LIQUIDITY ANALYSIS OF NABIL BANK LIMITED

A Project Work Report

By

Abisek Nepal

Symbol No:- 4840002

T.U. Registered Number 7-2-0484-0102-2015

Lincoln College, Kathmandu

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kirtipur, Kathmandu

May, 2019
 ii

DECLARATION

I hereby declare that the project work entitled “LIQUIDITY ANALYSIS OF

NABIL BANK LIMITED” submitted to the Faculty of Management, Tribhuvan

University, Kathmandu is an original piece of work under the supervision of Mr.

Sandesh Thapa (supervisor), faculty member Lincoln College, Kathmandu, and is

submitted in partial fulfillment of the requirements for the degree of Bachelor of

Business Studies (BBS). This project work report has not been submitted to any other

university or institution for the award of any degree or diploma.

___________

Abisek Nepal

May, 2019
 iii

SUPERVISOR’S RECOMMENDATION

The project work report entitled “LIQUIDITY ANALYSIS OF NABIL BANK

LIMITED” submitted by Abisek Nepal of Lincoln College; Kathmandu is prepared

under my supervision as per the procedure and format requirements laid by the

Faculty of Management, Tribhuvan University, as partial fulfillment of the

requirements for the degree of Bachelor of Business Studies (BBS). I, therefore,

recommend the project work report for evaluation.

________________

Mr. Sandesh Thapa

May, 2019
 iv

ENDORSEMENT

We hereby endorse the project work report entitled A CASE STUDY ON

LIQUIDITY ANALYSIS OF NABIL BANK LIMITED submitted by Abisek

Nepal of Lincoln College, Kathmandu in partial fulfillment of the requirements for

the degree of the Bachelor of Business Studies (BBS) for external evaluation.

----------------------------- -------------------------------

……………………….. Prakash Sharma Ghimire

Research Committee Principal

May, 2019 May, 2019

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ACKNOWLEDGEMENTS

This report has been prepared to fulfill the partial requirements for the Degree of

Bachelors of Business Studies (B.B.S), Tribhuvan University, Nepal. In the process of

preparation of this Term Paper, I got a lot of inspiration, co-operation and suggestion

from various persons.

Firstly, I owe a debt of gratitude to my respected adviser Mr. Sandesh Thapa,

Lectures of Lincoln College for his valuable support and suggestion in the process of

preparation of this thesis. I am extremely indebted by their efforts despite of their

busy schedule.

I would like to thanks to my friend Mr. Shiva Shrestha who helps to prepare to this

report for his valuable time for a editing the reports.

Finally, I would like to thank all respondents and informants for providing me the

required information in the process of data collection, and I never forget all those who

were sharing their brotherly advice and materials.

Abisek Nepal
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TABLE OF CONTENTS

Title Page i

Declaration ii

Endorsement iii

Acknowledgements iv

Table of Contents vi

List of Tables vii

List of Figures viii

Abbreviations ix

CHAPTER I INTRODUCTION

1.1. Background of the Study 1

1.2. Introduction of Nabil Bank Limited. 5
1.3. Statement of the Problems 7
1.4. Objectives the Study 9
1.5. Rationale of the Study 9
1.6 Review of Literature 9
1.7 Research Methodology 13
1.8. Limitation of the Study 14
CHAPTER II RESULTS AND ANALYSIS

2.1 Data Presentation 15

2.1.1. Participation of the All the Deposit in the Total Deposit Liability 15
2.2 Major Finding 25
CHAPTER III SUMMARY AND CONCLUSION

3.1. SUMMARY 26
3.2. CONCLUSION 26

BIBLOGRAPHY

APPENDICES
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LIST OF TABLE

1. All the Deposit in the Total Deposit Liability………………………..………16

2. Saving Deposit to Total Deposit……………………………………………..17

3. Fixed Deposit to Total Deposit Ratio………………………………….…......18

4. Cash and Bank Balance to Current Deposit Ratio……………………….......19

5. Cash and Bank Balance to Total Deposit Ratio…………………….…..……20

6. Balance with NRB to current and Saving Deposit Ratio…………………….21

7. Balance With NRB to Fixed Deposit Ratio………………………………….22

8. Total Investment to Total Deposit Ratio……………………………………..23

9. Liquidity Assets to Total Deposit Ratio……………………………………..24

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LIST OF FIGURE

1. Total Deposit Liability……………………………………….………………16

2. Saving Deposit to Total Deposit Ratio……………………………….............17

3. Fixed Deposit to Total Deposit Ratio…………………………………….…..18

4. Cash and Bank Balance to Current Deposit Ratio………………………..….19

5. Cash and Bank Balance to Total Deposit Ratio…………………………...…20

6. Balance with NRB to Current and Saving Deposit Ratio…………………...21

7. Balance With NRB to Fixed Deposit Ratio………………………………....22

8. Total Investment to Total Deposit Ratio…………………………………….23

9. Liquidity Assets to Total Deposit Ratio…………………………………..…24

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ABBREVIATION

ABBS - Any Branch Banking Service

SCT - Smart Choice Technology

ATM - Automatic Teller Machine

NRB - Nepal Rastra Bank

NIC - National Industrial Corporation

ADB - Agricultural Development Bank

L.C. - Letter of Credit

NBL - Nepal Bank Limited

CDs - Certificates of Deposits

GNP - Gross National Product

B.B.S. - Bachelor of Business Studies

USD - United States Dollar

NRs - Nepalese Rupees

 1

CHAPTER – 1

INTRODUCTION

1.1. Background of the Study

Generally, bank is an institution which accepts deposits, makes business loans, and offers
related services. Commercial banks also allow for a variety of deposit accounts, such as
checking, saving, and time deposit. There institutions are run to make a profit and owned
by a group of individuals, yet some may be members of the Federal Reserve System.
While commercial banks offer services to individuals, they are primary concerned with
receiving deposits and lending to businesses.

