart and (oth are very inter3related and have converse relationK one can (e achieved only at the cost of the others" 5i$hly li7uid (ank may have less profita(ility as it has to hold more assets in the form of cash" 5o)ever+ the (ank has to maintain sufficient fund in the form of cash and li7uid assets to meet various commitments like depositors claim+ personnel e4penses+ interest payments+ to e4ploit unforeseen opportunities etc" 0ince+ NIBL has held more li7uidity its profita(ility ratios are lo)er than Na(il Bank" 0o" NIBL is hi$hly recommended to maintain reasona(le li7uidity so as to increase profita(ility of the (ank"

BIBLIO2RAPHY
B *. American Institute of Bankin$" (?/G-)" Principal of Ban !peration. #0A AIB" Be4ley+ ,"B"(?/@G)" Ban ing Management. Ne) 6elhi 0u<eet pu(lication" Crosse+ 5"6" (?/JE)" Management policies of commercial Ban s. Ne) ,ersey 1n$le)ood cliffs+ prentice hall Inc" *othari+ C"R" (?//H)""uantitative Techniques. Ne) 6elhi 9ikash pu(lishin$ Pvt" Ltd" Radhas)amy+ '" and 9asudevan+ 0"9" (?/G/)" # te$t %oo of Ban ing. Ne) 6elhi 0" Chand 8 Company Ltd" Reilly+ &"*" (?/@J)" Investment. ,apan CB0 Colle$e Pu(lishin$& !he 6ryden Press" 0in$h+ P" (?/@J)" Investment Management. Bom(ay 5imalaya Pu(lishin$+ 5ouse" 0in$h+ 0"P" and 0in$h+ 0" (?/@E)" 'inancial #nal(sis for Credit Management in Ban s. Ne) 6elhi 9ikas Pu(lishin$ 5ouse Ltd" 0harpe+ W"&"+ Ale4ender+ ="," and Bailey+ ,"9" (?//@)" Investments. Ne) 6elhi Pentice 5all of India Pvt" Ltd" Wolff+ *"5" 8 Pant+ P"R" (-..-)" # )and Boo 'or Social Science *esearch and Thesis +riting. *athmandu Buddha Academic 1nterprises"

T(".i. Laudhari+ 0" (-..?)" # stud( on Investment Polic( of ,epal Indosue- Ban .td. In Comparison To ,epal SBI Ban .td.+ !"#" *athmandu" Ba<racharya+ R" (-...)" Investment of Commercial %an s in Priorit( Sector.+ !"#" *athmandu" Bhattarai+ R" (?/G@)" .ending Polic( of Commercial Ban *athmandu" Lamichhane+ '" (-...)" Investment Polic( of /oint 0enture Ban s in ,epal.& !"#" *athmandu" Pandit+ *" (-..E)" # Stud( on Investment Polic( #nal(sis of S.C Ban ,epal .imited (In Comparison to !ther Commercial Ban s of ,epal).& !"#" *athmandu" Poudel+ *" (-..-)" .iquidit( and Investment Position of /oint 0enture Commercial Ban s in ,epal.& !"#" *athmandu" 0hrestha+ 0" (?//E)" Investment Planning of commercial Ban s in ,epal.& !"#" *athmandu" !hapa+ 0" (?///)" # comparative stud( on Investment Polic( of ,epal Bangladesh Ban .td. and 1oint 0enture Commercial Ban s in ,epal.& !"#" *athmandu" in ,epal.& !"#"

Pub-i!a$i n. an+ F urnaAnnual Report (-..J)" Bankin$ 0upervision" Annual Report of Na(il Bank (-..E3-..@)" *athmandu Na(il Bank" Annual Reports of NIBL (-..E3-..@)" *athmandu Nepal Investment Bank" Bankin$ and &inancial 0tatistics (NRB -..E3-..@)" *athmandu Nepal Rastra Bank" Bankin$ Pra(ardhan (9olume --+ 6ec" .G:,an" .@) 6hau$ana Bhishma Ra<+ >Bank and &inancial Institution> (-..G) 'onetary Policy (-..J:.G)" *athmandu Nepal Rastra Bank" NRB 1conomic Bullitin (9olume H?+ 'id3April -..G)" *athmandu Nepal Rastra Bank" Pradhan+ 0hekhar Bahadur+ >Baisakha 'asanta> (-.FE) 0hrestha+ 6r" 'anohar *rishna+ 2Commercial Ban s and Comparative Performance 3valuation2+ *armachari *osh+ (-.HG) 0hrestha + 0hi(a Ra<+ 2Portfolio Management In Commercial Ban s& Theor( and Practive> Nepal Bank Patrika+ (E?st Baisakh+ -.FF)" '"b.i$". )))"nr("or$"np )))"ni(l"com"np ))"na(il(ank"com ))"nepalne)s"com

