LOAN MOBILIZATION OF BANK OF KATHMANDU

A Reasearch Proposal

Submitted by
SAGAR KARKI
T.U. Reg. No.: 7-2-577-104-2018
Symbol No: - 705770048
Nepalaya College

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kalanki, Kathmandu
May, 2023
Background of study

The study entititled as “A study on loan mobilization of bank of Kathmandu”. The

main focus of the study is to analyze the loan mobilization of the bank. We all know
that Bank of Kathmandu is now merged with Global IME Bank Ltd but also I am
preparing this proposal along with report on the basis of previous data I have obtained
from different sources.

In the modern financial landscape , loan mobilization plays a vital role in the
functioning and growth of financial institutions. It involves the process of acquiring
funds from various sources and channeling them into loans that help to the diverse
needs of borrowers. Effective loan mobilization strategies are important for financial
institutions to obtain a sustainable and profitable lending portfolio. This background
of study aims to explore the strategies and implications of loan mobilization for
financial institutions providing valuable insights for policy makers ,practitioners and
researchers. Moreover I have selected Bank Of Kathmandu (BOK) for the research
because I am more familiar with this bank from the long time bank and it was one of
the leading commercial bank.

Statement of Problem

The main objective of any organization such as banks is profit maximization.

loan mobilization is the key factor to attain this objective. Therefore, if the bank
fails to utilize its funds suitably then it is not possible to maximize the profit.

Though the banking system is making much progress, it is facing many

problems. Being an under developed country, there is lack of saving habit in
people. Many people are still below the poverty line. People are still illiterate
and not conscious about the banking system and its importance.

 How to study of loan mobilization position of BOK?

 How to find out the loan creation of BOK?
 How to analyze the financial performance?

Objectives of Study

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The joint venture banks have become a base for the development of Nepal by
providing a large contribution towards different sectors i.e. industry, tourism,
agriculture, trade, commerce, hydroelectricity etc. So the activities of such joint
venture bank highly affect the economy as well as economy other environment of the
country. Thus, the financial performance of Joint venture banks must be evaluated
occasionally and this study is based on the same objective. The overall objectives of
the study are:

 To study of loan mobilization position of BOK.

 To find out the loan creation of BOK.
 To analyze the financial performance.
 To check the BOK bank’s profitability.

Rationale of the Study

This report is prepared to analyze the loan mobilization position of Nepal investment
bank. This report comprises the date from 2016 to 2019. This would help the bank to
observe the trend of the loan mobilization 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.

Review of Literature

This chapter deals with the theoretical aspects of the topic of Loan mobilization of
BOK 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.

Conceptual framework

One of the sensitive factor or element in the bank is loan mobilization. Loan
mobilization 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

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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.

The trend of commercial banking is changing rapidly. Competition is getting stiffer

and, therefore, banks need to enhance their competitiveness and efficiency by
improving performance. Normally, the financial performance of commercial banks
and other financial institutions has been measured using a combination of financial
ratios analysis, benchmarking, measuring performance against budget or a mix of
these methodologies (Avkiran, 1995).

Gopinathan (2009) has presented that the financial ratios analysis can spot better
investment options for investors as the ratio analysis measures various aspects of the
performance and analyzes fundamentals of a company or an institution.

They concluded that neural network method outperforms the multiple linear
regression method however it need clarification on the factor used and they noted that
multiple linear regressions, not withstanding its limitations, can be used as a simple
tool to study the linear relationship between the dependent variable and independent
variables.

Neceur (2003) using a sample of ten Tunisian banks from 1980 to 2000 and a panel
linear regression model, reported a strong positive impact of capitalization to ROA.
There are number of studies, which examine the bank performance using CAMEL
framework, which is the latest model of financial analysis.

Elyor (2009) and Uzhegova (2010) have used CAMEL model to examine factors
affecting bank profitability with success. The CAMEL Framework is the most widely
used model (Baral, 2005). The Central bank of Nepal (NRB) has also implemented
CAMEL Framework for performance evaluation of the banks and other financial
institutions. CAMEL stands for capital adequacy, asset quality.