In an economy the bank is regarded as one of the economic backbone of the country for
its development. Bank is a financial institution that deals in money. The basic function of
bank is collecting deposit and granting the loans. It involves in credit creation that in
related to creation of deposit and loan. In the economy, the banks collects small saving of
general people, accumulative it and lends the productive sectors of the society for the
overall economic development.

Various writers have been defined the word “bank” in different ways.

According to Scholars, “The bank is defined as factory of money for credit where it does
not purchase goods and sells it rather produces credit inform of deposit and sells it inform
of loans.”

According to C.R. Crowther, ”A banks collects money from those who have it to spare or
who are saving it out of their income and lends this money to those who required it.”

Thus in conclusion, we can say that bank is an organization which deals with the
monetary transactions for the mobilization of idle money or deposits in productive
sectors, is essentially essential for the development of the whole net.

And this study will be equally useful to the other readers, students of related subjects and
other people who are concern with banking field.
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1.1.1. The Banking in Nepal

In the context of Nepal, like as in other country the goldsmiths and landlord was the
ancient banker. The Nepalese people were highly exploited by shahu mahajan by
charging higher interest rate that is compound interest rate and even by manipulating the
principle amounts. If we try to see the history of banking transaction in depth then
evidence of money landing function are found in practice before 8th century in 780 B.S.

Gunakamdev the ruler of Kathmandu reconstructed Kathmandu valley by borrowing dept

from the people. In 14th century tankdhari system had been running in the period of
ranodip shing in Kathmandu established and office called tejarath adda. From the office
the government distributed salary to their employees and provided loan to government
employment @5% of interest against the security gold, silver etc.

Because of the development of economy activities in Nepal the above institutions could
not be fulfilled the need of people. So in kartik 30, 1994 B.S. Nepal bank was established
as one of the semi government commercial bank which had 10 million authorized capital
and 842000 paid of capital. it has done the pioneering function in function spreading the
banking habits among the people. Having felt a need of central bank to control and direct
the commercial bank and help the government for making monitory polices Nepal Rastra
bank was set up in 14 Baishakh, 2013 B.S.

To fulfill the growing credit requirement of the country. The commercial bank i.e.
Rastraya Banijya bank was establishes in 10th Bhadra 2022 B.S. this bank also provides
facility for the economy welfare of the general public. Nepal is an agricultural country to
develop agriculture system. Industry agriculture development bank and Nepal industrial
development corporation was established in 2024 B.S. 2016 B.S. respectively.

The initiation of the financial sector; liberalization policy by Nepal rastra bank, a board
of joint venture banks entered with the view to accelerate the pace of development of
nation. At present, there are many joint venture banks which are running successfully in a
competitive environment. His majesty government deliberates policy of allowing foreign
joint venture banks to operate in Nepal basically targeted, to encourage local tradition
commercial bank to enhance their capacity through competitor’s efficiencies
 3

mechanization modernization prompt customer service. Nepal Arab bank ltd was
established in 2041 as a first foreign joint venture bank.

Now in our country there are 31 commercial bank, 87 development bank, 79 finance
company and 21 micro credit development banks after mid July 2011(licensed by NRB)

1.1.2. List of Commercial Banks in Nepal:

The history of financial and economic development in Nepal is not very old. It has gone
through different stages, during the PM Ranodip shingh around 1972 A.D. “TEJARATH
ADDA” was introduced, which brought a reform in economic and financial section. The
main purpose of “TEJARATH ADDA” was to provide credit facilities to the general
public at confessional rate. However the installment of “KHUSI KHANA” as a banking
agency during the king Prithivi Narayan Shah could also be regarded as the first step
towards banking in Nepal.

After that the first commercial bank of Nepal, Nepal bank Limited (NBL) was lunched
with the cooperation of imperial bank of India in November 1937. Holding 51%
government equity. The second commercial bank, Rastriya Banijya bank come into
existence in 1966 A.D. with 100% government ownership. In early 1980, to meet the
need of health completion in the financial system, Nepal allowed to entry of foreign
banks as joint ventures with up to maximum of 50% equity participation.

Nepal Arab bank limited was the first joint venture bank which was established with the
joint venture of Arab bank emirates in 1984. in 1986, Nepal grind lays bank limited (now
chartered bank limited) entered in Nepali financial market as a joint venture with ANZ-
Grind lays.

1.1.3.2 Functions of Commercial Banks:

Although profit maximization is a major objective of commercial bank, to achieve this

objectives commercial bank performs various functions under the mandatory rules and
registrations and directives of NRB and commercial Bank Act 2031(1974) which are:
 4

Primary functions

a) Accepting Deposits:

Accepting deposits is the main function of commercial banks. Commercial banks collects
money from those who want to deposit in different types of deposits accounts such as:

● Fixed deposit account

● Current deposit account
● Saving deposit account

b) Advancing of Loans:

Commercial banks provide the required loan or credit to various sectors of economy such
as industry, trade, agriculture, business deprived sector etc. in this way bank creates
facilities. It provides loans from various procedures in different form such as:

● Overdraft
● Cash credit
● Direct loan with collateral
● Discounting bill of exchange
● Loans of money at call and notice

General Utility functions

Commercial banks also form general utility functions such

Issuing of letters of credit to customers

● Issuing of bank draft and travels cheque etc for transfer of funds from one place to
another.
● Dealing in foreign exchange and financial foreign trade by accepting or collecting
foreign bill of exchange.
● Underwriting loans to be raised public bodied and corporations.
● Providing safety vaults or lock for the safe custody of valuables and securities of
the customers.
● Remittance of money
 5

Agency Functions

Apart from the above function, commercial banks also perform agency functions for
which they act as agent and claim commission on some facilities such as:

● Collection of customer’s money from other banks.

● Receipt and payment of dividend and interest.
● Security brokerage service
● Financial advisory services
● To underwrite the government and private securities.