ANNEHURE A Ann"Gur" A4 Na(il (ank Ltd" NRB (alance to total deposit ratio ;ear( mid3 ,uly) NRB deposit -..H @/-+GHJ+FF/ -..F J.J+J/H+F/H -..J E@/+G.F+.HG -..G E?@+EF@+GG? -..@ ?+??E+H?F+HEJ Investment Bank Ltd NRB (alance to total deposit ratio ;ear(mid3,uly) NRB deposit -..H HF.+HGG+JF/ -..F FHF+J-.+?.@ -..J G@.+-HE+JEJ -..G ?+F-J+.JJ+JJ. -..@ ?+E@?+EF?+FFJ Ann"Gur" A7 Na(il (ank Ltd" !otal li7uid fund to total deposit ratio ;ear( mid3,uly) -..H -..F -..J -..G -..@ Li7uid fund ?+@@/+-?/+/HE ?+-HF+@.@+/-? ?+H-G+@.@+/-? -+EJF+?H.+FE? ?+/JE+EF@+H@E !otal deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio ?H".H/ @"FH? ?."??E ?-"--F @"H?? !otal deposit G+/--+GJJ+H-. ??+F-H+JG/+JHF ?H+-FH+FGE+JJE ?@+/-G+E.F+/GH -H+H@@+@FF+J/J Ratio F"J@J H"GEH F"HGH @".JE F"JH? !otal deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio J"JE/ H"?F/ -"GJ. ?"JHF H"GG.

Investment Bank Ltd !otal li7uid fund to total deposit ratio ;eai (mid3,uly) Li7uid fund -..H /JJ+FEF+J/F -..F ?+FEJ+/--+/?. -..J ?+H@.+H@.+@HF -..G -+H.J+F-?+E/J -..@ -+@.H+H@H+-.. !otal deposit G+/--+GJJ+H-. ??+F-H+JG/+JHF ?H+-FH+FGE+JJE ?@+/-G+E.F+/GH -H+H@@+@FF+J/J Ratio ?-"?// ?E"EEJ ?."E@J ?-"G?F ??"HF-

Ann"Gur" A9 Na(il (ank Ltd" Loan and advances to total deposit ratio ;ear( mid3,uly) -..H -..F -..J -..G -..@ Loan 8 advances G+@.@+??J+-EG @+E./+-..+@H?.+@-E+JH/+@/E ?E+.EE+-F-+/.E ?F+JF/+/FJ+@J. !otal deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio F@".JE FJ"/JF GJ"JJ. JG"EJH JG".@@

Investment Bank Ltd Loan and advances to total deposit ratio ;ear( mi Loan 8 advances !otal deposit d3,uly) -..H -..F -..J -..G -..@ F+/-?+G@@+?.E G+EE@+FJJ+H@G ?.+HFE+?JE+//G ?E+?G@+?F?+@-H ?G+GJ/+.//+/.E G+/--+GJJ+H-. ??+F-H+JG/+JHF ?H+-FH+FGE+JJE ?@+/-G+E.F+/GH -H+H@@+@FF+J/J GH"GHH JE"JGG GE"EEJ/"J-F G-"FJ. Ratio

