CHAPTER-1

INTRODUCTION

1.1 Background of the study

Bank has always played a significant role for the financial activities in the different
financial sectors. So, bank is the major need for various developments. Bank collects
fixed deposits as a saving from the community and invest them into most desirable
and highly yielding sector as a full to a process of economic development. It develops
saving habits of people. The habit of the banking as the nerve center of economic
development cannot be over emphasized and it is said that bank which are the need of
and great wealth of country have got to be kept very scared. Just as water for
irrigation, good banks are for the country’s industry and trade (Desai, 1967).

Deposit is the most important source of the liquidity for every commercial bank for
financial strength of banks; it is treated as a barometer. A deposit is the lifeblood of
the commercial banks. Even though, they constitute the great bulk of bank liabilities,
the success of a bank greatly depends upon the extent to which it may attract more
and more deposits. Depositors keep their money in the banks for a motive to
undertake some activities in the future. Financial sector is broad which consists of the
banking sector and other financial institution (such as insurance corporations and
pension funds, brokers, public exchange and securities markets, Micro Finance
Institution, etc.). Banks have historically been viewed as playing role in financial
market for two reasons. One is that they perform a critical role in facilitating
payments. Commercial banks, as well as other intermediaries, provide services in
screening and monitoring borrowers, banks reduce the cost of supplying credit. Thus
in their role as lenders, banks are often not merely buying someone’s debt, rather they
are providing significant financial service associated with extending credit to their
customers and to the extent that investors want to hold banks liabilities, banks can
fund borrowers directly.

Banks perform various roles in the economy, they ameliorate the information
problems between investors and borrowers by monitoring the latter and ensuring a
proper use of the depositors’ fund; they provide inter temporal smoothing of risk that
cannot be diversified at a given point in time as well as insurance to depositors against
unexpected consumption shocks. Mobilization of deposit is one of the important
functions of banking businesses. It is an important source of working fund for the
bank. Deposit mobilization is an indispensable act or to increase the sources of the
banks to serve effectively. Mobilization of deposit plays an important role in
providing satisfactory service to different sectors of the economy. The success of the
banking greatly lies on the deposit mobilization. Performance of the bank depends on
deposits, as the deposits are normally considered as a cost effective source of working

1
fund. There are different types of deposits, with different maturity pattern carrying
different rates of interests. Deposit mobilization is depending on the cost of deposits.
Mobilization of deposits for a bank is as essential as oxygen for human being. To
enhance profitability, banks take steps to minimize the expenditure and are forced to
mobilize low cost deposits. In the present context banks’ performance is measured on
several indicators, including the deposit mix and the quantum of low cost deposits in
the mix among others. In the present era of competition and with the emergence of
private and multinational banks, an ideal mix of deposits is a must to survive. Since
the interest paid on deposit forms a big burden on bank, the mobilization of low cost
deposits, like current account and saving bank deposit is the urgent need for the bank.
Banks borrow and lend, they borrow money by accepting deposits from the public
including members of the bank.

Deposit Mobilization is the chief sources of funds to undertake lending operations, for
profitable operation, the amount of deposits is very important. The banks should
introduce various deposits schemes to attract the public to deposit. It is the size of the
deposits that largely decides the lending potential of a bank.Deposit Mobilization is
an integral part of any bank. It is the primary function of any commercial banks. Bank
cannot achieve its goal and objective without mobilizing the deposit in the right sector
in different activities. Banks will have to show an ascending order if profit in order to
ensure growth with stability. For this purpose, the bank will have to allocate the
resources to different sectors in such a way the banks can gain adequate profitability.
Therefore, banks should mobilize their deposits in suitable and profitable banking
activities in the right sector. For accounting and analyzing purpose, deposits are
categorized in three headings.

General fixed deposit means to flow the cash in different sectors at profit motive.
Investment in its broadest sense means the sacrifice of certain present value for
(possibly uncertain) future value. In pure financial sense, the subsequent use of the
term investment will be in the prevalent financial sense of the placing of money in the
hands of other for their use, in return for a proper instrument entitling the holders to
fixed income payment or the participation in expected profits. It can define the terms
of investment at manufacturing and trading forms those long term expenditures that
aim at increasing plant capacity of efficiency or at building up goodwill, there by
producing an increased return over a period. Experts define the terms of investment
from which additional are made to capital equipment. But it needs to clear the terms
of investment in financial point of view as related to this study.This research focuses
on the comparative study of fixed deposit of three joint venture banks; Himalayan
Bank Ltd, Everest Bank Ltd and Standard chartered Bank Ltd as well as governmental
bank RastriyaBanijya Bank. These four banks are compared as per their fixed deposit
procedure by taking 7 years’ data from the year 2015/2016 to 2019/2020.

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1.1.1Introduction of the Sample Banks

As there are 27 commercial banks and as my sample banks are SCNBL, EBL, HBL
and RBB so their introduction and minor information are as follows.

Everest Bank Limited

Catering to more than 10 lacks customers; Everest Bank Limited (EBL) is a name we
can depend on for professionalized & efficient banking services. Founded in 1994, the
Bank has been one of the leading banks of the country and has been catering is
services to various segments of the society. With clients from all walks of life of Bank
has helped the nation to develop corporately, agriculturally & industrially.Punjab
National Bank (PNB) is joint venture partner (holding 20% equity) is one of the
largest nationalized bank in India having presence virtually in all important centers.
Owing to its performance during the year 2012-13, the Bank earned many laurels &
accolades in recognition to its service & overall performance. As a joint venture
partner, PNB has been providing top management support to EBL under Technical
Service Agreement.

Everest Bank Limited provides customer-friendly service through ABBS system,

which enables customers for operational transactions from any branches. The bank
has 102 branches, 132 ATM Counters, 31 Revenue Collection Counters and 3
Extension Counters across the country making it a very efficient and accessible bank
for its customers, anytime, anywhere.

Himalayan Bank Limited

Himalayan bank was established in 1993 in joint venture with Habib Bank Limited of
Pakistan. Despite the tough competition in the Nepalese Banking sector, Himalayan
Bank has been able to maintain a lead in the primary banking actives- Loans and
Deposits. Legacy of Himalayan lives on in an institution that’s known throughout
Nepal for its innovative approaches to merchandising and customer service. Products
such as Premium Saving Account, HBL Proprietary Card and Millionaire Deposit
Scheme besides service such as ATMs and Tele- banking were first introduced by
HBL. Other financial institutions in the country have been following their lead by
introducing similar products and services. Therefore, they stand for the innovation
that they bring about in this country to help customers besides modernizing the
banking sector. With the highest deposit base and loan portfolio amongst private
sector bank and extending guarantees to correspondent bank covering exposure of
other local banks under their credit country’s number 1 Bank easily confirms their
claim.

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Standard Chartered Bank Limited

Standard Chartered Bank Nepal Limited has been operation in Nepal since 1987 when
it was initially registered as a joint venture operation. Today, the Bank is an integral
part of Standard Chartered Group having an ownership of 70.21% in the company
with 29.79% shares owned by the Nepalese public. The Bank enjoys the status of the
only international bank currently operating in Nepal. They are a leading international
banking group with a 160 - year history in some of the world’s most dynamic
markets. Their heritage and values are expressed in their brand promise, Here for
good. Their operations reflect their purpose, which is to drive commerce and
prosperity through their unique diversity. They are present in 60 markets and serve
segments in four regions- Europe & Americas and Middle East, ASEAN & South
Asia, Greater China & North Asia.

With 15 points of representation, 26 ATMs across the country and more than 531
local staff. Standard Chartered Bank Nepal Limited is serving its clients and
customers through an extensive domestic network. In addition, the global network of
Standard Chartered Group enables the Bank to provide truly international banking
services in Nepal. Standard Chartered Bank Nepal offers a full range of banking
products and services to a wide range of clients and customers including individuals,
mid- market local corporates, multinationals , large public- sector companies,
government corporations, airlines, hotels as well as the development organizations
segment comprising of embassies, aid agencies etc. The Bank has been the pioneer in
introducing client- focused products and services and aspires to continue its
leadership. It is the first Bank in Nepal to implement the Anti- Money Laundering
policy and to apply the “Know Your Customer” procedure on all the customer
accounts.

In May 2019, the Bank’s new Global Community Program Strategy” Future makers
by Standard Chartered” was launched in Nepal subsequent to the global launch in
January 2019. This initiative focuses on empowering the next generation to learn, earn
and grow. There are three pillars to the strategy: education, employability and
entrepreneurship. It builds on the success of their current community programs while
growing their ambition to ensure that they are reaching more young people across
their markets. The Bank is also actively engaged with the communities in raising
awareness around Financial Literacy Environment, Health and Education.

RastriyaBanijya Bank

RastriyaBanijya bank Limited (RBBL) has a history of serving its customers far and
wide across the nation for more than half century. The bank them fully owned by
Government of Nepal, was established on 10 Magh 2022 under the special statute
“RastriyaBanijya Bank Act 2021” and has operated under “Commercial Bank Act
2031” until it was re- registered as a public limited company on 6 Baishak 2063. At

4
present, the Banks operates as “A” class financial institution licensed by Nepal Rastra
Bank and carries out commercial banking activities as per the provisions of the “
Bank and Financial institutions Act 2073”

In recent period 2021 Rastriyabanijya bank declared that they are providing 9%
interest rate for the fixed depositors. Now we can see the higher competition
increasing between private sector banks and government owned banks.

1.2 Statement of the problem

Availability of sufficient deposits in banking business is the same as the life blood in
human body structure, because, life is impossible without blood circulation. In the
same manner deposit mobilization is the primary requirement for banking business to
secure their existence. Hence, attraction of more & more customers is crucial for
banking business.Deposit takes the line share of liquidity management and revenue
generation in banking business. Credit provisions to borrowers become possible when
the amount of deposit growth is improved in line with the growth of demand for
credit.Banks, the world over thrive on their ability to generate income through their
lending activities. Since commercial banks depend on depositor’s money as a source
of funds, it means that there are some relationship between the ability of the banks to
mobilize deposits and the amount of credit granted to the customers. The cash reserve
is a component of liquidity reserves which measure the ability of the bank to meet its
expected withdrawals and recurring withdrawals. The withdrawals made from the
reserve are oddly- offset against new deposit which the bank should continuously
mobilize. The inability to get sufficient deposits could result in negative fund
situation. The level of deposits growth also indicates the bank’s performance in
relation to customers’ satisfaction on interest payout and service rendered (Sarada,
2009).

Fund mobilization is the important factor from the shareholder and bank management
point of view. This study focused on comparative study on deposit mobilization of
commercial banks (SCBN, EBL, HBL& RBB).After introducing the liberalization
policy of the government, many banks and institutions are established rapidly. These
days many commercial banks, development banks and financial institutions are
operating their work to assist in the process of economic development in the country.
Due to the high competition between the financial institutions the collected huge
amount from public is comparatively lower than deposit and investment practice of
collected deposit. Therefore, it raised the problem of investment and proper deposit of
collected fund. Strong fund activities play a vital role in utilization of collected
deposit and overall development of the economy of the nation (Anoj, 2010).

If the deposit are wrongly invested without thinking any financial risk, business risk
and other related facts, the bank cannot obtain profitable return as well as it should
sometime lose its principle. Deposit policy may differ from one joint venture bank to

5
another as well as government owned bank but there is no optimum utilization of
shareholders deposit to have greater return in any bank. Nepal Rastra Bank has also
played significant role to make commercial banks mobilize their deposit in good
sector. For this purpose, NRB imposed many rules and regulations so that commercial
banks can have sufficient liquidity and security. Though most of the joint venture
banks have been successful to earn profit from deposit, none of them seem to be
capable in invest their entire deposit in more profitable sectors.

Commercial banks are reported to be criticized by customer due to implementation of

wrong investment policies. They are said to be investing less risky and highly liquid
sector, they keep high liquid position and flow less fund in productive sectors, so
these type of function prove less investment opportunity of the deposit. Sometimes
they seems to be ready to invest in the idle deposit even in those investment, which
have lower risk and comparatively greater profit the another problem is diversification
of investment. The bank cannot achieve profitable return form their resources as well
as they sometimes may lose their principle resulting in decreasing of national
economy (Shrestha2020).

1.3 Research question

Deposit mobilization is the most important factor from the shareholder and banks
management point of view. This study is a comparative study on deposit mobilization
of EBL, HBL, RBB and SCBNL. The problem related to deposit mobilization
procedures of joint venture bank and government owned commercial bank of Nepal
have been presented briefly as under:

i. How sample banks collecting its deposit and mobilizing it?

ii. What are the financial performances of selected banks?
iii. What are the relationship between total deposit and loan and advances?
iv. What is the impact of deposit on loan advances?

1.4 Objective of the study

Banks provides both the deposit and credit services to the public. They accept the
funds from the serves as deposit and lend the funds to the fund seek in the economy.
Therefore, banks can run effectively and efficiently only if they can mobilize their
deposits fund at their prescribed area and realize those disbursed amounts timely. In
totality, the study aims to analyze how far the banks have been able to achieve these
objectives. The main objective of this study is the examine deposit mobilization of
Nepalese Commercial banks, the objectives are:

i. To analyze deposit collection of sample banks.

ii. To identify the financial performance of sample banks.

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 iii. To find out the relationship between total deposit and loan and advances.
iv. To explore the impact of deposit and loan and advances
.

1.5 Significance of the study

The study has great contribution to deposit mobilization practice of commercial

banks. It help the bank to design and implement key factors of deposit mobilization
that identified by this study. The researcher investigate the factors affecting deposit
mobilization and give remedial solution to management but suggesting key factors
that contribute for growth of deposit and which support the bank to successfully
meet its target or budget by overcoming the challenges that are identified in the
study. The study benefits selected bank’s shareholders, management, staff and other
stakeholders that increase in deposit mobilization can satisfy the current demand for
financing which contribute to increase the bank’s profitability, also support economic
growth of the country.