1.2. Introduction of Nabil Bank Limited.

Nabil, the first foreign joint venture bank of Nepal, started operations in July 7, 1984.
Nabil was incorporated with the objective of extending international standard modern
banking services to various sectors of the society. Nabil provides a range of commercial
banking services through its 74 points of representation across the country and over 170
correspondent banks across the globe. It was earlier known as Nepal Arab Bank Ltd. It
has its head office located at Nabil Center, Durbar marg, which is also a premium
location of the capital. It has the largest staff among private commercial banks of Nepal.
Pursuing its objective, Nabil provides a full range of commercial banking services
through its 74 points of representation. In addition to this, Nabil has presence through
over 1500 Nabil Remit agents throughout the nation.

Nabil, as a pioneer in introducing many innovative products and marketing concepts in

the domestic banking sector, represents a milestone in the banking history of Nepal as it
started an era of modern banking with customer satisfaction measured as a focal objective
while doing business. Operations of the bank including day-to-day operations and risk
management are managed by highly qualified and experienced management team. Bank
is fully equipped with modern technology which includes international standard banking
software that supports the E-channels and E-transactions.

Nabil is moving forward with a Mission to be “1st Choice Provider of Complete

Financial Solutions” for all its stakeholders; Customers, Shareholders, Regulators,
 6

Communities and Staff. Nabil is determined in delivering excellence to its stakeholders in

an array of avenues, not just one parameter like profitability or market share. It is
reflected in its Brand Promise “Together Ahead”.

Vision, Mission, Value and Ethics

“Our Vision is to be the most preferred provider of Financial Services in Nepal”
Mission Statement:
To be the leading Nepali bank, delivering world class service through the blending of
state-of-the-art technology and visionary management in partnership with competent
and committed staff, to achieve sound financial health with sustainable value addition
to all our stakeholders. We are committed to do this mission while ensuring the highest
levels of ethical standards, professional integrity, corporate governance and regulatory
compliance.

Core Values and Ethical Principles:

Our core values tell us, our customers and the communities we serve, who we really
are; what we are about; and the principles by which we pledge to conduct business. In
essence, we believe that success can only be achieved by living our core values and
principles:

Customer Focus: At Nabils, our prime focus is to perfect our customer service.
Customers are our first priority and driving force. We wish to gain customer
confidence and be their trusted partner.
● Quality: We believe a quality service experience is a paramount to our customers
and we are strongly committed in fulfilling this ideal.
● Honesty and Integrity: We ensure the highest level of integrity to our customers,
creating an ongoing relationship of trust and confidence. We treat our customers with
honesty, fairness and respect.
● Belief in our people: We recognize that employees are our most valuable asset and
our competitive strength. We respect the worth and dignity of individual employees
who devote their careers for the progress of the Bank.
● Teamwork: We are a firm believer in team work and feel that loyal and motivated
 7

teams can produce extraordinary results. We are drived by a performance culture

where recognition and rewards are based on individual merit and demonstrated track
record.
● Good Corporate Governance: Effective Corporate Governance procedures are
essential to achieve and maintain public trust and confidence in any company, more
so in a banking company. At Nabils, we are committed in following best practices
resulting in good corporate governance.
● Corporate Social Responsibility: As a responsible corporate citizen, we consider it
important to act in a responsible manner towards the environment and society. Our
commitment has always been to behave ethically and contribute towards the
improvement of quality of life of our people, the community and greatly the society,
of which we are an integral part.

1.2.1. Strategies and Future Plans of the Nabil Bank.

● To develop a customer oriented service culture with special emphasis on

customer care and convenience
● To increase our market share by following a disciplined growth strategy
● To leverage our technology platform and pen scalable systems to achieve cost-
effective operations, efficient MIS, improved delivery capability and high service
standards
● To develop innovative products and services that attracts our targeted customers
and market segments
● To continue to develop products and services that reduce our cost of funds
● To maintain a high quality assets portfolio to achieve strong and sustainable
returns and to continuously build shareholders’ value
● To explore new avenues for growth and profitability

1.3. Statement of the Problems

Liquidity is the status and part of the assets which can be used to meet the obligation.
Liquidity can be viewed in term of liquidity stored in the balance sheet and in term of
liquidity available through purchased fund. The degree of liquidity depends upon the
 8

relationship between cash assets plus those assets which can be quickly turned into cash
and liability awaiting payments.

Bank needs to maintenance some seasonable level of liquidity to fulfill different

commitments such as provide money to depositors when they demand for administrative
expenses, for maintaining cash reserve ratio in the central bank etc. so, liquidity is
defined as the bank’s capacity to pay cash in exchange of deposits. Liquidity is crucial in
the business like banking. Because if the bank has the high liquidity it can no on a desired
profit and if the bank has the shortfall of the liquidity it cannot satisfy its customers.
Inadequate liquidity may lead to collapse of the bank while excess liquidity is
determinant to bank’s profitability in order to remove demerits associated with
maintaining inadequate and excess liquidity, bank should maintained and optimum level
of liquidity. This possible only when bank’s liquidity needs is correctly predicted.
Prediction covers inflows and outflows of liquidity. If prediction shows more outflows,
bank should be prepared to cover the shortfall by borrowing or by liquidating assets. If
inflow is greater than outflows, bank should plan where to invest so that income can be
increase. Banks attach great importance short terms and long terms predictions.
Prediction of liquidity need should be in the form of primary and secondary reserve so
that bank generates income and at the same time does not compromise to liquidity. Banks
got failure because of wrongly analyzed liquidity position and wrongly predicated
liquidity requirement and management policy of liquidity. Thus to gain the trust of the
customers and be success on the operation, the bank should maintain and forecast the
liquidity need for the period and optimum level of liquidity based on the past liquidity
position.

● How to check the liquidity position of the Nabil’s?