Ann"Gur" A6 Na(il (ank Ltd" Investment to total deposit ratio ;ear(mid3,uly) Investment -..H J+.E?+?GF+FHG -..F F+@EJ+.J@+H/@ -..J H+-J/+JF@+?G@ -..G J+?@.+JF@+?.@ -..@ @+/FJ+E.@+JGInvestment Bank Ltd Investment to total deposit ratio ;ear( mid3,uly) Investment -..H ?+G.F+-H.+J/@ -..F E+@J-+H@E+EE. -..J E+/EH+?@@+G.@ -..G F+J.-+@J@+JH/ !otal deposit G+/--+GJJ+H-. ??+F-H+JG/+JHF ?H+-FH+FGE+JJE ?@+/-G+E.F+/GH Ratio -?"F-E EE"F?F -G"F// -/"J.!otal deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio HH"@H/ H.".?. E."-H. E?"/HJ E@"EJ/

-..@ Ann"Gur" A< Na(il (ank Ltd"

J+F.F+JG/+/@G

-H+H@@+@FF+J/J

-J"FJJ

Investment in deprived sector to total deposit ratio ;eai (mid3 ,uly) -..H -..F -..J -..G -..@ Inv" In deprived sec -JJ+-..+... -G?+J..+... E??+?..+... EJ?/.E+... HE.+-..+... total deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio ?"/@. ?"@J-"-.E ?"@G? ?"@HE

Investment Bank Ltd Investment in deprived sector to total deposit ratio ;ear(mid3,uly) Inv" in deprived sec total deposit -..H ?H@+E..+... G+/--+GJJ+H-. -..F ?@.+F..+... ??+F-H+JG/+JHF -..J -@-+/J.+... ?H+-FH+FGE+JJE -..G EJF+H..+... ?@+/-G+E.F+/GH -..@ F?H+J..+... -H+H@@+@FF+J/J Ann"Gur" A= Nabi- ban* Ltd" Investment in priority sector to total deposit ratio ;ear (mid3,uly) Inv" in priority sec total deposit -..H EJF+-H.+... ?E+HHG+JJ?+.JH -..F @G@+/..+... ?H+F@J+J.@+G.G -..J @.E+-..+... ?H+??/+.E-+??F -..G GJH+JJ.+... ?/+EHG+E//+HH. -..@ @/F+@..+... -E+EH-+-@F+E-G Inv".$#"n$ Ban* L$+ Investment in priority sector to total deposit ratio ;ear( mid3,uly) Inv" In priority sec total deposit -..H H/E+/..+... G+/--+GJJ+H-. -..F FJ?+?..+... ??+F-H+JG/+JHF -..J G.J+E..+... ?H+-FH+FGE+JJE -..G J/E+...+... ?@+/-G+E.F+/GH -..@ H@F+G..+... -H+H@@+@FF+J/J Ratio J"-EH H"@J/ H"/FF E"JJ? ?"/@E Ratio -"G?J J".-F F"J@/ E"/FE"@E@ Ratio ?"@G?"FJJ ?"/@F ?"/E? -"?.?

Ann"Gur" A@ Nabi- ban* L$+1 Investment in &inancial institution to total deposit ratio ;ear( mid3,uly) -..H -..F -..J -..G -..@ Inv" In firm" Ins EJ.+...+... @+J?J+G..+... . EJ.+...+... . total deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio -"JGG F/".GE ."... ?"@J? ."...

Inv".$#"n$ Ban* L$+ Investment in &inancial institution to tot ;ear( mid3,uly) Inv" In film" Ins -..H @H.+...+... -..F G+EE@+J..+... -..J . -..G @H+...+... -..@ @E+/..+... AnnGur" AC Na(il (ank Ltd" Investment in shares+ (ond and de(entures to total deposit ratio ;ear(mid3,uly) -..H -..F -..J -..G -..@ Inv" in (onds ---+-..+... ---+-..+... HH.+-@-+E-F ?.H+?/-+.@-@J+/FG+FHtotal deposit ?E+HHG+JJ?+.JH ?H+F@J+J.@+G.G ?H+??/+.E-+??F ?/+EHG+E//+HH. -E+EH-+-@F+E-G Ratio ?"JF?"F-E E"??@ ."FE/ ?"--/ al deposit ratio total deposit G+/--+GJJ+H-. ??+F-H+JG/+JHF ?H+-FH+FGE+JJE ?@+/-G+E.F+/GH -H+H@@+@FF+J/J Ratio ?."J.JE"JGG ."... ."HHH ."EHE