It can also be used by the management of the bank to identify factors affecting deposit
mobilization that imposes improvement of deposit so that the deposits level of the
banks can be as targeted or planned. Good and optimum fund mobilization policy of a
bank depicts the sound health of the bank. Successfully formulation of fund
mobilization policy and its effective implementation is a most in banking business.
Moreover this study can serve as source of information to other researchers who will
be interested to conduct further study on similar topic in future in following manner.
Important to the management party of the selected banks for the evaluation of the
performance of their banks & comparison with other banks. Important for the
investors, customers (depositors, loan takers) and personnel of bank to take various
decisions regarding deposits and loan advance. The study of deposit mobilizing policy
would provide information to the management of the bank that would help to take
corrective action in the field of banking activities.

1.6 Limitation of the Study

The study has focused on its objective to observe the deposit mobilization position of
commercial banks. As the study is more objective and is made for the fulfillment of
academic requirement it’s possess numbers of limitations. Some specific limitations
are as follows.

1. The research work is made on the basis of latest five years’ data from fiscal
year 2015/2016 to 2019/2020.

2. Simple statistical and financial tools are used for the analysis.

3. Study is made mainly on the basis of secondary data only.

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 4. The usage of transaction period of the selected banks has been determined by
the specific nature and availability of data.

5. Out of total 27 commercial bank in Nepal the present study deals with only
selected banks( SCBNL,EBL,HBL & RBB)

1.7 Organization of the study

This unit considers the total considerations of the research report. This report is
organized on five chapters. These five chapters consider:

Introduction
The first chapter includes the introduction of the study that considers the background
of the study, historical development of commercial banks in Nepal, statement of the
problem, significance of the study, objective of the study, limitation of the study and
the organization of the study.

Review of the Literature

This is the second chapter of the report. It includes the conceptual review and review
of related studies. Conceptual review considers the study of books and other
publications related to the concept of commercial banks, concept of deposit and
concept of deposit mobilization. And the review of related studies includes the study
of past studies made on the deposit related topics especially the studies related to the
deposit mobilization of commercial banks.

Research Methodology
This chapter contains the tools and techniques these are applied on the study. The
financial and statistical tools which are used for the analysis and presentation of data
are described in this chapter.

Presentation and analysis of data

This is the major chapter of the study. It contains the presentation of data and analysis
f the data that specify the findings of the study. Data are presented on the basis of
objective of the study. This chapter contains the major findings of the study too. It
helps the searcher to find out what is going on about the deposit mobilization in Nepal
and selected commercial banks.

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Summaries, Conclusion and Recommendation
This is the last chapter of the study that contains summery of the study, conclusion of
the study and some recommendations to related banks and policy makers for making
the deposit mobilization position of related banks and total commercial banking
system better than that is.

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 CHAPTER -2

REVIEW OF LITERATURE

This chapter is basically concerned with review of literature relevant to the topic
Deposit Mobilization of commercial bank. Every study is very much based on past
knowledge. The previous studies can’t be ignored because they provide the
foundation to the present study. In other words, there has to be continuity in research
is ensured by linking the present study with the past research studies.

Literature Review is basically a Stock Taking of available literature in one’s field of

research. The literature survey thus provides us with the knowledge of the status of
their field of research. Therefore, this chapter has its own importance in the study
(Wolff and Pant, 2000).

2.1 Conceptual Review

It is basically concerned with the theoretical part relevant to the topic.

Banks are that kind of institution, which, deal with money and substitution for money.
They deal with credit instrument. Effective circulation of credit if more significant for
the banks. Unsteady and unevenly flow of credit harms the economic situation of the
nation. Because of this, collected deposits should be invested and mobilized into the
right sector. An investment of fund decides the life and death of the banks. An
investment is a commitment of money that is expected to generate additional money.
Every investment entails sacrifice for a future uncertain benefit (Francis, 1991).

The investment objective is to increase systematically the individual’s wealth, defined

as assets minus liabilities. The higher the level of the desired wealth, the higher must
be received. An investor seeking higher return must be willing to face higher level of
risk (Cheney and Moses, 1991). The banks make a variety of loans to a wide variety
of customers from many different purpose form purchasing automobile to construct
the homes and making trade with foreign countries. There, no uniform rules can be
laid down to determine the portfolio of bank. The environment in which the bank
operates influences its investment policy. The nature and availability of deposit and
assets also differ widely from region to region within a country or country to country.
For example, the scope of operating a bank in Jumla will be different from the scope
of a bank operating in Kathmandu. The investment policy to be applied in Kathmandu
may not be applicable to the customer ofJumla because the demand loans is less in
rural areas whereas it is higher in urban areas (Vaidya, 1999).

10
Bhalla (2007) has derived a three-pointed basic concept of investment covers
Economic investment that is an economics definition of investment. Investment in a
more general or extended sense which is used by the man of street or ordinary people.
The sense in which we are going to be very much interested namely financial
investment. Banks are those institutions which accepts deposits from the public and in
return provide credit to trade, business and industry that directly makes a remarkable
impact on the economic development of a country. To collect deposit and collect as a
good investment is a very risky job. Ad-hoc investment decision leads the bank out of
the business thereby drawn the economic growth of a country. Hence, sound
investment policy is another secret of a successful bank.

2.1.1 Concept of Commercial Bank

A commercial bank is a financial institution which accept deposit from the public and
gives loans for the purpose of consumption and investment to make profit. It can also
refer to a bank, or a division of a large bank, which deals with corporations or large /
middle-sized business to differentiate it from a retail bank and an investment bank.
Commercial banks include private sector banks and public sector banks. The history
of banking began with the first prototype banks which were the merchants of the
world, who gave grain loans to farmers and traders who carried goods between cities.
This was around 2000 BC in Assyria,India and Sumeria. Later, in ancient Greece and
during the Roman Empire, lenders based in temples gave loans, while accepting
deposits and performing the change of money. Archeology from this period in ancient
China and India also shows evidence of money lending.

Many histories position the crucial historical development of a banking system to

medieval and Renaissance Italy and particularly the affluent cities of Florence, Venice
and Genoa. The Bardi and Peruzzi Families dominated banking in 14th century
Florence, establishing branches in many other parts of Europe. The most famous
Italian bank was the Medici Bank, established by Giovanni Medici in 1397. The
oldest bank still in existence is Banca Monte del Paschi di Siena, headquartered in
Siena, Italy, which has been operating continuously since 1472. Until the end of 2019,
the oldest bank still in operation was the Banco di Napoli headquartered in Nepalese,
Italy which had been operating since 1463.

2.1.2 Role of Commercial Bank in Nepal

For all countries of the world and more so far the developing countries like Nepal, fast
Economic Development is one of the most important aspects of the developmental
activities. However, it is obvious that unless the development of the most important
sector like agriculture, industry, trade and commerce are achieved, envenomed
development is impossible. For all the development, the regular supply of financial
resources is a perquisite. Finance is thus like fuel for providing energy to move the
11
tempo of economic development and financial institution naturally, serve as reservoir
for supplying and controlling the stream of the fuel i.e. finance, the commercial banks
which are the financial institutions dealing with activities of agriculture industry, trade
and commerce play the most important role for the business activities of the world.
The objectives of the commercial banks are to mobilize the idle resources in
productive uses collecting them from scattered and various sources. Its role in
economic development is thus immense in order to bring out greater mobility of
resources to meet the ever increasing needs of financing or the various economic
activities.

These institutions are now trying best to contribute more and more services and
facilities for the enlistment of national economy. They have become the core of
financial system by holding the deposits of millions of people, government and
business units. Thus from their deposits, they make fund available through their
lending and investing activities to different borrower like individuals, business firms
and even to the government. They ultimately facilitate the flow of goods and services
from producers to customers and to the financial activities of the government. It is
quite clear that commercial banks are the most important institutions of capital
formation that imply mainly saving, investment and productions which ultimately
lead to the economic development of a country.

The role of commercial banking in the economy is obviously a prime prerequisite for
the formulations of the bank policy as the role shapes, the nature and character of the
bank. The deposit minded bankers may overstress conservation liquidity while the
loan minded banker may under emphasize safety. Often Commercial Bank performs a
number of interrelated functions. There are not only the custodians of the
community’s money but the suppliers of its liquidity. For these banks customers who
seldom borrow money from the bank an important function may be the acceptance
and safe keeping of deposits. But those customers who often take loans from the bank,
the credit creation function may be the most important. The commercial bank is
different from the other banks especially from central bank. In appearance the main
distinction between central bank and a commercial bank is the now-a-days the central
bank does not do much banking, but the more fundamental difference in one of aim.
The main objective of the commercial bank is to make profit where as the central
bank thinks of the effects of its operations on the working of the economic system.
The commercial bank has the shareholders and is expected to do the best it can for
them but the central bank by contrast is usually owned by the government. The
commercial bank may be few or many and they are to be found business with the
general public all over the country. But, there is only one central bank in each
country. Its market operations are mainly impersonal and are confined to what is
necessary for influencing the country’s financial business in the directions citrated by
economic policy (Sayers, 1972:17-18).

Commercial Banks are those banks that are engaged in commercial banking
transactions and exclude from this description such banks are established for

12
achieving certain specific goals such as co-operatives, agricultural and industrial
banks, much wider activities in relation to the economic development of the country
have been empowered to the banks. Apart from strictly performing commercial
functions, commercial banks so described in the act are empowered to perform such
functions as the undertaking of agency business. In the issue of shares and debentures
for public corporations guaranteeing and underwriting foreign exchange business
under the restrictions imposed by foreign exchange act, rules, order and notifications;
advancing loans for period not exceeding one year against the security of jewelers,
gold and silver ornaments or gold and silver bullion or against the mortgage of land
and buildings, for acquiring plant and machinery; and receiving deposits of
government money according to the order of Government in those places where there
are no branches of the NRB or NBL or where the NRB gives its consent to remit
through bills of exchange and cheques in Nepal and foreign countries and so on (Pant,
1980:118).

Nepal has been facing the problem of accelerating the pace of economic development.
In this respect the role of commercial bank in the country is vital. The commercial
banking system in Nepal is still in its infant stage as compared to other development
countries. However, their important role in the economic development of the country
has been fully realized and these banks are being oriented in their activities best suited
for the overall economic development. Today, there are 17 commercial banks are in
operation. Among these Nepal Bank Ltd is the oldest one established in 1937 A.D.
These banks though not as modern as those of developed countries in their service and
management’s, the role they are performing for Nepal’s overall economic
development cannot be underestimated. They have been performing a leading role to
the best of their capacity in the promotion of Agriculture, Industry, Trade and
commerce etc.

Nepal being an underdeveloped country, its industries, agriculture sector, trade and
commerce are still in a state of infancy. Their development greatly depends upon the
effective role of commercial banks. The insufficiency of capital for the establishment
of the industries, modernization in agriculture etc. has become a serious problem for
economic development in Nepal. Presently, the contribution of commercial banks ink
agriculture sectors has been expanding. It provides the credit facilities for the
development of agriculture in cases where agricultural development banks and
cooperative societies do not enter into tha field. The agriculture sector needs more and
more capital for the improved methods of farming viz. the fertilizers, equipment,
irrigation facilities etc. require obviously more investment. Thus role of commercial
bank in promoting agriculture sector is increasing in many of other boundaries,
especially in developing countries like Nepal.

The economy of our country is dominated by agricultural sector. This could be

exemplified from the figures that about 76 percent of the total population is engaged
in agriculture and about 40 percent of the national income comes from the agriculture.
Similarly, about 51% of the export trade is in agricultural product. Also if we take

13
into account of the major industries of Nepal, they are mainly based on agriculture
sector is most urgent and indispensable for strengthening the base of national
economic structure. Nepal being an under developed country, majority of the farmers
in the villages are very poor. They do not have the sufficient capital to invest in this
sector. The commercial bank has an important role to play here by helping the
agriculture sector through two channels:

By providing fixed capital to Agricultural Development Bank by purchasing its shares

of debentures. By giving direct credit facility to the farmers on the mortgage of their
land, house, food grains and other cash crops like jute, tobacco etc. As the agricultural
development needs capital, the commercial banks are helping by providing financial
help to the farmers and they are able to invest or utilize the fund in different ways that
make them increase agricultural product. Thus in order to accelerate the tempo of
economic development of Nepal, the government and the commercial banks should
play crucial role in the agriculture sector of the economy. Thus, the sound
development and wide geographical coverage of commercial banks particularly in
agriculture is a prerequisite for accelerated and sustained economic growth. In recent
years even though the commercial banks have made rapid progress in mobilizing
financial resources they are still insufficient in their lending policies. The lending
policies of Nepalese commercial banks resemble more closely to those of the 19th
century London banks than 21st century developing institutions. In a way, it would see
apparent that the accelerated private sector investment is dependent on the
commercial banks giving more emphasis in medium and long term credit for
equipment and constructions and more liberal policy on the requests of collateral. In
these respects, in recent years the NBL has been doing some useful services with its
development oriented approach but it goes without saying that there is a long way to
go to this particular field.
Thus commercial banks in Nepal have been helping farmers by providing different
facilities in Nepal. These helps are in the fields of cultivation, exporting rice, jute,
paddy etc. and providing facilities regarding better market for their product helping to
start livestock, poultry firm, rice mills, animal husbandry, bee firm etc. and also
provide the guidance for them.
The role of commercial bank is indispensable for industrial development of Nepal.
Due to insufficiency of capital, industries are depending more and more upon the
supply of capital by the banks. It would not be exaggeration to state that commercial
banks are mainly responsible for whatever the industrial development has been
achieved by Nepal. However many other financial institutions like ADB/N, NIDC
have already been established for the development of agricultural and industrial sector
of the country? The commercial banks are also continuously participating in these
activities. Being a mountainous country, many places are very remote and sometimes
it requires many weeks to approach some of the places. Due to lack of transport and
communication facilities and other geographical causes, the country has been still
facing the problem of imbalances economic growth. The scattered capital of the
country is unable to solve the problem of imbalance of the economy growth.