● How to analyze the financial performance?
● How to check the Nabil bank’s profitability?
● How to suggest the liquidity management policies?
 9

1.4. Objectives the Study

The main objective of the study is to analyze the Nabil Bank’s liquidity position. Based
on the analyzed liquidity position, the study will suggest the liquidity need and its
management for the current year. Objectives can be listed below:

● To check the liquidity position of the Nabil Bank

● To check the Nabil Bank’s profitability

1.5. Rationale of the Study

This report is prepared to analyze the liquidity position of Nabil Bank. This report
comprises the date from 2011 to 2016. This would help the bank to observe the trend of
the liquidity position hold in those periods. Besides that, this study also evaluates the role
of short term obligation and the bank ability to pay the currently maturity obligation.
Moreover, the study will check the profitability of the bank. This will help the bank to
take the corrective actions if there are any errors on the past performance and the study
aims to recommend correcting the division if the standard has not been met.

1.6 Review of Literature

This chapter deals with the theoretical aspects of the topic of financial analysis of Nabil
Bank. in more detail and descriptive manner. For this study, journals, articles, and some
research reports related with this topic have been reviewed. This study has to refer almost
all books related with this topic published. Some of the prior reports by students of BBS
regarding this topic have also been reviewed.

1.6.1. Conceptual framework

One of the sensitive factor or element in the bank is liquidity. Liquidity refers to the
convertibility assets into cash. It means how fast the assets can be change into cash.
There are many assets which are easily converted into cash by the bank. Such as cash in
hand, cash at bank, cash at central bank, investment in government securities. But some
assets are difficult to get converted into cash such as loan and fixed assets.

Liquidity is also defined as the position or capability of a bank to meet the current
obligation of customers such as payment of cheque. Payment of demand drafts,
 10

disbursement of approved loan etc. Bank needs to maintain some reasonable level of
liquidity to fulfill different commitments such as provide money to depositors when they
demand for administrative expenses, for maintaining cash bank’s capacity to pay cash in
exchange of deposits. Liquidity is crucial in the business like banking. Because if the
bank has high liquidity, it can no earn a desire profit and if the bank has the shortfall of
the liquidity it cannot satisfy its customers. Inadequate liquidity may lead to collapse of
the banks while excess liquidity is detrimental to bank’s profitability. In order to remove
demerits associated with maintaining inadequate and excess liquidity, banks should
maintain an optimum level of liquidity. This possible only when bank’s liquidity needs is
correctly predicted. Prediction covers in present outflows of liquidity. If prediction shows
more outflows, bank should be prepared to cover the shortfall by borrowing or by
liquidating assets. If inflow greater than outflow, bank should plan where to invest so that
income can be increase. Banks attach great importance short term and long term
predictions. Prediction of liquidity need should be in the firm of primary and secondary
reserves so that bank generates income and at the same time does not compromise to
liquidity.

1.6.1.1. Liquidity assets:

The assets which can be converted into cash immediately with or without a nominal loss
of value. Liquidity can be in the firm of treasury bills, investments in government
securities, gold and silvers, inventories and marketable securities etc.

1.6.1.2. Cash reserve Ratio (CRR):

Central banks the world over make banks maintains the certain level of liquidity to total
deposit liabilities in the form of the cash and bank balance. This ratio is known as the
cash reserve ratio or primary reserve.

1.6.1.3. Statutory liquidity ratio (SLR):

Central bank orders to the banks to maintain the certain level of liquidity to total deposit
liabilities in the form of the cash and bank balance and treasury bills and government
securities and bonds. Such liquidity requirement is called the statutory liquidity ratio.
 11

1.6.1.4. Importance of liquidity for the bank:

The liquidity is important for the bank for the motives cited as follow:

● Transaction motive
● Speculative motive
● Precautionary motive

1.6.1.5. Need of liquidity for the bank:

● To meet the expenses for the bank’s administrative works

● To pay all sorts of deposit on demand
● To repay the debt
● To provide the security to the bank

1.6.1.6. Demand for the liquidity:

● Withdrawal of customer deposit

● Acceptable loan request
● Repayment of non-deposit borrowing
● Payment of interest on deposit
● Payment of dividends
● Miscellaneous liabilities

1.6.1.7. Supply of bank liquidity:

● Capital issue
● Retained earning
● Borrowings
● Bond issue
● Repayments of loans
● Other incomes

1.6.1.8. Criteria of the measuring the bank liquidity:

● Criteria of measuring of the bank liquidity denotes

● attributes required being bank liquidity
● compliance test of liquidity requirement
 12

In words criteria area bank liquidity refers to:

● What conditions the assets have to meet to be bank liquidity?

● Whether CRR and SLR have been maintained as per instruction of the central
bank?

21.6.1.9. Liquidity to be maintained with the central bank:

Nepal Rastra Bank, as the central bank of Nepal, had made it mandatory for commercial
bankers to maintain liquidity as under:

Balance at Nepal Rastra bank – 7% current and saving deposit liabilities. 4.5% of fixed
deposit liabilities. Cash in vault – 2 % of deposit liabilities

1.6.1.10. Penalty for non-compliance:

Penalty will be levied for failing to maintain the adequate liquidity as above under any of
the following conditions:

● In the case of shortfall in maintenance of balance with Nepal Rastra bank but
maintenance of cash at vault more than 2%, then on such shortfall amount.
● In the case shortfall in maintenance of balance with Nepal Rastra bank but
maintenance of cash at vault more than 2%, up to 1% excess cash of total deposit
is added in the balance with NRB, than on such shortfall amount (after adding up
to 1% excess)
● In the case of shortfall in maintenance of cash in vault as well as shortfall in
balance held with Nepal Rastra bank, than on total shortfall amount.
1.6.1.11. Applicable penalty rates:
1. first time shortfall Equivalent to bank rate/highest refinance
(currently 5.5%)
2. for second time shortfall Equivalent to 2 times of bank rate
3.for third time shortfall and all Equivalent to 3 times of bank rate.
subsequent shortfalls

The penalty is imposed on the shortfall amount on weekly basis.

 13

1.6.2 Review of Previous Research:

In last 3 years prior to this thesis, some students of B.B.S. programme have been found
conducting research about the Liquidity Analysis of Nabil Bank. Some of them which are
supposed to be relevant have been reviewed and presented in this section.