Investment Bank Ltd Investment in shares+ (ond and de(entures to total deposit ratio ;ear(mid3,uly) Inv" In (onds total deposit -..H ?E+@/F+... G+/--+GJJ+H-. -..F ?E+@/F+... ??+F-H+JG/+JHF -..J ?G+GE@+... ?H+-FH+FGE+JJE -..G EF+-FE+... ?@+/-G+E.F+/GH -..@ ?G+GE@+... -H+H@@+@FF+J/J Ann"Gur" A8 Na(il (ank Ltd" Loan loss ratio ;ear(mid3,uly) -..H -..F -..J -..G -..@ Loan loss provision EFE+@FE+EEF EFF+HH.+/JF EF@+E@E+F?? EFJ+-E/+?.J EFH+.HG+.E? Loan 8 advances G+@.@+??J+-EG @+E./+-..+@H?.+@-E+JH/+@/E ?E+.EE+-F-+/.E ?F+JF/+/FJ+@J. Ratio H"FEH"-G@ E"E?? -"GEE -"-J? Ratio ."?GF ."?-? ."?-H ."?@J .".G-

Investment Bank Ltd L an - .. ra$i ;ear(mid 3,uly) -..H -..F -..J -..G -..@ Loan loss provision ?H@+E/H+-E@ -.@+HH.+/@F E-G+?.@+EGH H.?+/HE+G@G H@-+JG-+F?H Loan 8 advances F+/-?+G@@+?.E G+EE@+FJJ+H@G ?.+HFE+?JE+//G ?E+?G@+?F?+@-H ?G+GJ/+.//+/.E Ratio -"F.J -"@H. E"?-/ E".F. -"G?J

Ann"Gur" A4; Na(il (ank Ltd" Interest rate risk ratio ;ear( mid3,uly) Int" sensitive assets -..H ?J+FJ-+J-H+//-..F -..J -..G -..@ ?J+@FJ+G??+JE@ ?G+F//+-F..F? ?-+///+FHE+?FE ?F+GGH+@@E+-GInt" sensitive lia(ilities Ratio ?J+FJ-+J-H+//?.."... ?J+GHF+H@J+JE@ ?G+.JH+.@-+./E --+E-/+/G?+.G@ -G+-FE+E/E+..@ ?.."JJH ?.E"?EJ F@"-?J FG"@@-

Investment Bank Ltd Interest rate risk ratio ;ear( mid3,uly) Int" sensitive assets -..H F+GG-+?H.+-F? -..F G+?E.+?-F+F.-..J ?.+?-J+.FF+J-E -..G ?-+GGJ+-.@+.EG -..@ ?G+-@J+H-G+E@/ Ann"Gur" A44 Na(il (ank Ltd" Credit risk ratio ;ear( mid3,uly) -..H -..F -..J -..G -..@ Loan 8 advances G+@.@+??J+-EG @+E./+-..+@H?.+@-E+JH/+@/E ?E+.EE+-F-+/.E ?F+JF/+/FJ+@J. !otal assets ?J+FJ-+J-H+//?J+GHF+H@J+JE@ ?G+.JH+.@-+./E --+E-/+/G?+.G@ -G+-FE+E/E+..@ Ratio HG"?HE H/"J-? JE"H-/ F@"EJG FG"HJ? Int" sensitive lia(ilities J+/F.+F@F+-J@ ?.+EJ@+.GH+FG? ?E+.-?+FH-+EHJ ?G+--?+JH-+HG/ --+E?E+@-J+.E/ Ratio @E".HF J@"GG. GG"GJH GH"?@G GG"HG.