14
Commercial banks have their appropriate role to play here by expanding their
branches in the different hilly and terrain regions availing loan to the local people. In
industrial sector, commercial banks are providing the necessary financial help for the
industrial establishment in the country. They provide short and medium term loan to
industries to purchase machineries, tools, raw materials etc. and to introduce new and
developed techniques of production.

Without the development of foreign trade, economic development of a country will

not be possible. Nepal has focused its trade with India and Tibet only few years ago.
Today, Nepal’s trade has extended with different countries of the world. Commercial
banks has promoted the domestic and foreign trade of Nepal by spreading their
branches all over the country and extending close relations with many renowned
important by providing them facilities of BD, LC, OBD, TT etc.

Commercial banks are also helping for the development of transport by providing
funds for transport industry. Similarly, banks are playing important role in tourism
industries by helping to expand hotels facilities, dealing with foreign exchange and
accepting traveler cheque from the tourists.

So, the role of commercial banks is extremely important for the development of
industries, trade, commerce, agriculture etc. of the country. In fact, no nation can
develop itself without the development of these banks. It is not only true in the
capitalist countries but also true in the socialist countries and the mixed economic
countries like Nepal as well.

2.1.3 Function of Commercial Bank in Nepal

Commercial Banks deserve their role in more portions to conduct their system. There
are many function of the commercial bank which if furnished below.

Primary function:
Accepting the deposit:
It deals with the collection of deposit which is its first function. The banks also do not
have the entire amount as it also collects the amounts for further purpose. The amount
collected is deposited into their personal accounts by giving guarantees.
In today time, a person does not want to keep the huger amount in their pocket or in
their cupboard because of much offending expectations. People do not want to see
anyone success and stepping upward. Commercial banks provide the trust to them and
convince to deposit their amount in daily, monthly and weekly basis however you get
easy. The amount is deposited into three accounts having three objectives and three
features. Fixed account, Current account and saving account. All the account has
different features. Bank provides the interest of their depositing amount according to
the account.

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Fixed account get high rate of interest than other, then saving account and current
account. The current account has not any barriers of depositing and withdrawing of
the amount because banks do not provide them interest in high portion. But in a fixed
account, there are barriers of time for withdrawing the deposited amount according to
an agreement because it provides you a large percentage of interest. Many people earn
and deposit their amount portion in their personal account according their earning
portion.

Providing loans
The next function of commercial banks is providing the loans to needy people. It
provides the loans to businessman, merchant, farmers and other too who demands. As
the bank collects the deposit, they are invested as loans into the market to gain profit.
The difference between the interest rate that they pay in depositing amount and
providing loans amount is taken as the profit of bank including all the expenses.
Loans are also provided in term wise that is short term, medium term loan and long-
term loan.

The term of the loan is classified according to the amount that he takes a loan. When
there is bound made for paying the loan within or less than one year then it is taken as
a short-term loan. If the contraction is done for paying the loan in less than 3 years
then it is medium loans. Its loan amount is higher than a short-term loan. And the
high terms loan is repaid in and above 5 years. The amount and portion of loan define
the period of time for repayment. Mostly the industrialist and merchant take the long-
term loan because of their large network business and the short-term loan is taken by
a small businessman
Where the short-term loan is mostly taken by Macro industrialist, farmers, and
handicraft industries. The loan is given on the base of mortgage. The mortgage is
evaluated first and then only on the base of it, the loan is provided. Mostly it is
estimated that the bank provides only 40% of the loan after evaluating the value of
assets for giving mortgage loan. The loan is given after the analysis of property of
loan taken taking some days for analyzing.

Secondary functions
Overdraft facilities
It means that some of eth trusted customers are given the facilities of withdrawing the
amount more than deposited amount in their account. The facilities are given only to
reliable customers who are doing their transaction for a long time. This facility is not
given of long-term, it the facilities of short time provided in case of urgency. After
giving these services, bank charges some interest and even deduct from the account
holder’s account after taking these services. These facilities decrease the problems
and hazard of money to the customer for some period of time to get rid of that critical
situation.

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Bills of exchange
This is also one of the honorable services which banks always looks in active mode to
help the coming customers. Bills of exchange are even done before its maturity period
to make easy communication and transaction with the customer. Bank retakes the
amount from the party who had accepted the bills of exchange.Bank pays the
stipulated amount of bills to the holder after deducting some of the commission for
giving services. It is the services of reducing the mental burden of the customer.
Moreover, bills of exchange are referred as promising bills where the promise is made
to pay the amount of money after some period of time or maybe in demands or
according to the instruction and agreement that the bills expose.

Agency functions
This is also one of eth measure function of commercial banks which is taken as the
major strength of the commercial banks. This services gives the easiness and do not
let them tension and or dragged into the maze. After paying these services to the
customer, the bank charges some amount as a commission from their customer or
clients. Some of the major agency functions are:

Remittances
This the major function of sending and receiving the money form the third part from
far distances. There are many clients who receive the money from the foreign country
and even some sent it to from domestic country.Transfer and receipt of money from
one country to another country and even in native lands from places is called
remittance. Moreover, the banks provided the services of transferring the fund directly
into respective person’s accounts by the different medium like drafts, mail transfer
and so on.

Acceptance and payment of different items

Its main function also deals with the collecting of many bills like cheque, dividends,
bills other periodical receipts, rents, exchange bills, discounting bills, offers letter, etc.
on the request and instruction of customer. The customer also wants to solve all extra
problems with the help of the bank if possible.

To deals with that, the bank provides the services of paying the electricity bills,
telecommunication bills, recharge, insurance premium and other taxes on behalf of
the customer request and instructions.

Purchase and sales of securities

Commercial banks also solve the problems of buying and selling stocks, shares,
debentures. Most of the organizations do their transaction through commercial banks
for reliable trust. Both private and government sector do their works of buying and
selling of stocks, shares and different papers by the bridges of commercial bank for
making trustable transaction having proof. When some of any private or governmental
organizations have the necessity of equity of capital, then they use the road of
commercial banks by announcing the number of shares giving the instruction of
paying the amount through commercials banks.

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Services of foreign exchange
The rate of foreign currency and the domestic currency is determined by the Nepal
Rastra bank but it transacted through some other banks. When people from foreign
come to Nepal, they have to change their money into Nepalese money at that time
they use the commercial bank for exchanging the money. Commercial banks convert
their money into Nepalese money for making their visit and landing in Nepal easily.
Commercials banks also charge as a commission after giving these services too.

Trustee and Executor

Commercial banks are also taken as a friend of the customer because they do not keep
anything confidential which will harm the customer rights. Commercial banks do their
dusty very neatly and as trustee. When people make some mistakes, they are even
taught and make them understand the relevant issues. In the same case, when the
person gets out of contact and transaction for a long time, what types of account are
checked and informed for keeping it in active mode. If the account is not transacted
for six months, they become passive. Moreover, when some account holder dies, the
amount in their account is given to the beneficiary person whom he or she has
referred.

Acts as a tax consultant

Commercial banks also give the consultation to their reliable customer and mostly to
great trader who deals with large transaction about tax payment and process of doing
it neatly and cleverly. It provides the instruction, advice, process and law relating to it
to makes the clients more clear about the policy.

Letter of reference
This is also the additional function of commercial banks that it facilitated with. Banks
provide information about their amount that is in their account that is in their account
even from direct or indirect contact. Bank has started the new model’s services for
making the customer satisfied and protecting them. For making these services more
better, now the bank has operated its services is SMS mode. The customers get a
notification through the message of their deposited and withdrawn amount after the
transaction. This service is also taken as the pleasuring servicing to get connected and
informed about the amount of account.

Utility functions
Locker facilities
The commercial bank also provides locker facility to their reliable and good character
customers. Most people do not want to keep expensive jewelry, ornament and
valuable articles or papers at home considering security purposes. The customer wants
to keep it all safe places. Banks is the most secure place to keep all the things safely in
lockers. The customer provides their personal locker and their key where they keep all
their valuable materials. For these services also, they charge the commission. Banks
also provide the loan on the base of gold. In that case, also the customer uses this
locker services.

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Traveler cheque
By keeping the consideration of customer safety in the journey, the bank is providing
the traveler cheque for safe journey many times we have faced with unexpected
problems because of cash loot or theft, pickpocketing. These kinds of crimes are
normally happening with the customer during their long journey. And this issue
makes them irritating and sad in their journey due to the empty wallet and an empty
pocket. So commercial banks provided traveler cheques as a card that avoids the
tension of carrying the cash in the pocket which arises the mental pressure throughout
the journey.

Letter of credit
This is also the more effective function of customers in which banks work as the
mediator of paying the amount to the third party after giving instruction as a letter of
credit. Bank pays the amount to the third party after the agreement and instruction of
account holder. This is mostly done to communicate with foreign trade. The foreign
trader is paid money directly by the bank by standing as a guarantee on behalf of the
first party.

Underwriting the securities

Due to having the largest network and reputed image in the nation by their size and
services, it is also taken as a reliable and faithful financial institution. Securities are
announced by its medium because of the public or common people mostly belief on it.

Creation of money
Commercial banks collect the money from large groups mostly from commerce,
industrialist and provide them loans. The difference between the deposits made by
them and the loan taken by the large gap.People commonly deposit the small amount
of money into their account but takes the huge amount form the money after
depositing the money of many people, it forms a large amount of cash which is used
to provide loans to a needy person. This is also the way of creating money by various
deposits.

ATM banking
Commercial banks are also famous for giving these services in places to places mostly
in crowd area and emergency area like Hospital, Supermarket, Mall, etc. Nowadays
the youth are updating themselves with a change of technology and time. People of
today also want to make their work terminated within a few time because of their
busyness. They do not want to stand in a queue in banks of withdrawing and
depositing the amount. Thus, banks provided the ATM card to the customer who
demands it and charge some amount annually.

Master card
This is also the invisible function of commercial banks because this service is taken
by few people only mostly by the VIP person. The richest person or great

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businessman who makes traveling around the world and another country mostly keep
it in their wallet.

Master card is also called the international card which is used for withdrawing the
money from a bank or ATM anywhere without limits of the territory. Normally, it is
also called a universal card because we can use it anywhere, the giving kind if
services upgrade the value and increase the appreciation of commercial banks. Instead
of giving these services, banks charge some money as commission. Master card
provides the license for using this card anywhere in the world for their easiness. More
withdrawing the more money anywhere in the world, there must be the amount in the
account.

Internet banking
It is also the function of commercial banks which develops the trust of the customer
without reaching to offices. Nowadays a person is busier and wants to compete for
their task by sitting on the chair. That is why the bank is trying to give more and more
standard and dynamite services for protecting the customer and keeping in touch.
Customer also runs to that institution who transform their bunches of works into small
or easier.

Internet banking is such services which reduce the pressure of sending money to
anyone departing to the offices. A person can send their money to anyone account
directly by self and also know about the personal amount and account details. This
service increases the happiness of customer because of their self-control of account.
They can view their account anytime and know about the transaction for these
services, the customer has to notice and requests to provide it. Instead of taking these
services, banks also charge very few amounts and even some do not charge. It is
operated and can be conducted only if the connection is linked with an internet
browser.
Treasury bill
It is also colloquially called T-bills which is one of the major instrument to makes the
economic condition of the nation stable. T-bills are announced by the government for
collecting the money when there occurs the crisis in the economy.
By the via of T-bills, government collect a huge amount from the public of the
country and invest in the different sector for balance the condition. T-bills are also
taken as the short-term loan taken by the government. It is mostly announced at the
time critical situation even government have no anyway and have not money in hands.

Government borrows from the public and again returns it with interest. It has a period
of six months and can be exceeded to one year but not more than that. When the
government announces the T-bills, public invest their amount indirectly through the
commercial banks for belief and trust. Public care gave the draft as proof of payment.
They return the amount with interest in calculating their period of time used by the
government. But the government gives very few interest rates.

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2.1.5 Resources of commercial banks
Commercial Banks have mainly three sources for their advancing. They are follows:

Capital: So far as the capital fund its concerned, it is only a nominal source. Therefore
it cannot be used for investment purposes. This capital fund consists of two elements:
Paid up capital and General reserve.

Deposit: Deposits are the main resources of commercial banks for advancing loans.
Deposits are received from different forms and accounts. There are mainly three types
of deposits: Current, Saving and Fixed. In a developing country like Nepal, where the
majority of the people are still poor, saving deposits have played a significant role for
the development of the country. Therefore, the main source of raising capital is that of
deposit. Ronald (1962) rightly says “The deposits function of the banker is important
because it has to aggregate small sums of money lying scattered here and there
twenties, fifties and hundreds. Singly these sums have no economic efficiency what so
ever but they can accomplish Herculean tasks when they are aggregate and employed
by the banker” (p. 20).

Internal and external borrowing: Internal and external borrowing are very important
for a developing country like Nepal being an underdeveloped country; commercial
banks alone cannot fulfill the necessities of the society. Therefore commercial banks
are allowed to borrow from both two sources External and Internal. Generally
External borrowing means the borrowing from foreign bank, foreign government;
International Bank for Reconstruction and Development (IBRD), International
Monetary Fund (IMF) etc. Internally, commercial banks can borrow from only one
source that is from NRB.