Rimal, Roshani, (2018) conducted a study in a topic of “Liquidity Analysis of Nabil

Bank”. He collected the data of 5 year data in this bank. The study carried out with the
following objectives;
 To analyzed the liquidity position of Nabil Bank Ltd.
 To check the profitability of Nabil Bank.

Shrestha, Shiva (2017) conducted a study in topic of “Liquidity Analysis of Nabil Bank
Ltd.” He studies on all the strength and threats on liquidity as well as profitability of
Nabil Bank Ltd. and he carried out with some objectives which is list out following
 To analysis the liquidity of Nabil Bank.
 To explain the changing situation of liquidity in the banks.

1.7 Research Methodology

The method which is use in the research is called research methodology. How the data is
collected and which source the research use for getting the data is under the research
methodology. Research methodology covers the data analysis tools as well.

1.7.1. Research Design:

A research design is the arrangement conditions, for the collection and analysis of data in
a manner that aims to combined relevance to the research purpose with economy in
procedures.

This study aims on the financial analysis of the Nabil Bank. This study is mainly based
on primary data and secondary data. The primary data, which are collected directly from
the question answer, direct interview with customer and office staffs. The secondary data
are collected from respective annual reports especially from the Nabil Bank’s web sites
 14

and various other journals and from security bond Nepal (SEBON) and Nepal stock
exchange (NEPSE).
1.7.2 Population and Sample
At present, there are 28 commercial banks operating in Nepal out of 161 financial
institutions in 2018. Out of various bank functioning in the country, Nabil Bank Limited
has been chosen as samples to conduct the research due to the time constraint.
1.7.3 Data Collection Method

I went to the main office of Nabil Bank, Coprporate office, Darbarmarga, Kathmandu,
and get the important information. I collected the main annual reports of this bank
directly from the web site. And other various articles and journals from various
publication and some others from the SEBON, NEPSE and previous field reports are also
taken in to accounts.

1.7.4 Data Analysis Tools

● Financial Tools
● Statistical Tools

1.8. Limitation of the Study

This study is simply conducted for the partial fulfillment of the requirement for the
degree of the Bachelor in Business Studies (BBS). And only the secondary data is used
and analyzed which could not disclose the actual result. And being the first endeavor, the
report can comprise some mistakes which may cause to misinterpretation of the results.

The other limitation of the study is listed below:

● Only five years observation covering from fiscal year 2013/14 to 2016/17 is
analyzed.
● Analysis is based on the ratio and trend lines of the corresponding ratios only.
● For the forecast of the liquidity requirement, daily and monthly data is needed.
But due to time and cost constraints, only the annual data is used for analysis.
● Only the secondary data is used.
 15

CHAPTER – 2
RESULTS AND ANALYSIS

Presentation means the presentation of the collected data through table; figure etc.
presentation is the process of understanding the study or the report and calculating the
opinion. An analysis of a data means the process where the statement or the report gets
resolve by breaking them into simple statement. Analysis means to find out something
and give opinion about the presented data.

2.1 Data Presentation

2.1.1. Different segments of Deposits in Nabil

Table No 1 All the Deposit in the Total Deposit Liability

Year Current deposit Saving deposit Fixed deposit Total deposit

2013/14 1,705,668,495 8,081,980,512 5,412,969,595 15,200,618,592
2014/15 2,175,020,657 10,742,331,625 7,516,686,866 20,424,048,148
2015/16 3,138,669,428 13,688,766,549 7,944,232,558 24,771,668,535
2016/17 3,756,570,350 17,066,252,467 11,633,380,218 32,456,203,035
2017/18 4,025,820,180 14,324,255,897 16,825,148,284 35,175,224,361
Source: - annual reports of Nabil Bank.

Fig No 1 Total Deposit Liability

2013/14
2014/15
2015/16
2016/17
2017/18
 16

In the above table and chart, we see that, in fiscal year 2013/14, the current deposit
account occupied 11%, saving deposit account 53%, fixed deposit account 37%.in fiscal
year 2014/15 the current deposit account occupied 10%, saving deposit account53%,
fixed deposit account 36% occupied. In fiscal year 2015/16 the saving deposit account
occupied 13%, saving deposit account 53%, fixed deposit account 37% occupied. In
fiscal year 2016/17 the current deposit account occupied 13% saving deposit
account55%, fixed deposit account32% occupied. In fiscal year 2017/18 the current
deposit account occupied 11%, saving deposit account 42%, fixed deposit account
occupied 48%.

2.1.2 Saving Deposit to Total Deposit Ratio:

Table No 2 Saving Deposit to Total Deposit Ratio

Fiscal year Saving deposit Total deposit Ratio
2013/14 8,081,980,512 15,200,618,592 0.53
2014/15 1,074,233,1625 20,424,048,148 0.53
2015/16 13,688,766,549 24,771,668,535 0.55
2016/17 17,066,252,467 32,456,203,035 0.53
2017/18 14,324,255,897 35,175,224,361 0.41

Source: - annual reports of Nabil Bank.

Fig No 2 Saving Deposit to Total Deposit Ratio

Ratio, 2013/14,
Ratio, 2017/18, 0.53, 0.207843137
0.41, 0.160784314
2013/14
2014/15

Ratio, 2016/17, 2015/16

0.53, 0.207843137 2016/17
Ratio, 2014/15,
0.53, 0.207843137 2017/18

Ratio, 2015/16,
0.55, 0.215686275

From the above table and trend line chart, the ratio is fluctuating state. In the fiscal year
2013/14, the bank has the saving deposit of 0.53 times of total deposit liability. And 0.53,
 17

0.55, 0.53, 0.41 times of total deposit liability in fiscal year 2014/15, 2015/16, 2016/17
and 2017/18 respectively

2.1.3. Fixed Deposit To Total Deposit Ratio:

Table No 3 Fixed Deposit to Total Deposit Ratio

Fiscal year Fixed deposit Total deposit Ratio
2013/14 5,412,969,595 15,200,618,592 0.36
2014/15 7,516,686,866 20,424,048,148 0.37
2015/16 7,944,232,558 24,771,668,535 0.32
2016/17 11,633,380,218 32,456,203,035 0.35
2017/18 16,825,148,284 35,175,224,361 0.48

Source:- annual report of Nabil Bank.