Investment Bank Ltd Credit risk ratio ;ear( mid3,uly) -..H -..F -..J -..G -..@ Loan 8 advances F+/-?+G@@+?.E G+EE@+FJJ+H@G ?.+HFE+?JE+//G ?E+?G@+?F?+@-H ?G+GJ/+.//+/.E !otal assets /+.?H+-H/+F@H ?E+-FF+H/J+.?J ?J+-GH+.JE+G.J -?+EE.+?EG+FH-G+F/.+@HH+GJ? Ratio JF"J/H FF"EJJH"-EJ?"G@JH"H.-

Ann"Gur" A47 Na(il (ank Ltd" Return on total )orkin$ fund ratio ;ear( mid3,uly) Net profit -..H H?J+-EF+@?? -..F ?+H-/+.F?+?G-..J ?+F?.+J@H+-E. -..G JEF+-J-+EH/ -..@ JGE+/F/+J@/ Investment Bank Ltd Return on total X)orkin$ fund ratio ;ear( mid3,uly) Net profit -..H ??J@?G+JF/ -..F ?F-+JG.+/GJ -..J -E-+?HG+./@ -..G EF.+FEJ+H?E -..@ F?.+E/@+@FE Workin$ find G+/-/+F/F+H-. ??+@@J+?G/+JHF ?H+J.H+FGE+JJE ?@+/-G+E.F+/GH -H+H@@+@FF+J/J Ratio ?"HGE ?"-@H ?"F/. ?"@F-".@H Workin$ fund ?H+H./+?--+-?G ?H+EH@+J/-+??F ?H+J.E+JG?+E@G ?/+F-.+J.?+?F. -H+--H+@FG+@-G Ratio -"@@/ /"/F/ ?."EHF E"-FH -"G@-

Ann"Gur" A49 Na(il (ank Ltd" Return on total loan 8 advances ;ear(mid3,uly) -..H -..F -..J -..G -..@ Net profit H?J+-EF+@?? ?+H-/+.F?+?G?+F?.+J@H+-E. JEF+-J-+EH/ JGE+/F/+J@/ Loan 8 advances G+@.@+??J+-EG @+E./+-..+@H?.+@-E+JH/+@/E ?E+.EE+-F-+/.E ?F+JF/+/FJ+@J. Ratio F"EE? ?G"?/@ ?E"/FG H"@GH H"E.H

Investment Bank Ltd Return on total loan 8 advances ;ear( mid3,uly) Net profit -..H ??J+@?G+JF/ -..F ?F-+JG.+/GJ -..J -E-+?HG+./@ -..G EF.+FEJ+H?E -..@ F?.+E/@+@FE Ann"Gur" A46 Na(il (ank Ltd" Return on e7uity ratio ;ear( mid3 ,uly) -..H -..F -..J -..G -..@ Net profit H?J+-EF+@?? ?+H-/+.F?+?G?+F?.+J@H+-E. JEF+-J-+EH/ JGE+/F/+J@/ !otal e7uity capital H/?+JFH+H.. H/?+JFH+H.. H/?+JFH+H.. H/?+JFH+H.. H/?+JFH+H.. Ratio @H"JJ. -/."JJE.G"-JF ?-/"-./ ?EG".@. Loan 8 advances F+/-?+G@@+?.E G+EE@+FJJ+H@G ?.+HFE+?JE+//G ?E+?G@+?F?+@-H ?G+GJ/+.//+/.E Ratio ?"/GE -".@. -"--? -"JJ. -"@G-

Investment Bank Ltd Return on e7uity ratio ;ear( mid3,uly) Net profit -..H ??J+@?G+JF/ -..F ?F-+JG.+/GJ -..J -E-+?HG+./@ -..G EF.+FEJ+H?E -..@ F?.+E/@+@FE Ann"Gur" A4< Na(il (ank Ltd" Interest earned to total outside assets ratio ;ear( mid3,uly) -..H -..F -..J -..G -..@ Interest earned ?G+@G-+-@. ?+..?+J?J+/.? ?+.J@+GHJ+GJ/ ?+E./+//@+F.. ?+F@G+GF@+G?H !otal outside assets ?E+G@G+?-G+FE?H+.-F+/H?+EH/ ?H+@J?+J@/+-?. ?/+?.?+JGJ+-J? -H+H/?+.@/+-/G Ratio ."?E. G"?H? G"?/? J"@F@ J"H@E !otal e7uity capital F/+.F@+F.. F/+.F@+F.. ??F+-J/+F.. ??@+??G+... ?J.+-J@+@.. Ratio E/"FJ. F?"G.E/"H/@ F/"EFH JE"J/-