2.1.6 Deposit and its type

Deposit is the most important source of the liquidity for every commercial bank. For
financial strength of banks, it is treated as a barometer. A deposit is the lifeblood of
the commercial banks. Even though, they constitute the great bulk of bank liabilities,
the success of a bank greatly depends upon the extent to which it may attract more
and more deposits. For accounting and analyzing purpose, deposits are categorized in
three headings. They are:

Current Deposit
It is also known as demand deposit. A customer can open a current account with a
bank by making an initial of Rs.100. Any amount may be deposited in this account.
The bank makes a small charge on the customer having current deposit account.

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Saving Deposit
In this deposit, there are restriction on the maximum amount that can be deposited and
also withdrawals from the account. The bank may not permit more than one or two
withdrawals during week.

Fixed deposit
A fixed deposit is one where a customer is required to keep a fixed amount with the
bank for specific periods. He is not allowed to withdraw amount before expiry of the
period. The rate of interest is higher than on other deposit account. During this period
the bank is free to make use this money for granting loans and advances.

2.1.7 Credit Creation by commercial Banks

The creation of credits or deposits is one of the most important functions of
commercial banks. Bankers are dealers of money who deal others people’s money.
Banks generate profits by accepting cash through demand deposits and advance loan
on credit to customers. When a bank advances a loan, it does not pay the amount in
cash. But it opens a current account in his name and allows him to withdraw the
required sum by cheques. But very often, the customer retains certain amount with the
bank in a deposit. In this way, the bank creates credit or deposits. The process is
explained below how the credit is created by the help of deposits.

In the modern banking industry, actual cash withdrawals from the deposit are very
negligible. The bank usually synchronizes the withdrawals and deposits from their
past experience. Thus a bank lends a large part of the money it receives in deposits. If
the bank has more primary deposit, he can lend more keeping small cash in reserve
for day to day transactions. The bank knows that the customer will withdraw money
by cheques which will be deposited by his creditors in the same bank or some other
bank where they have their accounts. Such cheques which are deposited in other
banks are settled through clearing house. The same procedure is follows in other
banks and is settled through clearing house. The same procedure is follows in other
banks. In this way, the bank is able to create credit or deposits by keeping small cash
in reserves and lending the remaining amount. Therefore, the loans make an increase
in the total amount of deposits. These deposits are called derived deposits.

On the other hand, when a bank advances money by discounting a bill of exchange,
the proceeds of the bill are credited to the customer’s account. The deposits of the
customers will then increase. More deposits can make more lending by banks. This is
also one of the ways of creating credit. We know that the bank provides overdraft
facility to a customer on the basis of some security. The bank enters the amount of the
overdraft in the existing account of the customer and the customer is allowed to
overdraw his account up to the fixed limit subject to the condition that the amount
overdrawn from time to time is more than fully covered by the market value of the
securities lodged with the bank. The amount may be used to buy goods and services.

22
He can make payment by issuing cheques in settlement of his transactions. This
process gives the bank an additional supply of money which did not exist before.

A bank also creates a deposit by making investments by buying government bonds

and securities. The bank pays for the bond through a cheque on itself to the central
bank. If it buys such security from others, it creates the amount in the account of the
seller, provided he is the bank’s customer. Otherwise it pays by cheque which is
deposited in some other bank. In all such cases, liabilities and assets in the banking
system on the whole are increased. Thus loans by banks create deposits or credit is
created by banks (Vaidya, 2001:42-44).

2.1.8 Deposits Mobilization

“Collecting scattered small amount of capital through different Medias & investing
the deposited fund in productive sector with a view to increase the income of the
depositor is meant deposit mobilization. In the other words, investing the collecting
fund in the productive sectors & increasing the income of the depositor, it also
supports to increase the saving through the investment of increased extra
amount”.When we discuss about Deposit Mobilization, “we are concerned with
increasing the income of the low income group of people & to make them able to save
more & to invest again the collected amount in the development activities. The main
objective of Deposit Mobilization is to convert idle saving into active saving”.

Saving refers to that part of the total income which is more than the expenditure of the
individual. In other words, saving = Total income – total expenditure. Basically
saving can be divided into two parts: Voluntary saving & Compulsory Savings.
Amount deposited in different accounts of Commercial Bank, investment in
government securities are some examples of voluntary saving. A commercial bank
collects deposit through different accounts like fixed, saving & current. In developing
countries there is always shortage of the capital for the development activities. There
is need of development in all sectors. It is not possible to handle & develop all the
sectors by the government alone at a time, Private people also can not undertake large
business because the per capita income of the people is very low while their
propensity consumes is very high. Due to the low income their saving is very low and
capital formation is also very low. So their saving is not sufficient for carrying on
development work.

To achieve the higher rate of growth and per capita income, economic development
should be accelerated. “Economic development may be defined in a very broad sense
as a process of raising income per head through the accumulation of capital but how
capital can be accumulation in the development countries there are two ways one
from the external and other from the internal sources. In the first gap foreign Aid,
Loans and grants are the main. While in the later, financial institution operating with
in the country, play in a dominant role. In the context of Nepal, commercial bank is
the main financial institution which can play very important role in the resource
23
mobilization for the economic development in the country. Trade, industry,
agriculture and commerce should be developed for the economic development.

Economic development so defined is necessary and sufficient to generate rate of

saving and investment. The generation of high rates of saving and there by investment
is possible only through the commercial banks. Commercial banks occupies greater
role in economic development by generating the saving towards the desired sectors
from one place to another, communicating with its branches and agencies in different
part of the country and the world and advising to the commercial people." Increasing
the income of the low income group of people and making them able to save more,
deposit mobilization helps to invest the collected deposit in desired sector".

The saving growth rate depends among others, on the level of country's per capita
income and its growth rate, population growth rate, interest rate in saving or, on bank
account, banking and financial facilities and net factor income etc. The national
income is the measure of the nation from the economic activities. Saving is the excess
if income over consumption. Investment is the expenditure made for the formation of
fixed capital. Mobilization of saving implies transfer of resources from surplus
spending unit to deficit units. In this connection, financial intermediaries play an
important role in mobilizing of voluntary saving.

The amount of saving of a typical household in Nepal is a small because the people
have limited opportunities for investment. They prefer “to spend saving on
commodities rather than on financial assets. These restricts the process of financial
intermediation, which might otherwise bring such as reduction of investment risk and
increase in liquidity when capital is highly mobile internally, saving from abroad can
also finance the investment needed at home. When capital is not mobile internally,
saving from abroad will limit investment at home.

Insurance of bank deposits, creation of proper atmosphere can increase deposits and
the development of severity of capital markets with the helps of banks will prove
effective in mobilizing the available floating resources in the country.Capital
formation is possible through collecting scattered unproductive and small saving from
the people. This collected fund can be utilized in productive sector to increase
employment and national productivity. Deposit mobilization is the most dependable
and important sources of capital formation. Banking transaction refers to the
acceptance of deposits from the people for granting loan and advances, and returning
the accepted deposit at demand or after the expiry of a certain period. According to
banking rules and regulations, this definition clearly states that Deposit mobilization
is the starting point of banking transactions.

Banking activities can be increase as much as we can mobilize the accumulated

deposit effectively. Deposit, such as current, saving and fixed are the main part of the
working Capital. it is due to this reason that banks keep their deposit mobilization
campaign always in full swing taking resort every possible means laying at their
deposal. “A Commercial bank changes the scattered unproductive small saving into

24
Lon able & active savings. The bank not only collect saving, but also it provides
incentives to the saver & help them to be able to save more”. Commercial banks are
set up with a view to mobilize national resources. The first condition of National
Economic Development is to be able to collect more & more deposit. In this context,
the yearly increasing rate of commercial banks deposit clearly shows the satisfactory
progress of deposit mobilization.

2.1.8.1 Need for Deposits Mobilization

The following are some reasons for why Deposit Mobilization is needed in a
developing country like Nepal. Workshop report “Deposit Mobilization why & how”
Group “A” states the following points as the need for deposit mobilization.Capital is
needed for the development of any sector of the country. The objective of Deposit
Mobilization is to collect the scattered capital in different forms within the country.

It is much more important to canalize the collected deposit in the priority sector of a
country. In our developing country’s we have to promote our business & other sectors
by investing the accumulated capital towards productive sectors.The need of deposit
mobilization is felt to control unnecessary expenditure. If there is no saving, the extra
money that the people have, can flow forwards buying unnecessary & luxury goods.
So, the government also should help to collect more deposit, steeping legal procedures
to control unnecessary expenditures.
Commercial banks are playing a vital role for National Development. Deposit
mobilization is necessary to increase their activities. Commercial banks are granting
loan not only in productive sectors, but also in other sectors like food grains, gold &
silver etc. though these loans are traditional in nature & are not helpful to increase
productivity, but it helps, to some extent, to mobilize bank deposit.To increase saving
is to mobilize deposit. It is because if the production of agricultural & industrial
products increases, it gives additional income, which helps to save more, & ultimately
it plays a good role in deposit mobilization. Deposit mobilization plays a vital role for
the economic development of an under developed & developing country, rather than
developed one. it is because, a developed country does not feel the need of deposit
mobilization for Under Developed Country (UDC) & developing country.

Deposit mobilization plays a great role in such countries. Low National Income, Low
per Capita Income, lack of technical know, vicious cycle of poverty, lack of irrigation
& fertilizer, pressure of population increase, geographical condition etc. are the main
problem of Economic Development of an UDC like Nepal. So far the developments
of these sectors concerned, there is needs of more capital. Again, instead of the
development of a particular sector, the development of every sector should go side by
side. So, the development process of these sectors on one side & to accumulate the
scattered & unproductive sectors deposit on the other is the felt need of an UDC. We
can take this in our country’s present context.

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2.1.8.2 Advantages of Deposit Mobilization
Following points as the advantages of deposit mobilization:

i) Circulation of Idle Money

Deposit mobilization helps to circulate idle money. The meaning of deposit
mobilization is to convert idle saving into active saving. It helps the depositors' habit
of saving on one side, and it also helps to circulate the idle saving into productive
sector on the others. This helps to create incentives to the depositors. Again,
investment in productive sector helps to develop a country's economic development,
and also increase in investors' income.

ii) To Support Fiscal and Monetary Policy

Fiscal policy of the government and monetary policy of the central bank for economic
development of a country can be supported by deposit mobilization. It helps to
canalized idle money into productive sectors. Again it helps in the money supply,
which saves the country from deflation and helps central banks objectives of
monetary policy.

iii) To Promote Cottage Industries

It is needed to facilitated cottage industries located in rural and urban areas. If the
bank utilized the collected deposit in the same rural or urban sector for the
development of the cottage industries, it is helpful not only to promote cottage
industries in the area, but also support in the development in the locality as a whole
increasing employment and income of the local people.

iv) Formation of Capital

Capital plays a vital role for the development of industries. But in an underdeveloped
country, there is always lack of capital to support such industries. Capital formation
and industrialization is possible through deposit mobilization.

v) Development of Banking Habit

One important side of economic development of a country is to increase banking habit
in the people. Deposit mobilization helps in these aspects. If there is proper deposit
mobilization, people believe on the bank and banking habit develops on the people.

vi) To Check up Miss Utilization of Money

Mostly our customs and habit are supported by social and religious believes. There is
also tendency of copying others and to show there superiority buying unnecessary and
luxury items in our society. In such society, deposit mobilization proves a tool to
check up miss utilization of money.

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vii) To Support Government Development Project
Every underdeveloped country's government needs a huge amount of money for
development project. The deposit collected by the commercial banks can fulfill to
some extent the need of money to the government.

vii) Co-ordination between Different Sectors

It helps to collect capital from surplus and capital hoarding sector. The fund can be
invested for the needy sectors. Thus, it helps to fulfill the gap between these two
different sectors. Earning interest in their deposit and the needy sector by receiving
loans and advances benefits the surplus and hoarding sectors, thus it helps to keep
good co-ordination between different sectors.

viii) Others
Deposit mobilization supports small savers by earning interests, helps to the
development of rural economy, protects villagers from being exploitation of
indigenous bankers, increase investment incentives, and provides facilities to the
small farmers to purchase tools and fertilizers.

2.2 Empirical review

2.2.1 Review of published studies
In this subject, effort has been made to examine and review some of the related
articles published in different economic journals, Bulletin of World Bank, dissertation
papers, newspapers, researchers view and finding towards fixed deposit and other
related books.
Shrestha (2014) has concluded that the credit deposit ratio would be 51.30%, other
things remaining the same in Nepal, which was the lowest under the period of review.
Therefore , he had strongly recommended that the joint venture banks should try to
give more credit entering new field as far as possible, otherwise, they might not be
able to absorb even the total expenses.
Shrestha (2015) has found in the following issues, in case of investors having lower
income, portfolio management may be limited to small saving incomes. However, on
the other hand, portfolio management means to invest fixed in various schemes of
mutual fixed like deposits, shares and debentures for the investors with surplus
income. Therefore, portfolio management becomes very important both for individual
as well as for institutional investors. In order to prepare structure and modus operandi
of effective portfolio management, Shrestha has presented the following approaches
to be adopted.

To find out the investing assets ( generally securities) having scope for better returns
depending upon individual characteristics like age, health, need deposition, liquidity
and tax liquidity etc.
27
To find out the risk of securities depending upon the attitude of investor towards risks.
To develop alternative investment strategies for selecting a better portfolio this will
ensure a trade-off between risk and return so as to attain the primary objective of
wealth maximization at lowest risk. To identify variety of securities for investment to
refuse volatility of returns and risk.