Fig No 3 Fixed Deposit to Total Deposit Ratio

Ratio, 2013/14,
Ratio, 2017/18, 0.36, 0.191489362
0.48, 0.255319149

2013/14
2014/15
2015/16
2016/17
Ratio, 2014/15,
0.37, 0.196808511 2017/18
Ratio, 2016/17,
0.35, 0.186170213
Ratio, 2015/16,
0.32, 0.170212766

From the above table and trend line chart, the ratio is fluctuating in increasing and
decreasing trend. The highest ratio is 0.48 times in year 2017/18 and lowest ratio is 0.32
times in fiscal year 2014/15. And 0.36 times, 0.37 times and 0.35 times in year 2013/14,
2015/16 and 2016/17 respectively.
 18

2.1.4 Cash and Bank Balance to Current Deposit Ratio:

Table No 4 Cash and Bank Balance to Current Deposit Ratio

Fiscal year Cash and bank balance Current deposit Ratio
2013/14 81,0454,736 1,705,668,495 0.48
2014/15 106,0162,644 2,175,020,657 0.49
2015/16 1,934,935,533 3,138,669,428 0.62
2016/17 3,578,672,803 3,756,570,350 0.95
2017/18 3,506,870,807 4,025,820,180 0.87

Source:- annual report of Nabil Bank.

Fig No 4 Cash and Bank Balance to Current Deposit Ratio

Ratio, 2013/14,
0.48, 0.140762463

Ratio, 2017/18,
0.87, 0.255131965 2013/14
Ratio, 2014/15,
2014/15
0.49, 0.143695015
2015/16
2016/17
2017/18

Ratio, 2015/16,
Ratio, 2016/17,
0.62, 0.181818182
0.95, 0.278592375

From the above table and trend line chart, the ratio is fluctuating in not normally. In fiscal
year 2013/14, the bank has the liquidity against current deposit is 0.48 times. And the
bank has the liquidity against current deposit are0.49, 0.62, 0.95, 0.87times in year
2014/15, 2015/16, 2016/17 and 2017/18 respectively.
 19

2.1.5. Cash and Bank Balance to Total Deposit Ratio:

Table No 5 Cash and Bank Balance to Total Deposit Ratio

Fiscal year Cash and bank balance Total deposit Ratio
2013/14 810,454,736 15,200,618,592 0.05
2014/15 1,060,162,644 20,424,048,148 0.05
2015/16 1,934,935,533 24,771,668,535 0.08
2016/17 3,578,672,803 32,456,203,035 0.11
2017/18 3,506,870,807 35,175,224,361 0.10

Source:- annual report of Nabil Bank.

Fig No 5 Cash and Bank Balance to Total Deposit Ratio

Ratio, 2012/13,
Ratio, 2016/17, 0.1, 0.05, 0.128205128
0.256410256

Ratio, 2013/14, 2012/13

0.05, 0.128205128 2013/14

2014/15
Ratio, 2015/16, 2015/16
0.11, 0.282051282
2016/17

Ratio, 2014/15,
0.08, 0.205128205

From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2012/13,
the bank has the liquidity for total deposit in the ratio of 0.05 times. And in fiscal year
2013/14, 2014/15, 2015/16, and 2016/17, the bank has the liquidity for the total deposit in
ratio of 0.05, 0.08, 0.11 and 0.10 times respectively.
 20

2.1.6. Cash and Bank Balance to Total Deposit (Excluding Fixed Deposit) Ratio:

Table No 6 Cash and Bank Balance to Total Deposit Ratio

Fiscal year Cash and bank balance Total deposit Ratio
2013/14 810,454,736 9,787,648,997 0.08
2014/15 1,060,162,644 12,917,361,282 0.08
2015/16 1,934,935,533 16,827,435,977 0.11
2016/17 3,578,672,803 20,822,822,817 0.17
2017/18 3,506,870,807 18,350,076,077 0.19

Source: - annual report of Nabil Bank.

Fig No 6 Cash and Bank Balance to Total Deposit Ratio

Ratio, 2012/13,
0.08, 0.126984127

Ratio, 2016/17,
0.19, 0.301587302
Ratio, 2013/14, 2012/13
0.08, 0.126984127
2013/14
2014/15
2015/16
2016/17
Ratio, 2015/16, Ratio, 2014/15,
0.17, 0.26984127 0.11, 0.174603175

From the above table and trend line chart, the ratio is fluctuating in increasing state. In
fiscal year 2012/13, the bank has the liquidity against current and saving deposit account
deposit account liability in the ratio of 0.08 times. And in fiscal year 2013/14, 2014/15,
2015/16, and 2016/17, the bank has the liquidity against current and saving deposit
account liability in the ratio of 0.08 times, 0.11 times, 0.17 times and 0.19 times
respectively.
 21

2.1.7. Balance with NRB to Current and Saving Deposit Ratio:

Table No 7 Balance with NRB to Current and Saving Deposit Ratio

Fiscal year Balance with NRB Current Saving Ratio
2013/14 1,526,066,660 9,787,648,997 0.16
2014/15 1,381,351,556 12,917,361,282 0.11
2015/16 1,820,006,035 16,827,435,977 0.11
2016/17 4,411,133,083 20,822,822,817 0.16
2017/18 3,237,217,030 18,350,076,077 0.18

Source: - annual report of Nabil Bank.