Investment Bank Ltd In$"r".$ "arn"+ $ $ $a- u$.i+" a.."$. ra$i ;ear(mid3,uly) Interest earned !otal -..H -..F -..J -..G -..@ HF/+F./+@@J GE?+H.-+/E. @@J+G//+/F/ ?+?G-+GH-+?/E ?+F@H+/@G+EFH outside Ratio J"?HF J"JFH J"E.G J"E@? J"JJ-

assets G+HGG+E@.+/H/ ?.+//-+J.@+@E?H+.J.+-HH"EE? ?@+EG/+.GJ+J@J -E+G/-+?.G+EGJ

Tr"n+ ana-y.i. ) T $a- +", .i$ Ann"Gur" B4 1stimation of deposit of NABIL BAN* for the year -../ to -.?E" (Rs" in million) ;ear -..H -..F -..J 6eposit(;) ?E+HH@ ?H+F@G ?H"??/ ;ear (S) ? E S; ?EHH@ -/?GE H-EFG #$ ? H /

-..G -..@ sum

?/+EHG -E+EH@H+@HE

H F ?F

GGE/. ??JG?? -G/.G/

?J -F FF

5ere+ the actual e7uation of linear trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le @H@HER FaY?F( """""""""""""" (I) -G/.G/R ?Fa Y FF """""""""""" (II) to solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (II) )e $et+ -G/.G/R ?Fa Y FF( -FH+F-/R ?Fa Y HF( 3 3 3 -HFF. R?.( ( (R-HFF.:?. (R-HFF 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et @H@HE RFa Y?F4-HFF Fa R@H@HE3EJ@-F a R H@.?@:F a R /J.E"J !hus+ the re7uired trend is ; R /J.E"J Y-HFF S &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R /J.E"JY -HFF4 J R -HEEE"J ;-.?. R/J.E"J Y -HFF4 G R-JG@@"J

;-.?? R /J.E"J Y -HFF4 @ R-/-HE"J ;-.?- R /J.E"J Y -HFF 4 /RE?J/@"J ;-.?E R /J.E"J Y -HFF4 ?.REH?FE"J Ann"Gur" B 414 1stimation of deposit of NIBL for the year -../ to -.?E (Rs" In 'illion) ;ear -..H -..F -..J -..G -..@ sum 6eposit(;) G+/-E ??+F-F ?H+-FF ?@+/-G -H+H@/ GG+??@ ;ear3 (S) ? E H F ?F S; G/-E -E.H/ H-GJH GFG./ ?--HHH -G?@@/ 43 ? H / ?J -F FF

5ere+ the actual e7uation of linear trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le GG+??@R FaY?F("""(I) -G?@@/R ?Fa YFF"""(II) !o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (II) )e $et+

-G/.G/R ?Fa Y FF( -E?EFHR ?Fa Y HF( 3 3 3 H.FEF R ?.( ( RH.FEF:?. (RH.FE"F 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et GG??@RFaY?F4H.FE"F FaRGG??@3J.@.-"F aR ?JE?F"F:F a R E-JE"? !hus+ the re7uired trend is ;R E-JE"?Y H.FE"F S &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R E-JE"?YH.FE"F 4 J R -GF@H"? ;-.?. R E-JE"?YH.FE"F 4 G RE?JEG"J ;-.?? R E-JE"? Y H.FE"F 4 @ REFJ/?"? ;-.?- R E-JE"? Y H.FE"F 4 /RE/GHH"J ;-.?E R E-JE"?YH.FE"F 4 ?.RHEG/@"? Tr"n+ ana-y.i. ) - an an+ a+van!". Ann"Gur" B7 1stimation of %oan & advances of NABIL BAN* for the year -../ to -.?E (Rs" In 'illion) years -..H -..F -..J -..G -..@ sum loan and advances(;) G+@.@ @+E./ ?.+@-H ?E+.EE ?F+JJ. FF+JEH year(S) ? E H F ?F S; G@.@ ?JJ?@ E-HG? F-?EE G@E.. ?@GEE. 4? H / ?J -F FF