Bajracharya (2016) has concluded the deposit of domestic saving is one of the prime
objectives of monetary policy in Nepal. For this purpose, commercial banks stood as
the active and vital financial intermediary for generating resources in form of deposit
of the investors in different aspects of the economy. Researcher has explained that
commercial banks only can play an important role to mobilize the national saving.
Now days other financial institutions like finance companies, cooperative societies
have been established actively to mobilize deposits in the proper sectors so that return
can be ensured from the investment.

Sharma (2017) has same results that all the commercial banks are establishing and
operating in urban areas, in this study. Researcher further concluded that due to the
lack of investment avenues, banks are tempted to invest without proper credit
appraisal and on personal guarantee, whose negative side effects would show colors
only after four or five years. Private commercial banks have mushroomed only in
urban areas where large volume of banking transaction and activities are possible.

Pradhan (2018) has done a research for which he carried out a survey of 78
enterprises. Through his research entitled, Financial Management Practices in Nepal,
he found some of the major features of the Nepalese financial management.
According to him most important one appeared to be maintaining good relation with
stockholder. The finding reveals that banks and retained earnings are most widely
used financing sources. Most enterprises do not borrow from one bank only and they
do switch between banks to banks whichever offers best interest rates. Most
enterprises find that one year are more popular in public sector where as banks loan of
1-5 years are more popular in private sector. In period of light money, the majority of
private sector enterprises fell that bank will treat all firms equally while public sector
does not feel so. Similarly, he concluded that the majority of enterprises in traded
sector find that bank’s interest rate is just right while the majority of non- traded
sector find that the sum is one higher side.

2.2.2 Review of unpublished thesis report

Before this study, various studies regarding the various aspects of commercial banks
such as fixed deposit mobilizing policy, financial performance, and investment policy,
lending policy, interest rate structure, resources deposit and capital structure have

28
been conducted in several thesis works. Some of them, which are relevant for this
study, are presented below:

Roy (2014) has conducted the study with the main objective of evaluating liquidity
activity & profitability ratio of RBB in comparison with NBL & industry average by
using different financial ratios as well as to use trend analysis to compare loan and
advances, total investment, total deposits and net profit of RBB and compare the same
with others two. From this research, he found that RBB has good deposit collections,
enough loan and advances and small investment in government securities. The assets
management ratio of RBB is not better than that of NBL. The profitability position of
RBB is worse in comparison with NBL due to low return on working fixed deposit,
loans and advances and outside assets.

Poudyal (2014) has conducted the study that entitled with objectives of analyzing the
repayment position of the priority sectors. In addition, to find trends of priority sectors
loan by using trend analysis method from this research, he conducted that the
procedure of loan sanction is rather slow and clumsy. Moreover, bank was not able to
fulfill the proposed target of corresponding loan to the priority sector.

Karki (2014) has conducted study with the objectives of finding out the relationship
between deposit, loans & advances, total investment, net profit as well as analyzing
the effectiveness of deposit of RBB, Lahan branch and to analyze the deposit
projection for next five years of RBB, Lahan branch by using graphical methods.
From this research, he found that interest rate has not influenced the deposit collection
as well as lending sector of the banks. Due to the lengthy lending, the credit
experience is unsatisfactory. The procedure of loan granting is very slow and time
consuming; the bank has good deposit collection, enough loan and small investment
in securities.

Subedi (2014) has conducted the study during the period from 1996 to 2000. The
main objectives of the study were to compare investment policies of the sampled bank
as well as analyze the deposit utilization and its projection for next five years of HBL
& EBL. And find out relationship between total investment, deposit and loans &
advances, net profit and outside assets and to compare them. He outlined his major
findings as follows:

The mean of total loans and advances to total saving deposits ratio of EBL is greater
than that of HBL and the coefficient of variation between the ratios of HBL is less
than EBL. It means at the variability of the ratios of HBL, is more uniform than EBL.
The analysis found that EBL is more employing its saving deposits in term of loans
and advances than that of HBL. So , loans and advances to total saving deposits ratio
appear better in EBL than HBL.

29
The mean ratio of total investment to total deposits of EBL is significantly greater
than that of HBL but the coefficient of variance between the ratios of HBL is less than
EBL. It means that the variability of the ratio of HBL is more consistent than that of
EBL. According to analysis, it is found that EBL is more successful in utilizing its
resources on investment. However, he failed to give his overall conclusion regarding
the superiority of the financial performance of these two banks during the period of
his study.

Shahi (2014) has conducted the study with the main objectives to evaluate the
liquidity, assets management, efficiency, profitability, and risk position of Nepal Bank
Ltd. As well as to discuss fixed deposit & investment policy of Nepal Bank Ltd. With
respect to its financial position and performance in comparison to joint venture bank
by using different financial ratios, the finding of the study are liquidity position of
NBL is comparatively better than that of joint venture banks. Highly fluctuating
liquidity position shows that the bank has not formulated any stable policy. It can also
be concluded that NBL has more portion of current assets as loan and advances but
less portion or investment on government securities.

Shrestha (2015) has conducted the study with the main objectives of the study were
comparing investment policy of concerned banks, discussing about the fixed deposits
of the sampled bank, finding out empirical relationship between total investment with
deposit, loans & advances and net profit and outside assets. The other objectives were
comparing and analyzing the deposit utilization with its projection to next five years
of SCBNL and NABIL by using different statistical tools and sources & uses of fixed
deposit. He has concluded with the study that both have good deposit collection.
NABIL has the highest cash and bank balanced to total deposit, cash and bank
balance to current ratio. This makes the bank to be in good position to meet the daily
cash requirement as well as SCBNL has successfully maintained and managed its
assets towards different income generation activities. SCBNL has made high portion
of total working fixed deposit in investment on government on share and debentures
of other companies.

Joshi (2015) has conducted the study with objectives of comparing investment policy
of concerned banks, discussing about the fixed deposit of the sampled bank and
finding out empirical relationship between total investment, deposit and loans &
advances and net profit and outside assets and comparing them by using different
financial ratios. From this research, he concluded that both have good deposit
collection. EBL has the highest cash and bank balance to total deposit, cash and bank
balance to current ratio. This makes the bank to be in good position to meet the daily
cash requirement. SCBNL has successfully maintained and managed its assets
towards different income generation activities. SCBNL has made high portion of total
working fixed deposit in investment on government on share and debenture of other
companies.

30
TerefeKaba(2019) has conducted the study with the main objective to determine the
effect of advertising and publicity, effect of bank branch, effect of exchange rate,
inflation, loan and advances, money supply and nominal gross domestic product on
CB’s deposit growth. The secondary data were used for the analysis. The ratio scale
was used to measure the independent variables and the dependent variables. The
result of the study shows that none of the CLRM assumptions was violated. The
regression results shows the change in branch, exchange rate, loan and advances, and
nominal GDP have positive and statistically significant effect on the banks’ deposit
growth, as well as advertising and publicity has positive but statistically insignificant
effect on banks’ deposit growth. In other side average annual inflation rate and change
in money supply have negative but statistically significant effect on the bank deposit
growth.

Shrestha(2020) has conducted study with the main objective to determine impact of
deposit on performance of banks. Only the fixed deposit aspects were analyzed in her
thesis. Other performances of the organization were fully neglected. The sample
banks were EBL, HBL and NIBL. The study was under secondary data. Financial
tools and statistical tools were used for the find out the result. The finding shows that
the NIBL has the better liquidity position; EBL is comparatively successful to invest
in productive sectors and has mobilized its collected deposit to provide loan and
advances. HBL is better in investment on share and debenture to total working fund,
NIBL is better in return on total working fixed deposit. The growth ratio of deposit,
loan and advances and net profit EBL holds better position. In the side of growth in
investment NIBL seems more better than EBL and HBL.

2.2.3 Literature review Matrix

The credit deposit ratio would be 51.30%, other things

remaining the same in Nepal, which was the lowest under
the period of review. Therefore he had strongly
1 Shrestha R. 2014 recommended that the joint venture banks should try to
give more credit entering new field as far as possible,
otherwise, they might not be able to absorb even the total
expenses.

The issues, in case of investors having lower income,

portfolio management may be limited to small saving
incomes. However, on the other hand, portfolio
Shrestha management means to invest fixed in various schemes of
2 2015
R.L. mutual fixed like deposits, shares and debentures for the
investors with surplus income. Therefore, portfolio
management becomes very important both for individual
as well as for institutional investors.

31
 Study concluded the deposit of domestic saving is one of
the prime objectives of monetary policy in Nepal. For this
Bajracharya purpose, commercial banks stood as the active and vital
3 2016
B.B financial intermediary for generating resources in form of
deposit of the investors in different aspects of the
economy.

From this research, he found that RBB has good deposit

collections, enough loan and advances and small
investment in government securities. The assets
4 Roy J. 2014 management ratio of RBB is not better than that of NBL.
The profitability position of RBB is worse in comparison
with NBL due to low return on working fixed deposit,
loans and advances and outside assets.

This research, he conducted that the procedure of loan

sanction is rather slow and clumsy. Moreover, bank was
5 Poudyal R. 2014
not able to fulfill the proposed target of corresponding
loan to the priority sector.

The findings of this study was mean of total loans and

advances to total saving deposits ratio of EBL is greater
than that of HBL and the coefficient of variation between
the ratios of HBL is less than EBL. It means at the
6 Subedi K. 2014 variability of the ratios of HBL, is more uniform than
EBL. The analysis found that EBL is more employing its
saving deposits in term of loans and advances than that of
HBL. So , loans and advances to total saving deposits ratio
appear better in EBL than HBL.

From this research, he concluded that both have good

deposit collection. EBL has the highest cash and bank
balance to total deposit, cash and bank balance to current
ratio. This makes the bank to be in good position to meet
7 Joshi S 2015 the daily cash requirement. SCBNL has successfully
maintained and managed its assets towards different
income generation activities. SCBNL has made high
portion of total working fixed deposit in investment on
government on share and debenture of other companies.

32
 The finding shows that the NIBL has the better liquidity
position; EBL is comparatively successful to invest in
productive sectors and has mobilized its collected deposit
to provide loan and advances. HBL is better in investment
8 Shrestha A. 2020 on share and debenture to total working fund, NIBL is
better in return on total working fixed deposit. The growth
ratio of deposit, loan and advances and net profit EBL
holds better position. In the side of growth in investment
NIBL seems more better than EBL and HBL.

2.4 Research gap

There are various researcher conducts on lending practices, credit policy, financial
performance and credit management of various commercial banks. Some of the
researchers have done the financial performance between three different commercial
banks. In order to perform those analysis researchers have used various ratio analysis.
The past researchers in measuring financial performance of bank have been focused
on the limited ratios, which are incapable to solving problems. In this research various
ratio are systematically analyzed and generalized. Past researchers are not properly
analyzed about deposit on bank and its impact on the profitability. The ratios are not
categorized according to nature.

This study comprises of three joint venture banks EBL, HBL,SCBNL and one
government owned bank RBB. This study is also different from the previous studies
in view of the time period its covers. During this period of the country has witness
political uncertainty, deteriorating security situation that have rendered the economy
further sluggish. There has been restructuring in the banking business. In previous
studies some researchers were focused on only particular types of deposit, but in this
study total deposit focused to analyze the effect of deposit on the performance of the
banks.

The job conducting research and preparing report is difficult in itself especially to the
unprofessional person like a student. Researcher has tried to make this thesis as a
complete outcome of the research on mentioned topic from the best of my effort and
knowledge. Researcher wants to prove that this research is an original one and should
be the foundation for the future researcher to know about the problem of deposit
procedures of commercial banks (Shrestha, 2020).

33
 CHAPTER - 3
RESEARCH METHODOLOGY

This chapter presents the research methodology of the study. It describes and justifies
the methods and processes that were used in order to collect data in answering the
research questions. The chapter also focuses on the research design that was adopted ,
sampling techniques , the key study variables and units of analysis. The rest are the
sources of data and methods of data collection as well as methods of data analysis . it
explains the type of data used for the study and the techniques employed that how
commercial banks are mobilizing deposits.

3.1 Research Design

A research design is the arrangement of condition for collection and analysis of data
in a manner that aims to combine relevance to the research purpose with economy in
procedure. For the analysis of the Deposit Mobilization of EBL, HBL, RBB and
SCBNL descriptive design applied to achieve the objective of the research.

3.2 Population and Sample

There are altogether 27commercial banks are in operation in Nepal. In this study, the
deposit mobilization of SCBN,EBL,HBL& RBB is studied. 27 commercial banks are
taken as the population and SCBN, EBL,HBL& RBB is chosen as the sample by
using convenience sampling method to find the condition of deposit mobilization.

3.3 Source of Data collection

This study is conducted on the basis of secondary data. The data relating to the
investment, deposit, loan & advances, assets, & profit are directly obtained from the
balance sheet & profit & loss a/c of concerned bank’s annual reports. Supplementary
data & information are collected from number of institution & regulating authorities
like NRB, security exchange board, Nepal stock exchange Ltd, ministry of finance
budget speech of different fiscal years, economic survey & national planning
commission etc.

3.4 Method of Analysis

To achieve the objectives of the study, various financial, statistical & accounting tools
have been used in this study. The analysis of data will be done according to pattern of
data available. Because of limited time & resources, simple analytical statistical tools
such as graph, percentage, Karl Pearson’s coefficient of correlation, & the method of
least square, are adopted in this study. Especially descriptive analysis method is used
for the study.The various calculated results obtained through financial, accounting

34
&statistical tools tabulated under different heading and these are compared with each
other. Major tools used for the analysis of collected data are:

3.5 Data collection procedure

Thesis work is based on financial as well as statistical analysis. Some major tools and
techniques applied for making the thesis work more presentable are briefly considered
below:

3.5.1 Financial tools (Ratio Analysis)

In this unit the financial position of the banks are observed. Especially the ratio
analysis technique is applied for financial analysis of total commercial banking
system and sampled banks in this unit. An arithmetical relationship between two
figures is known as ratio. It is computed by dividing one item of relationship with the
other. Ratio simply means one number expressed in terms of another.