Fig No 7 Balance with NRB to Current and Saving Deposit Ratio

Ratio
2013/14 2014/15 2015/16 2016/17 2017/18

25% 22%

16%
22%
15%

From the above table and trend line chart, the ratio has been maintained in fiscal year
2013/14 by 0.16 times. And the bank has been maintained its ratio in fiscal year 2014/15,
2015/16, 2016/17 and 2017/18 by 0.11 times, 0.11 times, 0.16 times and 0.18 times
respectively.
 22

2.1.8. Balance With NRB To Fixed Deposit Ratio:

Table No 8 Balance With NRB to Fixed Deposit Ratio

Fiscal year Balance with NRB Fixed deposit Ratio
2013/14 1,526,066,660 5,412,969,595 0.28
2014/15 1,381,351,556 7,516,686,866 0.18
2015/16 1,820,006,035 7,944,232,558 0.23
2016/17 4,411,133,083 11,633,380,218 0.38
2017/18 3,237,217,030 16,825,148,284 0.19

Source: - annual report of Nabil Bank.

Fig No 8 Balance with NRB to Fixed Deposit Ratio

Ratio, 2016/17,
0.19, 0.150793651 Ratio, 2012/13,
0.28, 0.222222222

2012/13
2013/14
Ratio, 2015/16,
0.38, 0.301587302 2014/15
2015/16
Ratio, 2013/14,
0.18, 0.142857143 2016/17
Ratio, 2014/15,
0.23, 0.182539683

From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2012/13,
the bank has the balance with NRB against fixed deposit liability in the ratio of 0.28
times. And in fiscal year 2013/14, 2014/15, 2015/16, 2016/17, the bank has the balance
with NRB against fixed deposit liability in the ratio of 0.18 times, 0.23 times, 0.38 times
and 0.19 times respectively.
 23

2.1.9. Total Investment to Total Deposit Ratio:

Table No 9 Total Investment to Total Deposit Ratio

Fiscal year Total investment Total deposit Ratio
2013/14 5,602,808,649 15,200,618,592 0.37
2014/15 6,505,679,987 20,424,048,148 0.32
2015/16 6,874,023,625 24,771,668,535 0.28
2016/17 7,399,811,700 32,456,203,035 0.23
2017/18 8,635,530,125 35,175,224,361 0.25

Source: - annual reports of Nabil Bank.

Fig No 9 Total Investment to Total Deposit Ratio

Ratio, 2017/18, Ratio, 2013/14,

0.25, 0.172413793 0.37, 0.255172414

2013/14
2014/15
Ratio, 2016/17,
2015/16
0.23, 0.15862069
2016/17
2017/18

Ratio, 2014/15,
0.32, 0.220689655
Ratio, 2015/16,
0.28, 0.193103448

From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2012/13,
the bank has invested 37% of the deposit in investment. In fiscal years 2013/14, 2014/15,
2015/16, 2016/17, the bank has invested 32%, 28%, 23% and 25% of the deposit in
investment respectively.
 24

2.1.10. Liquidity Assets to Total Deposit Ratio:

Table No 10 Liquidity Assets to Total Deposit Ratio

Fiscal year Liquidity assets Total deposit ratio
2013/14 4,068,425,766 15,200,618,592 0.26
2014/15 5,203,482,662 20,424,048,148 0.51
2015/16 5,403,444,347 24,771,668,535 0.51
2016/17 5,561,846,381 32,456,203,035 0.50
2017/18 5,683,996,571 35,175,224,361 0.48

Source: - annual report of Nabil Bank

Fig No 10 Liquidity Assets to Total Deposit Ratio

Ratio, 2017/18, Ratio, 2013/14,

0.48, 0.212389381 0.26, 0.115044248

2013/14
Ratio, 2014/15, 2014/15
0.51, 0.225663717
Ratio, 2016/17, 0.5, 2015/16
0.221238938 2016/17
2017/18

Ratio, 2015/16,
0.51, 0.225663717

From the above table and trend line chart, the ratio is fluctuating slightly except fiscal
year 2012/13 in fiscal year 2012/13; the bank has invested 26% of the deposit in the
liquid assets. In fiscal year 2013/14, the bank has invested 51% of deposit in liquid assets.
In fiscal year 2014/15, 2015/16 and 2016/17, the bank has invested 51%, 50%, and 48%
of the deposit in the liquid assets respectively.
 25

2.2 Major Finding

● Cash and bank balance to total deposit ratio is fluctuating. But the ratio is
somehow satisfactory even though the ratio is higher than the central banks
prescription. The ratio is moving around the between 0.05 times to 0.11 times.
● The balance with the NRB to fixed deposit ratio is fluctuating. It is moving
around between 0.18 times to 0.39 times.
● The investment to total deposit ratio is fluctuating adversely. Since the ratio is
fluctuating the bank has unsatisfactory result. However the investment from
source of deposit is higher. It will give a higher return without risk only if the
ratio is stabilized.
● The proportion of the saving deposit account is high in total deposit liability. So,
it is recommended that the bank should utilize the amount collected from the
saving deposit account carefully. It should be invested in the higher yielding
areas.
● Balance with NRB to current plus saving deposit should be maintained at the
below than 0.11 times.
● Bank should not spend too much in the fixed assets because it yields only a
nominal portion, almost no yield.
 26

CHAPTER – 3

SUMMARY AND CONCLUSION

3.1. SUMMARY

Nepal is one of the least developed countries of the world. For most of the developing
process, it is financially depending upon the foreign countries. It is economically too
weak. Thus, the economic condition of the people is weak. In Nepal 85% of the people
are depended upon agricultural sector which is unable to provide full employment to the
people. Nepal government has to activate people in the nation’s development through
overall industrialization of nation. For this purpose, development of sound banking
system is essential.

In Nepalese banking sector, commercial banks including ventures banks are operating at
present. In the absences of modern banking any country cannot develop the economic
activity. Therefore, it is essential to find out whether or not the banks are serving an
important contribution to develop sectors of economy. Liquidity is said to be general
business of fund, which shows the bank ability to meet cash requirement. In this record,
this study has been based upon the objective to evaluate the liquidity position of Nabils.