5ere+ the actual e7uation of linear trend is ; R a Y (4

!)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le FFJHER FaY?F(22"(I) ?@GEE.R?Fa Y FF22(II)" !o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (5) )e $et+ ?@GEE.R ?Fa Y FF( ?JJ/.-R ?Fa Y HF( 3 3 3

-.H-@ R l.( ( R-.H-@:?. ( R -.H-"@ 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et FFJHE R Fa Y ?F 4 -.H-"F Fa RFFJHE 3E.JEG"F a R -F..F"F:F a R F..?"? !hus+ the re7uired trend is ;RF..?"?Y-.H-"@S &orecastin$ the loan 8 advances for the upcomin$ ne4t F years ;-../ R F..?"?Y-.H-"@4JR ?G-FG"/ ;-.?.R F..?"?Y -.H-"@ 4 G R?/E.."G ;-.??RF..?"?Y-.H-"@4@R-?EHE"F ;-.?- RF..?"?Y-.H-"@4/R-EE@J"E ;-.?E R F..?"?Y -.H-"@ 4 ?. R-FH-/"?

Ann"Gur" B714 1stimation of Loan 8 advance of N!BL for the year -../ to -.?E ( Rs" In million) years -..H -..F -..J -..G -..@ sum Loan 8 advances(;) F+/-G+EE/ ?.+HFE ?E+?G@ ?G+GJ/ FH+JJ? year(S) ? E H F ?F S; F/-?HJGG E?EF/ F-G?E @@@HF ?/EF?G 4? H / ?J -F FF

5ere+ the actual e7uation of lineal trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le FH+JJ?R FaY?F ( (I) ?/EF?GR?Fa Y FF $et+ ?/EF?GR ?Fa Y FF( ?JE/@-R ?Fa Y HF( 3 3 3 -/FEF R l%( ( R-/FEF:?. (R-/FE"F 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et ?/EF?GRFaY?F4-/FE"F FaR?/EF?G3HHE.-"F aR?H/-?H"F:F aR-/@H-"/ (II) !o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (I!) )e

!hus+ the re7uired trend is ; R -/@H-"/Y-/FE"FS &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R -/@H-"/Y -/FE"F4J R HGFJE"/ ;-.?.R -/@H-"/Y-/FE"F4GRF.F?G"H ;-.?? R -/@H-"/Y-/FE"F4@RFEHG."/ ;-.?- R -/@H-"/Y -/FE"F4 / RFJH-H"H ;-.?E R -/@H-"/Y -/FE"F4 ?. RF/EGG"/ Tr"n+ ana-y.i. ) inv".$#"n$. Ann"Gur" B9 1stimation of !otal Investments of NABIL BAN* for the year -../ to -.?E (Rs" In 'illion) ;ears -..H -..F -..J -..G -..@ sum Investment J+.E? F+@EJ H-+J/G J+?@? @+/FJ J/+G.? ;ears (4) ? E H F ?F S; J.E? ??JG?-@./. -HG-E HHG@-?F-/G S? H / ?J -F FF

5ere+ the actual e7uation of linear trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le J/+G.?R FaY?F(2 (I) -?F-/GR ?Fa YFF2 (II) !o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (II) )e $et+ -?F-/GR ?Fa Y FF( -./?.-R ?Fa Y HF( 3 3 3

J?/F R l.( (RJ?/F:?. (RJ?/"F 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et J/+G.?RFEY?F4J?/"F FaRJ/+G.?3/-/-"F a R J.H.@"F:F aR?-.@?"G thus+ the re7uired trend is ;R ?-.@?"GY-/FE"FS &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R?-.@?"GY J?/"F 4 J R ?FG/@"G ;-.?. R ?-.@?"GY J?/"F4 G R?JH?@";-.?? R ?-.@?"GY J?/"FS @ R?G.EG"G ;-.?- R ?-.@?"GY J?/"FS / R?GJFG";-.?E R ?-.@?"GY J?/"F4 ?.R?@-GJ"G Ann"Gur" B 914 1stimation of Investments of NIBL for the year -../ to -.?E (Rs" In 'illion) years -..H -..F -..J -..G -..@ sum Investments (;) ?+G.F E+@JE+/EH F+J.E J+F.J -?+J?. year(S) ? E H F ?F S; ?G.F GG-F ??@.E --H?? E-F-@ GJ?GE 4? H / ?J -F FF