Ratio analysis is a technique of analysis & interpretation of financial statement. To

evaluate the performances of an organization by creating the ratios from the figure of
different accounts consisting in balance sheet & income statement is known as ratio
Analysis. Ratio analysis is also very helpful for decision making. From the
information provided by ratio analysis with the help of financial statement are very
useful for making decision on any financial activity. Due to inter-firm comparison
ratio analysis also serves as a stepping stone to remedial measures. It helps
management in evolving future market strategies’.

I. Liquidity Ratios

Liquid Assets to Total Assets ratio = liquid assets

Total assets
Liquid fund to total deposit ratio = liquid fund
Total deposits
Cash& bank balance to current assets ratio = cash & bank balance
Current assets

35
i. Assets Management Ratios

Total deposit to total liabilities ratio = Total deposit

Total liabilities

Loan and advances to total deposit ratio = loan and advances

Total deposits
Total investment to total deposit ratio = Total investment
Total deposits

Loan and advances to total assets ratio = loan and advances

Total assets
Investment on government bond to
total deposit ratio Investment on government bond
Total deposit

iii. Profitability Ratios

Return on Equity = Net profit

Total equity capital
Return on Investment = Net profit
Cost of Investment

iv. Growth Ratios

Growth ratio of deposit
Growth of loan and advances
Growth of investment
Growth of return

36
3.5.2 Statistical tools
In this study, some important statistical tools have been used to present and analyze
the data for achieving the objectives. Such as coefficient of correlation between
different variables, trend analysis of important variables.

Mean
The most popular and widely used measure of representing the entire data by the one
value is known as average. Its value is obtained by adding together all times and the
summation of times is divided by the number of sample banks period. If the past items
of the sample period are Xt ,number of periods are n then the mean is defined as
follows:
∑𝑋
𝑋̅ =
𝑁

Standard Deviation
The measurement of the scatter ness of the mass of figure in a series about an average
is known as dispersion. The standard deviation measures the absolute dispersion. The
greater the amount of dispersion, larger will be the standard deviation. A small
standard deviation means a high degree of uniformity of the observation as well as
home gently of a series; a large standard deviation means just the opposites. In this
study, standard deviation of different ratio is calculated.
S.D. = √ ∑x ² - (∑x) ²
N N

Co-efficient of variance (C .V)

The co-efficient of variance is the relative measurement of dispersion, comparable
across distribution, which is defined as the ratio of the standard deviation to the mean
expressed in percentage. It is calculated as.
C.V = S.D_ × 100%
Mean
Where,
Standard deviation (S.D.) = √∑x ² - (∑x) ²
N N

Correlation Coefficient
The correlation coefficient is the specific measure that quantifies the strength of the
linear relationship between two variables in a correlation analysis. The coefficient is
what we symbolize with the rin a correlation report. For two variables, the formula

37
compare the distance of each data point from the variable mean and uses this to tell us
how closely the relationship between the variables can be fit to an imaginary line
drawn through the data. This is what we mean when we say that correlation look at
linear relationships. It can be calculated as:

𝑁∑𝑥𝑦 − (∑𝑥)(∑𝑦)
𝒓=
√[𝑁∑𝑥2 − (∑𝑥)2] [𝑁∑𝑦2 − (∑𝑦)2]

Where,
∑x = Independent variable
∑y = Dependent variable
N = Total number of observation

Regression analysis

Regression coefficient is a statistical measure of the average functional relationship

between two or more variables. In regression analysis, one variable is considered as
dependent and other as independent. Thus, it measures the degree of dependence of
one variable on the other. Regression coefficient is calculated as:

Yi = β0 + β1Xi + ∈ 𝑖

Where,

Yi = Dependent Variable

β0 = Population Y intercept

β1 = Population Slope Coefficient

Xi = Independent Variable

Ei = Random Error term

38
 CHAPTER -4
RESULT AND DISCUSSION
This is an analytical chapter, which primarily deals with the presentation and analysis
of data collected from various sources with a view to measure the various dimensions
of the problems of the study that particularly affects the investment management and
fund mobilization of EBL, HBL, RBB& SCBNL.

4.1 Data presentation and analysis

4.1.1 Financial tools

Liquidity ratio
a) Cash and bank balance to total deposit ratio

Cash and bank balance are the most liquid current assets, which is said to be the first
defense of every bank. This ration measures the availability of a bank’s highly liquid
and immediately available fund to meet its unanticipated call on all type of deposits.
This ratio is computed by dividing cash and bank balance by total deposits. Higher
ratio shows higher liquidity position and ability to cover the deposit and vice versa.

Cash and bank balance to total deposit ratio = Cash and bank balance
Total deposit

Table: 4.1
Cash and Bank Balance to Total Deposits Ratio (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL

2015/16 21.9789 7.3013 15.0164 5.6938

2016/17 19.2678 7.9209 10.625 12.708

2017/18 19.24 10.2525 5.8794 13.1427

2018/19 18.4097 9.2468 6.7323 16.3177

2019/20 16.091 14.9683 7.7919 6.5206

Mean ( X ) 18.99 9.94 9.21 10.88

S.D.(  ) 1.89 2.72 3.32 4.10

C.V.(in%) 9.94 27.34 36.001 37.67

Source: Appendix 1

39
 Figure: 4.1
Cash and Bank Balance to Total Deposits Ratio

Chart Title
20
Cash & Bank balance 18
16
14
12
10
8
6
4
2
0
EBL HBL RBB SCBNL
Commercial Bank

From the above analysis, cash and bank balance to total deposits ratio of the sample
banks followed a fluctuating trend. The higher ratio of EBL is 21.9% in year 2015/16,
HBL has higher ratio of 14.97% in year 2019/20, RBB has 15.02% in year 2015/16
and SCBNL has higher ratio of 16.31% in fiscal year 2018/19 respectively. The
average ratio of EBL is greater than other banks (i.e. 18.99%>9.94%, 9.21%, and
10.88%). The variability of the ratio of EBL is lower than sample banks.

(b) Cash and Bank Balance to Current Assets Ratio

This ratio reflects the proportion of cash and bank balance out of total current assets.
It can be calculated as follows:

Cash and bank balance to Current assets ratio = Cash and bank balance
Current assets

40
 Table: 4.2
Cash and Bank Balance to Current Assets Ratio (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL
2015/16 22.6215 8.2703 19.8658 7.6744
2016/17 18.4683 8.6239 13.2153 13.3464
2017/18 17.9975 10.0433 6.0497 11.3639
2018/19 16.6085 9.0115 8.1629 15.3286
2019/20 15.2146 14.1169 8.1594 6.0522
Mean ( X ) 18.18 10.01 11.09 10.75
S.D.(  ) 2.14 2.49 4.98 3.45
C.V.(in%) 13.72 21.33 44.92 32.11
Source: Appendix 1

Figure: 4.2
Cash and Bank Balance to Current Assets Ratio

Chart Title
20
18
Cash & Bank balance

16
14
12
10
8
6
4
2
0
EBL HBL RBB SCBNL
Commercial Bank

Both banks have maintained the cash and bank balance to current assets in fluctuating
trend. EBL has maintained fewer ratios than other sample banks. The highest ratio of
the EBL is 22.62% in year 2015/16 among sample banks (i.e. HBL 14.11%, RBB
19.86% & SCBNL 15.32%). As well as the lowest ratio of EBL 15.21 % is in year
2019/20. EBL has the lowest standard deviation and coefficient of variation among all
sample banks.

41
(c) Investment on Government Securities to Current Assets Ratio
Investment on government securities to current assets ratio reflects the current assets
invested on government securities, treasury bills and development bonds. Though the
government securities are not so liquid as cash & balance, they can be easily sold in
the market or they can be easily converted into cash in other ways and they are risk
free too.

This ratio shows that out of total current assets, how much percentage of it has been
occupied by the investment on government securities. This ratio is calculated by
dividing the amount of invested on government securities by current assets.
Invt. On Govt. Securities to Current assets = Inv. On Govt. Securities
Current assets

Table: 4.3
Investment on Government Securities to Current Assets Ratio (Rs in Million)

Fiscal Year EBL HBL RBB SCBNL

2015/16 11.3775 12.2074 26.3952 17.6112

2016/17 8.6058 9.3373 21.6111 7.4611

2017/18 11.7256 5.3164 14.1444 5.6976

2018/19 14.3262 5.602 24.3239 13.9747

2019/20 20.9317 5.8222 32.7298 12.4002

Mean ( X ) 13.39 7.66 23.84 11.43

S.D.(  ) 4.18 2.71 6.08 4.34

C.V.(in%) 31.23 35.33 25.50 37.98

Source: Appendix 1

42
 Figure: 4.3
Investment on Government Securities to Current Assets Ratio

Chart Title
30

Investment on Govt. Securities

25

20

15

10

0
EBL HBL RBB SCBNL
Commercial Bank

All banks has invested their fund in government securities in variable trend.. HBL has
invested low portion of current assets in government securities i.e. 7.66% in the year
2018/19and high portion in the year 2015/16 i.e.12.20%, EBL has lowest portion of
current assets in government securities in year 2016/17 i.e. 8.65% and highest portion
20.93% in year 2019/20 as well as SCBNL has lowest portion of current assets in
government securities in 2017/18 i.e. 5.69% and highest 17.61% in year 2015/16. The
mean ratio of RBB is higher among sample bank (i.e. 23.84% >13.39%, 7.66%,&
11.43%). SCBNL seems more variable in investing its current assets than that sample
banks.

4.1.2 Assets Management Ratio

Assets management ratio measures the efficiency of the bank to manage its assets in
profitable and satisfactory manner. A commercial bank must manage its assets
properly to earn high profit. Under this chapter following ratio are studied:

(a) Loan and Advances to Total Deposits Ratio

The ratio measures the extent to which the banks are successful to mobilize their total
deposits on loan and advances. We have,

Loan and advances to total deposit = Loan and advances

Total deposit

43
 Table: 4.4
Loan and Advances to Total Deposits Ratio (Rs in Million)

Fiscal Year EBL HBL RBB SCBNL

2015/16 72.5394 77.5695 55.9329 56.1718

2016/17 81.2747 82.2495 66.5197 61.4716

2017/18 81.5348 87.0404 74.0355 69.6323

2018/19 86.4465 89.1057 77.4875 73.4616

2019/20 82.9488 85.201 67.2713 59.9192

Mean ( X ) 80.95 84.23 68.25 64.13

S.D.(  ) 4.59 4.022 7.41 6.41

C.V.(in%) 5.67 4.78 10.86 9.99
Source: Appendix 2

Figure: 4.4
Loan and Advances to Total Deposits Ratio

Chart Title
90
Loan & Advance to total Deposit

80
70
60
50
40
30
20
10
0
EBL HBL RBB SCBNL
Commercial Bank

A high ratio of loan and advances indicates better mobilization of collected deposits
and vice versa. But it should be noted that too high ratio might not be better from
liquidity point of view. The above comparative table shows that these sample banks
have mobilized their collected deposits in variable trend. The highest ratio of EBL &
HBLis 80.95% and 84.23% respectively. In average EBL & HBL has mobilized
80.95% and 84.23% of its collected deposit in loan and advances that is more than
that of RBB & SCBNL. EBL and HBLseems to be more consistent in mobilizing its

44
total deposits as loan and advances than that of RBB & SCBNL due to low coefficient
of variation.

(b) Total Investment to Total Deposits Ratio

Total investment to total deposit ratio indicates how properly firm deposit have been
invests on government securities and share and debenture of the other companies.
This ratio can be computed by dividing the total investment by total amount of
deposit collections.

Total Investments to Total deposit = Total Investment

Total Deposit

Table: 4.5
Total Investment to Total Deposits Ratio (Rs. In Million)
Fiscal Year EBL HBL RBB SCBNL

2015/16 19.415 21.1056 29.9152 41.4423

2016/17 12.5818 19.3035 24.9227 24.4736

2017/18 13.4655 11.9733 15.181 6.9504

2018/19 16.8017 15.5147 21.4625 15.2317

2019/20 20.3514 15.1817 32.5739 13.743

Mean ( X ) 16.52 16.62 24.81 20.37

S.D.(  ) 3.10 3.23 6.17 11.93

C.V.(in%) 18.75 19.45 24.86 58.56
Source: Appendix2

45
 Figure: 4.5

Total Investment to Total Deposits Ratio

Chart Title
30

Total Investment on Deposit

25

20

15

10

0
EBL HBL RBB SCBNL
Commercial Bank

From the study of mean ratio we can conclude that, RBB has mobilized its collected
deposits on investment better than sample banks. . RBB has lowest ratio of 15.18% in
the year 2017/18 and highest ratio of 32.57% in the year 2019/20.The coefficient of
variation of NABIL is 38.87% which is more than that of NCC. SCBNL has highest
coefficient of variance 58.56% among sample banks.