Review of related studies

Bank needs to maintain some reasonable amount of loan mobilization 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,
loan mobilization is defining bank’s capacity to pay cash in exchange of deposits.

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Loan mobilization needs of commercial banks are unique because in no other types of
business there will be such large portion of deposits payable on demand. Inadequate
loan mobilization does damage credits standing of other organization as well but a
banks fails to pay the deposits on demands, the bank loose the faith of the public.
Bank may maintain the loan mobilization in the form of :
         Cash and bank balance
         Placement money at short calls or short notice
         Investments in gov. securities and other securities convertible into cash

International federation of accountants has recommended the measuring the loan

mobilization of bank by:
 Cash and liquid securities
 Interbank money deposit liabilities

In last five years prior to this thesis, some students of B.B.S. program have been
found conducting research about the loan mobilization of BOK. Some of them which
are supposed to be relevant have been reviewed and presented in this section.
The main objectives of this study are as follows:

Ramesh Khatiwada (2001) conducted a study in a topic of “Impact of Deposit, interest

rate, loan and to depends upon the related topic managements and Dividend and
Earning Announcement on Shareholder’s Return and stock prices in Nepal”. He
collected the data of 5-year data in this banks. The study carried out with the
following objectives;

 To take information about its different account (deposit)

( and features.
 To take information about its customer’s view on interest rates.
 To analyze the relationship between interest rate on deposits & interest rates
on loans and advances.
 To give valuable suggestion on related topic to its managements
 To analyze the interest rate policy.
 This report is conducted under the weak financial support.

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  The comprehensibility and the accuracy of the study is based upon the data
provided by the BOK and response made by the respondent on the
questionnaire.

Research Gap

The purpose of the research work is quite different from the above studies. The
present study focuses on loan mobilization if Kumari Bank in comprehensive manner
considering some major aspects. This study has tried to indicate the effectiveness of
investment policy of concerned bank.
 Long-term effect of bonus share issue, as well as immediate, is
significantly positive. In most of the cases the aggregate market valuation
of the corporate firm’s equity capital increased as the result of bonus issue.
81.2 percent of the bonus issue cases are recorded different level gain over
the base data price, after
 There is a great misconception about bonus share that the general investors
think that they receive extra/additional share with same value.
 The immediate share price rise after bonus announcement is significant.
Bonus share announcement of banking sector is considering positively by
the investors but shows reluctant for the non-banking sectors. None of the
case have been observed under banking sector that the price decreased
immediately after bonus announcement.
 The share price of the non-banking sectors shows inconsistency as
compare to the banking sector. Therefore, investing on non-banking sector
is riskier than the banking sector.
 Adjusting of the general market movement in share prices.
 This report is prepared under the prescribed format by T.U. for the purpose
of field report writing of bachelor degree.
 This study is limited to BOK, Nepal and finding from this study may not
be generalized for all financial institution.

Research Methodology

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Research methodology is the method, guideline and the steps that are followed in
analysis and it is the way of presenting collected data with meaningful analysis. It
refers to the various sequential to be adopted by a researcher in studying a problem
with certain objects. The data prepared by highly skilled manpower is called
"Secondary Data". In other words, the data, which are initially collected by someone
but obtained from some published or in published sources, are called "Secondary
Data".

Research Design

Research design is a plan, structure and strategy to obtain the objectives of the study.
The research design is of both descriptive and perspective nature. For analysis,
primary data collected from a set of designed questionnaire is used. Along with
primary data historical secondary data has been employed to analyze the used
variables, which is related to Deposit practices of joint venture banks. The annual
reports, financial statements and other relevant materials of the companies will be
studied.