5ere+ the actual e7uation of linear trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le -?+J?.R FaY?F(2 (I)

GJ?GER?FaYFF2 (II) !o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (II) )e $et+ GJ?GER ?Fa Y FF( JH@E?R ?Fa Y HF( 3 3 3 ??EH- R ?.( ( R??EH-:?. (Rl ?EH"0u(stitutin$ the value of B(B in e7uation (I)+ )e $et -?+J?.R FaY?F4??EH"Fa R-?"J?.3?G.?E aR HF/G:F a R /?/"H !hus+ the re7uired trend is ;R ?-.@?"GY-/FE"FS &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R /?/"H Y ??EH"-4 J R GG-H"J ;-.?. R /?/"HY ??EH"-4 G R @@F@"@ ;-.?? R /?/"H Y ??EH"-4 @ R ///E ;-.?- R /?/"H Y ??EH"-S / R ???-G";-.?E R /?/"H Y ??EH"-S ?. R ?--J?"H Tr"n+ ana-y.i. ) n"$ ,r )i$ Ann"Gur" B6 1stimation of Net profit of NABIL BAN* for the year -../ to -.?E (Rs" In 'illion) years -..H -..F -..J -..G -..@ Net profit (;) H?J ?+H-/ ?+F?? JEF JGH year(S) ? $ E H F S; H?J -@F@ HFE-FH? EEG. 4? H / ?J -F

sum

H+JJF

?F

?EG?G

FF

5ere+ the actual e7uation of linear trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le H+JJFR FaY?F(222" ?EG?GR?FE Y FF222 $et+ ?EG?GR ?Fa Y FF( ?E//FR ?Fa Y HF( 3 3 3 3 -G@ Rl%( ( R 3-G@:?. ( R 3-G"@ 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et H+JJFR FaY?F 4 (3-G"@) Fa RH+JJFYH?G a RF.@-:F a R ?.?J"H (I) (II)

!o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (II) )e

!hus+ the re7uired trend is ;R ?.?J"H ?.?J"HS &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R ?.?J"H 3 -G"@ 4 J R @H/"J ;-.?.R ?.?J"H 3-G"@ 4 G R @-?"@ ;-.?? R ?.?J"H 3-G"@ 4 @ R G/H ;-.?- R ?.?J"H 3-G"@ 4 / R GJJ";-.?E R ?.?J"H 3-G"@ 4 ?. R GE@"H Ann"Gur" B 614 1stimation of Net profit of NIBL for the year3 -../ to -.?E (Rs" in 'illion) years -..H -..F -..J -..G -..@ sum Net profit (;) ??G ?FE -EEF? F?. ?EJE year(S) ? / E H F ?F S; ??G E.F J/J ?H.-FFF.GE 4? H / ?J -F FF

5ere+ the actual e7uation of linear trend is ; R a Y (4 !)o normal e7uations are

Puttin$ the values on normal e7uations from the a(ove ta(le ?+EJER FaY?F(" (I) F.GER?Fa Y FF((II) !o solve the a(ove e7uation )e multiply e7uation (I) (y three and su(tractin$ (I) from (I!) )e $et" F.GER ?Fa Y FF( H.@GR?Fa Y HF( /@JR?.( ( R /@J:?. ( R /@"J 0u(stitutin$ the value of B(B in e7uation (I)+ )e $et ?+EJERFaY?F4/@"J
127

FaRl+EJE Y ?HG/ E a R-@H-:F a RFJ@"H thus+ the re7uired trend is ; R FJ@"H Y/@"J S &orecastin$ the deposit for the upcomin$ ne4t F years ;-../ R FJ@"H Y /@"J 4 J R ??J. ;-.?. R FJ@"H Y /@"J 4 G R ?-F@"J ;-.?? R FJ@"H Y /@"J 4 @ R ?EFG";-.?- R FJ@"H Y /@"J 4 / R ?HFF"@ ;-.?E R FJ@"H Y /@"J 4 ?. R ?FFH"H

128

You might also like