(c) Loan and Advances to Total Working Fund Ratio

This ratio reflects the extent to which the commercial banks are success in mobilizing
their assets on loan and advances for the purpose of income generation. A high ratio
indicates better mobilization of fund on loan and advances and vice versa. We have,

Loan and advances to Total working fund ratio = Total loan and advances

Total working fund

46
 Table: 4.6
Loan and Advances to Total Working Fund Ratio (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL
2015/16 84.457 90.3285 81.9063 78.4328
2016/17 85.4731 91.7313 89.1534 66.3867
2017/18 83.7622 86.8238 80.467 61.4932
2018/19 89.4926 89.0414 98.329 70.8159
2019/20 90.6258 82.5581 73.736 56.7414
Mean ( X ) 88.76 86.10 84.72 66.77

S.D.(  ) 2.77 3.21 8.38 7.50

C.V.(in%) 3.19 3.64 9.90 11.23
Source: Appendix 2

Figure: 4.6
Loan and Advances to Total Working Fund Ratio

Chart Title
100
90
80
Loan & Advance

70
60
50
40
30
20
10
0
EBL HBL RBB SCBNL
Commercial Bank

During the study period EBL has highest ratio of 88.76% and lowest ratio of 83.72%
in the year 2017/18 and respectively whereas HBL has highest ratio of 91.73% and
lowest ratio of82.56%% in the year2016/17and 2019/20 respectively. RBB has
highest ratio in year 2018/19 is 98.33% and the lowest 73.74% in year 2019/20. As
well as SCBNL has lowest ratio in 2019/20 is 56.74% and the highest is 78.43% in
year 2015/16. The mean ratio of SCBNL is 66.77%, which is slightly lower than other
sample banks. Coefficient of variation of EBL is lower than comparison of other
sample banks.

47
(d) Investment on Government Securities to Total Working Fund Ratio

The main purpose of this ratio is to examine that portion of commercial banks total
working fund that has been invested into different government securities. This ratio is
calculated by dividing investment on government securities by total working fund.

Inv. On Govt. Securities to Total working fund = Inv. On Govt. Securities

Total working fund

Table: 4.7
Investment on Govt. Securities to Total Working Fund Ratio (Rs in Million)

Fiscal Year EBL HBL RBB SCBNL

2015/16 12.8704 12.5498 29.217 18.2442
2016/17 9.4422 9.5648 23.2872 6
2017/18 12.8805 5.4136 14.9404 5.5578
2018/19 16.4393 5.7441 25.4566 14.3405
2019/20 24.1863 5.9819 34.2593 12.651
Mean ( X ) 15.16 7.85 25.43 11.36

S.D.(  ) 5.02 2.79 6.43 4.91

C.V.(in%) 33.14 35.52 25.30 43.19
Source:Appendix2

Figure: 4.7
Investment on Government Securities to Total Working Fund Ratio

Chart Title
30
Investment on Govt. Securities

25

20

15

10

0
EBL HBL RBB SCBNL
Commercial Bank

48
Above analysis shows the investment on government securities to total working fund
ratio in fluctuating trend. EBL has 24.19%, the highest ratio in the year 2019/20 and
9.44% the lowest ratio in the year 2016/17. HBL, RBB & SCBNL has highest ratio
12.54%, 34.26% and 18.24% in years 2015/16, 2019/20 and 2015/16 respectively as
well as they have lower ratio in year of 2017/18 is 5.41%, 14.94% and 5.56%. RBB
has higher mean ratio among all sample banks (i.e.25.43%>15.16%, 7.85% &
11.36%). HBL has lower standard deviation and higher coefficient of variation than
other sample banks.

(e) Investment on Shares and Debentures to Total Working Fund Ratio

The main purpose of this ratio is to examine that portion of commercial banks total
working fund that has been invested into investment on share and debentures. This
ratio is calculated by dividing investment on share and debenture by total working
fund.

Inv. on Shares and Debenture to Total working fund = Inv. On Share and Debenture

Total working fund

Table: 4.8
Invt.on Shares and Debentures to Total Working Fund Ratio (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL
2015/16 0.0942 0.2719 0.2062 0.1403
2016/17 0.0839 0.2448 0.2362 0.0947
2017/18 0.0245 0.0064 0.2663 0.0737
2018/19 0.0221 0.016 0.4275 0.0713
2019/20 0.717 0.0174 0.3906 0.0558
Mean ( X ) 0.19 0.11 0.31 0.09

S.D.(  ) 0.27 0.12 0.09 0.03

C.V.(in%) 141.22 108.20 28.67 33.63
Source: Appendix2

49
 Figure: 4.8
Investment on Shares and Debentures to Total Working Fund Ratio

Chart Title
0.35

Investment on share & Debenture

0.3
0.25
0.2
0.15
0.1
0.05
0
EBL HBL RBB SCBNL
Commercial Bank

Comparatively, RBB has the greater volume of investment than that of NABIL in average
(i.e. 0.31%>0.11%, 0.19% & 0.09%). All banks followed a fluctuating trend in investing
shares and debentures from total working funds. SCBNL has lower standard deviation than
other sample banks. As well as RBB has lowest coefficient of variance than other sample
bank (i.e.28.67% < 141.22%, 108.20% & 33.63%).

4.1.3 Profitability Ratios

(a) Return on Equity (ROE)

The return on equity ratio is a profitability ratio that measures the ability of a firm to
generate profits from its shareholder’s investment in the company. In other words,
the return on equity ratio shows how much profit each dollar of common
stockholder’s equity generates.

So a return on 1 means that every dollar of common stockholder’s equity generates 1

dollar of net income. This is an important measurement for potential investors
because they want to see how efficiently a company will use their money to generate
net income. ROE is also an indicator of how effective management is at using equity
financing to fund operations and grow the company return on equity ratio formula is
calculated by dividing net income by shareholder’s equity.

Return on Equity (ROE) = Net Income

Shareholder’s Equity

50
 Table: 4.9
Return on Equity(Rs in Million)

Fiscal Year EBL HBL RBB SCBNL

2015/16 63.09 43.03 80.32 45.96

2016/17 43.55 33.76 57.4 35.49

2017/18 32.16 23.11 45.59 27.33

2018/19 38.05 32.44 62.87 30.39

2019/20 29.71 24.6 52.1 24.81

Mean ( X ) 41.31 31.38 59.65 32.79

S.D.(  ) 11.90 7.16 11.80 7.48
C.V.(in%) 28.81 22.83 19.79 22.81
Source: Appendix 3

Figure: 4.9
Return on Equity
90
80
70
60
50 EBL
40 HBL
30 RBB
20
SCBNL
10
0

From the analysis, RBB has the highest ratio of 80.32% in the year 2015/16 and
lowest ratio of 52.1% in the year 2019/20 whereas EBL, HBL & RBB has highest
ratio in year 2015/16 of all is The lowest ratio of EBL, HBL & RBB is 29.71%,
23.11% & 24.81% in year of 2019/20, 2017/18 and 2019/20. RBB has highest mean
ratio than all sample bank (i.e.59.65% >41.31%, 31.38% and 32.79%).

51
(b)Return on Investment

Return on investment (ROI) is a performance measure used to evaluate the efficiency

of an investment or compare the efficiency of a number of different investments. ROI
tries to directly measure the amount of return on a particular investment, relative to
the investment’s cost. To calculate ROI, the benefit (or return) of an investment is
divided by the cost of investment. The result is expressed as a percentage or a ratio.
The formula is:

ROI = Gain from Investment – Cost of Investment

Cost of Investment

Table: 4.10
Return on Investment (Rs in Million)
EBL HBL RBB SCBNL
Fiscal Year

2015/16 2.15 2.58 2.36 3.21

2016/17 2.22 2.62 2.42 2.4

2017/18 2.3 1.89 2.42 2.88

2018/19 2.44 2.52 3.39 3.1

2019/20 1.92 2.23 2.08 1.98

Mean ( X ) 2.206 2.368 2.534 2.714

S.D.(  )
1.77 1.54 2.08 1.49

C.V.(in%)
80.23 65.03 82.08 54.90

Source: Appendix 3

52
 Figure: 4.10
Return on Investment
90
80
70
60
50 EBL
40 HBL
30 RBB
20 SCBNL
10
0

The above table shows that RBB has highest ratio of 3.39% in the year 2018/19 lower
in 2019/20 is 2.08%. EBL, HBL & SCBNL has slightly lower ratio i.e. 1.92%, 1.89%
and 1.98% pn the year 2019/20, 2017/18 and 2019/20. All banks have decreasing
trend of ROI. The mean ratio of EBL is slightly lower (i.e. 2.21% < 2.37%, 2.53%
and 2.71%) of bank HBL, RBB& SCBNL. The coefficient of variation of SCBNL is
bank lowers among all sample banks (i.e. 54.90% < 80.23%, 65.03% & 82.08%).

4.1.4 Growth Ratios

Growth ratio denotes that how well the banks are preserving their economic or
financial position. To calculate, check and analyze the expansion and growth of the
selected bank the following ratios are calculated:

(a) Growth Ratio of Total Deposits

To measure such growth percentage and analysis the following formula are used:
Ending Value - Beginning Values
Growth Percentage =  100
Beginning Value

53
 Table: 4.11
Growth Ratio of Total Deposits (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL

2015/16 937.35 873.36 1462.08 557.27

2016/17 950.94 928.81 1535.81 638.73

2017/18 1155.1171 989.89 1642.1 670.61

2018/19 1295.68 1093.8706 1892.55 757.32

2019/20 1435.45 1252.64 2309.03 950.21

Growth
11.24 9.44 12.1 14.27
Rate(%)
Source: Appendix 4

Figure: 4.11
Growth Ratio of Total Deposits
16

14

12

10

8
Series1
6

0
EBL HBL RBB SCBNL

The above analysis shows that EBL, RBB & SCBNL has increasing trend and HBL
has fluctuating trend of total deposits. The growth ratio of EBL, RBB & SCBNL and
HBL are 11.24%, 12.01%, 14.27% and 9.44% respectively. The growth ratio of HBL
seems to be lower than EBL, RBB & SCBNL.

(b) Growth Ratio of Loan and Advances

To measure such growth percentage and analysis the following formula are used:
Ending Value - Beginning Values
Growth Percentage =  100
Beginning Value

54
 Table: 4.12
Growth Ratio of Loan and Advances (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL

2015/16 679.55 677.46 817.78 312.03

2016/17 772.88 736.94 1021.62 392.64

2017/18 941.82 861.6 1465.6 466.96

2018/19 1120.07 974.7 1552.55 556.34

2019/20 1128.97 1067.27 1214.6 569.36

Growth
13.53 12.03 10.39 16.22
Rate(%)
Source: Appendix 4

Figure: 4.12
Growth Ratio of Loan and Advances
18
16
14
12
10
Series1 8
6
4
2
0
EBL HBL RBB SCBNL

The above analysis shows that SCBNL has higher growth rate than EBL, HBL and
RBB (i.e. 16.22% > 13.53%, 12.03% and 10.32%). SCBNL has increasing trend and
EBL, HBL and RBB has fluctuating trend of growth rate of loans and advances.

(c) Growth Ratio of Total Investment

To measure such growth percentage and analysis the following formula are used:
Ending Value - Beginning Values
Growth Percentage =  100
Beginning Value

55
 Table: 4.13
Growth Ratio of Total Investment (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL

2015/16 181.99 193.06 437.68 230.95

2016/17 119.65 179.29 382.76 156.32

2017/18 155.52 118.5 249.57 46.61

2018/19 217.49 169.71 405.94 11.35

2019/20 291.93 230.17 751.77 130.59

Growth
12.54 4.49 14.48 -13.28
Rate(%)
Source: Appendix4

Figure: 4.13
Growth Ratio of Total Investment
20

15

10

5
Series1
0
EBL HBL RBB SCBNL
-5

-10

-15

The growth rate of total investment of SCBNL seems to be lower than EBL, HBL and
RBB (i.e. -13.28% <12.54%, 4.49% & 14.48%). SCBNL has fluctuating trend but
EBL, HBL and RBB has increasing trend of growth ratio of investment.

(d) Growth Ratio of Net Profit

To measure such growth percentage and analysis the following formula are used:
Ending Value - Beginning Values
Growth Percentage =  100
Beginning Value

56
 Table: 4.14
Growth Ratio of Net Profit (Rs in Million)
Fiscal Year EBL HBL RBB SCBNL
2015/16 17.3 19.36 5.89 12.92
2016/17 20.06 21.78 27.76 14.22
2017/18 25.82 18.76 36.59 21.9
2018/19 30.54 27.64 50.47 24.35
2019/20 25.16 25.88 43.77 19.87
Growth
9.82 7.53 65.11 11.36
Rate(%)
Source: Appendix 4

Figure: 4.14

Growth Ratio of Net Profit

70

60

50

40

30 Series1

20

10

0
EBL HBL RBB SCBNL

From above table we can conclude that RBB has growth rate of 65.11% and EBL,
HBL, SCBNL has the growth rate of 9.82%, 7.53% and 11.36%. It seems that RBB
has higher growth rate than EBL, HBL and SCBNL. All sample banks followed a
fluctuating trend on the growth ratio of net profit.

4.1.5 Correlation between total deposit and loan and advances

The following table describes the relationship between total deposit and loan and
advances of EBL, HBL, RBB and SCBNL with comparatively under five year period.
In this case, total deposits are independent variable say (X) and loan and advances is
dependent variable (Y).

57
 Table: 4.15

Relation between total deposit and loan and advances

Banks Correlation
Deposit Loan & advances
EBL Deposit 1
Loan & advances 0.99 1

Deposit Loan & advances

HBL Deposit 1
Loan & advances 0.98 1

Deposit Loan & advances

RBB Deposit 1
Loan & advances 0.91 1

Deposit Loan & advances

SCBNL Deposit 1
Loan & advances 0.89 1

Source: Appendix 5

From the above table we can find the coefficient of correlation between deposit and
loan and advances of EBL, HBL, RBB and SCBNL are 0.99, 0.98, 0.91 and 0.89
respectively. This shows the highly positive relationship between these two variables
i.e. total deposit and loan and advances. We can interpret that the highly positive
relation represents that if deposit increase then loan and advances will increase too.

4.1.6 Statistical tools

Regression Analysis

The following table describes the relationship between deposit and loan and advance
as well as relationship between deposit and investment of EBL, HBL, RBB and
SCBNL with comparatively under five year period. In this case deposit is dependent
(Y) variable and ROE and ROI is independent variable (X).