Nature and sources of Data

The study is based on primary as well as mostly on secondary data. First of all, I
visited the BOK Limited. I met the manager of this office. I studied fixed deposit of
BOK as well as consulted different people, working procedure of the deposit by
setting beside & observing their job also. After then I went to campus, consulted
different books & past year’s report writing which made me easy to write this report. I
took not only actual data from BOK about the deposit but analyzed the data also.

Secondary source:

For this purpose, various websites were surfed, published sources (brochures) of the
organization were collected, and reports of students and newspaper article were used.
Then a thorough study of all the collected secondary data were done and important
information were highlighted and noted down.

Data collection procedure

Several articles, bulletins and prospectus along with other related materials of BOK
Limited were studied and revised thoroughly. Then, most essential and necessary data

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were chosen and collected. After the collection of all required data, these were
processed and actual writing of this field report has been preceded.

Data processing

The collected data are processed by tabulation and arranging in a required from for
the sequential analysis of data. Pie chart is also used to processing the data. Then
through a study of all the collected secondary data were done and important
information were highlighted and noted down.

Tools and techniques used

The collected & observed data are tabulated with necessary amounts of each head. For
analysis of the data different tools are used. These tools are as follows.

 Financial Tools

 Statistical Tools

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:

 Data contains mostly of the annuals reports of the bank through fiscal year
2016/17 to 2020.
 Only five years’ observation covering from fiscal year 2016/17 to 2020
analyzed.
 Analysis is based on the ratio and trend lines of the corresponding ratios only.
 For the forecast of the loan mobilization 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.

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Summary

As banking section starts with the wider range of involvement for the economic
development of every country. Mainly Nepal, which has been listed in under-
developed countries. One of the way of leading or to help in progressing the country
is also related to the economic development. If the country is economically well
developed, then it can develop within the short period of time rather than having the
economical problem. Under the company act 2021, BOK has started his banking
activities in 2051 B.S as the joint venture with the Punjab national bank. The main
objective of the bank is to provide banking services to the people of different sectors
in the short period of operation it has earned large number of customers through its
diversification of 14 branches. The customer satisfaction is the main key role to get
prosperity and progress of the bank as well as targeted customers.

Conclusion

Loan mobilization is one of the major functions of BOK. It is based on the different
segments like short term loan, long term loan, investment loan, Sapat & bills
purchased, bank loans, overdraft, pre export loan, purchase & discount bills, letter of
credit etc. Some portion or segment include ed to loan Mobilization fluctuate more &
in vast manner & some quite often is gentle increasing & decreasing manner & even
some reaches to negative parts as well. Each & every year we have come to know that
there are some up’s & down are in different segment of loan Mobilization. BOK only
accept the proposal after studying and analyzing in depth of the required loan
proposal according to the policies and strategies of bank. BOK also settle the loan or
credit within the maturity time in installment or in lump sum basis. At the time of
settlement of loan and credit issued by BOK, that customer who are unable to settle
their credits within maturity period, BOK facilitates them to provide various
opportunities and grace period to settle the very loan.

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 Reference
Bajracharya, B.C. (2067). Business Statistics and Mathematics, M.K. Publishers and
Distributors.

Bhandari, Dilli Raj. Principle and Practice of Banking and Insurance, 3rd edition,
Aayush Publication, Kathmandu.

Dahal Bhuwan, Dahal Sarita. A Hand Book to Banking, 2nd edition, Union Press Pvt.
Ltd, Kathmandu.

Pant, Prem R. Fieldwork Assignment and Report Writing, 2nd edition, Buddha
Academic Enterprises Pvt. Ltd., Kathmandu.

Rejda, George E. Principles of Risk Management and Insurance, Pearson Education

Delhi.

Rose, Peter S. Commercial Bank Management, Irwin McGraw Hill, New Delhi.

Singh, Hirday Bir. Banking and Insurance, Asia Publication Pvt. Ltd., Kathmandu.
Annual reports of Bank of Kathmandu (2006-2011)

Press releases (November, November 21, December 04, December 24. 2009)

Web sites-

www.bok.com.np.com

www.nrb.org.np

Search Engines- www.google.com