3.2. CONCLUSION

● The saving deposit account is nearly constant trend. The highest ratio is 0.55
times in fiscal year 2016/17 and the lowest ratio is 0.41 times in fiscal year
2017/18. But the ratio is not satisfactory due to the last year ratio was decline.
● Fixed deposit is fluctuated. The lowest ratio is 0.32 times and highest ratio is 0.48
times. It is decrease up to fiscal year 2015/16 and grows up then. And it is 0.48
times on 2017/18. It is satisfactory. Bank made good ratio after 2014/15.
● From the cash and bank balance to current deposit liability is fluctuating. The
ratio is moving around between 0.48 times to 0.95 times. It is satisfactory.
 27

● Cash and bank balance to total deposit ratio is fluctuating. But the ratio is
somehow satisfactory even though the ratio is higher than the central banks
prescription. The ratio is moving around the between 0.05 times to 0.11 times.
● Cash and bank balance to total deposit (excluding fixed deposit) ratio is
fluctuating in increasing state. The ratio is satisfactory. It is moving around
between 0.08 times to 0.19 times.
● The ratio of balance with the NRB to current and saving deposit has been
fluctuating. The ratio is declined in year 2013/14 and constant in 2014/15 and
then it is grow up. So, the ratio is satisfactory.
● The balance with the NRB to fixed deposit ratio is fluctuating. It is moving
around between 0.18 times to 0.39 times.
● The investment to total deposit ratio is fluctuating adversely. Since the ratio is
fluctuating the bank has unsatisfactory result. However the investment from
source of deposit is higher. It will give a higher return without risk only if the
ratio is stabilized.
● The liquid assets to total deposit ratio is fluctuating slightly except fiscal year
2013/14. However the ratio is higher and somehow may be considered
satisfactory.
 28

BIBLIOGRAPHY
Anderson et al., (1992). Thesis and Assignment writing. Wiley Eartren Limited, New
Delhi,
ANNUAL REPORT. Himalayan Bank Limited
Bajracharya, B.C. (2053), Business statistics & mathematics, M.K. publishers and
Wistributors.
Brigham, Weston, Essentials of Managerial Finance”, Eleventh Edition, University
Publishers, USA.
Kothari, C.R., Research Methodology”, Mc. Grow Hill Company, second Edition.
INFO HIMALAYAN . Bimonthly newsletter of Himalayan Bank Limited.
J. F. W. & E. F. Brigham, (2056). Essential of Managerial Finance. The Dryden Press.
Harcount Brance Collage Publishers, U.S.A.
Joshi, S. & H.P. Shrestha, (2056). "Principles of Banking and Insurance". Taleju
Prakashan, Bhotahiti, Kathmandu.
Shekhar and Shekhar “Banking Theory & Practice”, Eighteenth Revised Edition, 1996.
Nepal Rastra Bank, Banking and Financial Statistics,
Nabil Bank., “annual report 2012-2018

Websites
http:// www.nrb.org.np
http://www.nabilbank.com.np
 29

APPENDICES
Appndix-1 List of Commercial Banks in Nepal
Operation Paid up
S. Date (A.D.) Capital
Name Head Office
N. (Rs.in Crore)
1 Nepal Bank Ltd. 1937/11/15 Dharmapath,Kathmandu 804.27
2 Agriculture Development Bank Ltd. 1968/01/21 Ramshahpath, Kathmandu 1393.79
3 Nabil Bank Ltd. 1984/07/12 Beena Marg, Kathmandu 804.32
4 Nepal Investment Bank Ltd. 1986/03/09 Durbarmarg, Kathmandu 1064.56
5 Standard Chartered Bank Nepal Ltd. 1987/02/28 Nayabaneshwor, Kathmandu 801.14
6 Himalayan Bank Ltd. 1993/01/18 Kamaladi, Kathmandu 811.45
7 Nepal SBI Bank Ltd. 1993/07/07 Kesharmahal, Kathmandu 804.69
8 Nepal Bangaladesh Bank Ltd. 1994/06/06 Kamaladi, Kathmandu 808.81
9 Everest Bank Ltd. 1994/10/18 Lazimpat , Kathmandu 810.69
10 Kumari Bank Ltd. 2001/04/03 Durbarmarg, Kathmandu 596.95
11 Laxmi Bank Ltd. 2002/04/03 Hattisar, Kathmandu 822.17
12 Citizens Bank International Ltd. 2007/04/20 Narayanhitipath, Kathmandu 803.32
13 Prime Commercial Bank Ltd. 2007/09/24 Kamalpokhari, Kathmandu 803.33
14 Sunrise Bank Ltd. 2007/10/12 Gairidhara, Kathmandu 815.26
15 Century Commercial Bank Ltd. 2011/03/10 Putalisadak , Kathmandu 806.34
16 Sanima Bank Ltd. 2012/02/15 Nagpokhari, Kathmandu 800.13
17 Machhapuchhre Bank Ltd. 2012/7/9 Lazimpat , Kathmandu 805.57
18 NIC Asia Bank Ltd. 2013/6/30 Thapathali, Kathmandu 803.11
19 Global IME Bank Ltd. 2014/4/9 Panipokhari, Kathmandu 888.84
20 NMB Bank Ltd. 2015/10/18 Babarmahal, Kathmandu 646.18
21 Prabhu Bank Ltd. 2016/2/12 Babarmahal, Kathmandu 800.13
22 Siddhartha Bank Ltd. 2016/7/21 Hattisar, Kathmandu 846.44
23 Bank of Kathmandu Ltd. 2016/7/14 Kamaladi, Kathmandu 624.54
24 Civil Bank Ltd. 2016/10/17 Kamaladi, Kathmandu 725.93
25 Nepal Credit and Commerce Bank Ltd. 2017/01/01 Bagbazar, Kathmandu 467.91
26 Janata Bank Nepal Ltd. 2017/04/07 Thapathali, Kathmandu 800.08
27 Rastriya Banijya Bank Ltd. 2018/05/02 Singhadurbarplaza, Ktm 900.48
28 Mega Bank Nepal Ltd. 2018/05/13 Kamaladi, Kathmandu 928.68

Source: “https://www.nrb.org.np/bfr/bfi_list/List%20of%20BFIs_July2018.pdf”