4.1.6.1Analysis between deposit and loan and advances

The following table describes the relationship between total deposits and loan and
advances of EBL, HBL, RBB and SCBNL with comparatively under five-year period.
In this case, total deposits are dependent variable say (Y) and loan and advances is
independent variable (X).

58
 Table : 4.16

Regression Statistics
Banks Multiple R R Square Adjusted R Standard Error Observation
EBL 0.99 0.98 0.97 34.08 4
HBL 0.98 0.95 0.94 37.69 5
RBB 0.91 0.82 0.76 166.07 5
SCBNL 0.89 0.78 0.71 80.23 5

Source: Appendix 6

ANOVA
Banks df SS MS F Significance F
Regression 1 125967.24 125967.24 108.43 0.0091
EBL Residual 2 2323.45 1161.73
Total 3 128290.69

Regression 1 85821.30 85821.30 60.42 0.0044

HBL Residual 3 4261.29 1420.43
Total 4 90082.58

Regression 1 386330.78 386330.78 14.01 0.0333

RBB Residual 3 82733.85 27577.95
Total 4 469064.63

Regression 1 70472.66 70472.66 10.95 0.0454

SCBNL Residual 3 19308.26 6436.09
Total 4 89780.92

Standard Lower Upper

Bank Coefficient t Stat P-value
Error 95% 95%
-
Intercep
110.085 106.928 1.030 0.411 349.98 570.160
EBL t
9
679.95 1.092 0.105 10.413 0.009 0.641 1.544

-
Intercep
215.397 105.830 2.035 0.135 121.40 552.196
t
1
HBL
X
Variable 0.935 0.120 7.773 0.004 0.552 1.317
2

RBB Intercep 530.415 338.933 1.565 0.216 - 1609.05

59
 t 548.22 2
2
X
Variable 1.019 0.272 3.743 0.033 0.153 1.886
3

-
Intercep
154.512 173.089 0.893 0.438 396.33 705.359
t
SCBN 5
L X
Variable 1.219 0.368 3.309 0.045 0.047 2.391
4

From the above table we can find that the regression analysis between deposits and
loan and advances of EBL, HBL, RBB and SCBNL are 0.99, 0.98, 0.91 and
0.89respectively. This shows the positive relationship between these two variables i.e.
loan and advances and deposits of sample banks. By considering coefficient of
determination (R²), the value of R² is 0.98, 0.95, 0.82 and 0.78 in case of sample
banks EBL, HBL, RBB and SCBNL.

The value of R² of EBL is 0.98, which means 98% of loan and advances decision is
determined by deposit and only 2% loan and advances depend upon other variables.
The value of R² of HBL is 0.95, which means that only 95% of loan and advances is
determined by deposit and 5% loan and advances depend upon other variables. The
value of R² of RBB is 0.82, which means that only 82% of loan and advances is
determined by deposit and 8% loan and advances depends upon other variable. The
value of R² of SCBNL is 0.78, which means that only 78% of loan and advances is
determined by deposit and 22% loan and advances depends upon other variables.

The intercept denoted as beta not in the regression. The β1, β2, β3 and β4slope has
value 1.092, 0.935, 1.019 and 1.219 which shows the positive relation between β1, β2,
β3, β4slope and dependent variables.

The P values of EBL, HBL, RBB and SCBNL (i.e. 0.0091, 0.0044, 0.0333 and
0.0454). Confidence level was taken 95% so our significance level is 5% (0.05). All
sample banks (EBL, HBL, RBB & SCBNL) has lower value than significance level
(i.e. 0.05 > 0.0091, 0.0044, 0.0333 & 0.0454) which shows significant relationship
between deposit and loan and advances.

4.1.6.2 Analysis between deposit and investment

The following table describes the relationship between total deposits and investment
of EBL, HBL, RBB and SCBNL with comparatively under five-year period. In this
case, total deposits are dependent variable say (Y) and investment is independent
variable (X).

60
 Table: 4.17

Regression Statistics
Banks Multiple R R Square Adjusted R Standard Error Observation
EBL 0.853 0.728 0.637 130.440 5.000
HBL 0.112 0.013 -0.317 172.194 5.000
RBB 0.796 0.633 0.510 239.600 5.000
SCBNL 0.367 0.135 -0.154 160.918 5.000

Source: Appendix 5

ANOVA
Banks df SS MS F Significance F
Regression 1 136411.099 136411.099 8.017 0.066
EBL Residual 3 51043.944 17014.648
Total 4 187455.043

Regression 1 1130.562 1130.562 0.038 0.858

HBL Residual 3 88952.022 29650.674
Total 4 90082.583

Regression 1 296839.933 296839.933 5.171 0.108

RBB Residual 3 172224.699 57408.233
Total 4 469064.632

Regression 1 12097.530 12097.530 0.467 0.543

SCBNL Residual 3 77683.387 25894.462
Total 4 89780.916

Bank Coefficient Standard P- Lower Upper

t Stat
s s Error value 95% 95%

Intercept 612.493 200.251 3.059 0.055 -24.795 1249.781

EBL
X Variable
2.805 0.991 2.831 0.066 -0.348 5.957
1

HBL Intercept 933.139 489.408 1.907 0.153 -624.376 2490.654

61
 X Variable
0.555 2.840 0.195 0.858 -8.485 9.594
2

Intercept 1114.838 306.639 3.636 0.036 138.976 2090.701

RBB
X Variable
1.467 0.645 2.274 0.108 -0.586 3.520
3

Intercept 826.684 178.773 4.624 0.019 257.747 1395.621

SCBN
L
X Variable -
-0.823 1.204 0.543 -4.653 3.008
4 0.684

From the above table we can find that the regression analysis between deposits and
investment of EBL, HBL, RBB and SCBNL are 0.853, 0.112, 0.796 and 0.367
respectively. This shows the positive relationship between these two variables i.e.
investment and deposits of sample banks. By considering coefficient of determination
(R²), the value of R² is 0.728, 0.013, 0.633 and 0.135 in case of sample banks EBL,
HBL, RBB and SCBNL.

The value of R² of EBL is 0.728 which means 72.80% of loan and advances decision
is determined by deposit and only 27.20% investment depend upon other variables.
The value of R² of HBL is 0.013, which means that only 1.30 % of investment is
determined by deposit and 98.70% investment depend upon other variables. The value
of R² of RBB is 0.633, which means that only 63.30% of investment is determined by
deposit and 36.70% investment depends upon other variable. The value of R² of
SCBNL is 0.135, which means that only 13.50% of loan and advances is determined
by deposit and 86.50% loan and advances depends upon other variables.

The intercept denoted as beta not in the regression. The β1, β2, and β3slope has value
2.805, 0.555 and 1.467 which shows the positive relation between β1, β2, and β3 slope
and dependent variables.β4slope has negative value i.e. -0.823 which shows the
negative relation between β4and dependent variables.

The P values of EBL, HBL, RBB and SCBNL (i.e. 0.066, 0.858, 0.108 and 0.543).
Confidence level was taken 95% so our significance level is 5% (0.05). All sample
banks (EBL, HBL, RBB & SCBNL) has higher value than significance level (i.e. 0.05
< 0.066, 0.858, 0.108 and 0.543) which shows insignificant relationship between
deposit and investment.
62
4.2Major Findings of the study

In this research work, all the data have been obtained from secondary sources. Data
have been analyzed by using financial as well as statistical tools. This topic focus on
the major findings of the study, which are derived from the analysis of deposit of
EBL, HBL, RBB and SCBNL with comparatively applying five years’ data from
2015/16 to 2019/20.

1) The above result shows that the liquidity position of RBB is comparatively
better that EBL, HBL and SCBNL ( i.e. 9.21% < 18.99%, 9.94% and
10.88%).It means the liquidity position of RBB is lower than other sample
banks. It shows the lower position regarding the meeting of demand of its
customer on their deposit at any time than EBL, HBL& SCBNL. The ratio of
RBB is less consistent and EBL, HBL & SCBNL is more consistent.
2) The average study of cash and bank balance to current assets ratio of EBL is
higher than HBL, RBB & SCBNL (i.e. 18.18% > 10.13%, 11.09% and
10.75%). It shows that HBL, RBB & SCBNL has taken more risk to meet the
daily requirement of its customer’s deposit than EBL. The ratio of EBL is
more consistent and other sample banks are less consistent ratio.
3) RBB has invested more portions of current assets on government securities
than EBL, HBL and SCBNL according to average study ( i.e. 23.84% >
13.39%, 7.66% and 11.48%) . It means RBB is more sensitive in investment in
productive sector than other sampled banks. Analysis shows that investment
on government securities of other sampled banks is more consistent and RBB
has less consistent ratio.
4) The mean ratio of loan and advances to total deposit of SCBNL is lower than
that of EBL, HBL & RBB (i.e. 64.13% < 80.95%, 84.23% and 68.25%). The
ratio of SCBNL is more consistent and other sampled banks has less consistent
ratio.
5) RBB has mobilized its collected deposits on investment better than that of
EBL, HBL & SCBNL (i.e. 24.81% > 16.52%, 16.62% and 20.37%). The ratio
of RBB is more consistent and other sampled banks has less consistent ratio.
6) The loan and advances to total working fund ratio describes that SCBNL
position is better than EBL, HBL & RBB (i.e. 66.67% < 88.76, 86.10% and
84.72%). The variability in ratio of EBL, HBL & RBB is slightly higher than
SCBNL.
7) The mean ratio of investment on government securities to total working fund
ratio of RBB is higher than that EBL, HBL & SCBNL (i.e. 25.43% > 15.16%,
7.8% and 11.36%). RBB seems more successful to invest its working fund in
government securities than other sampled banks. The variability in the ratio of
EBL, HBL & SCBNL is higher than that of RBB.

63
8) The mean ratio of investment on share and debenture to total working fund of
RBB seems slightly high than that EBL, HBL & SCBNL (i.e. 0.31% > 0.19%,
0.11% and 0.09%). RBB has less consistent ratio than EBL, HBL & SCBL.
9) From the average study of return on equity RBB seems more successful to
earn profit on loan and advances than EBL, HBL & SCBNL (i.e. 59.66% >
41.31%, 31.39% and 32.80%). The mean ratio of RBB is higher than other
sampled bank. The variability in the ratio of RBB is less consistent than other
sample banks.
10) SCBNL has slightly higher mean ratio than EBL, HBL & RBB to return on
investment (i.e. 2.71% > 2.21%, 2.37% and 2.53%). The variability in the ratio
of SCBNL is less consistent than other sampled banks.
11) The growth rate on deposit of SCBNL is higher than other sampled banks
EBL, HBL & RBB. The growth rate of SCBNL is 14.27% and EBL, HBL &
RBB has 11.94%, 9.44% and 12.1%
12) From the analysis of growth of loan and advances, RBB seems too weak in
increasing loan and advances than that EBL, HBL & SCBNL. The growth
ratio of loan and advances of RBB is 10.39% and EBL, HBL & SCBNL has
13.53%, 12.03% and 16.22%.
13) RBB seems better in increasing total investment in comparison of EBL, HBL
& SCBNL. Its growth rate is 14.48% which is higher than other sampled
banks.
14) The yearly growth rate of net profit of RBB is higher and better than EBL,
HBL & SCBNL. The growth rate is 65.11% and EBL has 9.82%, HBL has
7.53% and SCBNL has 11.36%.
15) The analysis of correlation and regression between deposit and loan and
advances the value of EBL, HBL, RBB & SCBNL has lower than significance
level which shows the significant relationship between deposit and loan and
advances (i.e. 0.05 > 0.0091, 0.0044, 0.0333 and 0.0454).
16) The analysis of correlation between deposit and loan and advances shows that
EBL, HBL, RBB and SCBNL all sample banks has highly positive relation
between total deposit and loan and advances. This can be interpreting that if
deposit increase then loan and advances will also increase (i.e. 0.99, 0.98, 0.91
and 0.89).
17) The analysis of regression between deposit and investment it shows the value
of EBL, HBL, RBB and SCBNL has higher than significance level (i.e. 0.05 <
0.066, 0.858, 0.108 and 0.543) which shows insignificant relationship between
deposit and investment.

64
4.3 Discussion

In this section researcher evaluates and interprets the results. Here the researcher
examines every aspects of the result in terms of related theories and empirical
findings of other researchers.

The analysis of financial analysis this study shows the better position of RBB which
holds the good liquidity position, investment on government securities than EBL,
HBL and SCBNL. The previous research done by Roy (2014) also shows that the
RBB has good deposit collection, investment on government securities than NBL. It
concludes that RBB has good deposit collection and higher ability to meet the cash
requirement than other sampled banks.

In the financial analysis of cash and bank balance to current assets EBL has hold
higher position than that of HBL, RBB and SCBNL. In previous researches Shrestha
(2020), Joshi (2015) has concluded that EBL has higher position of cash and bank
balance to current assets which show the positive and similar findings with them.

While analyzing investment on share and debenture RBB holds the better position
comparison to EBL, HBL and SCBNL. In previous research Shrestha (2015) shows
that the SCBNL has better position on investment on government securities and share
and debenture. The research has a great difference in time period with the study. This
study is conducted in year 2020 and the research has done in 2015.

The analysis of ROE and ROI RBB and SCBNL has the better position comparison
to EBL and HBL. In the previous research Shretha (2020) it shows the better position
of NIBL and EBL. This research was only focused on total fixed deposit and this
study is based or focuses on total deposit so the result can be difference in
comparison.

The analysis of loan and advances to total deposit and investment to total deposit the
position of RBB and SCBNL is better than that EBL, HBL. In the previous research
showsShrestha (2020) EBL has higher position in loan and advances and HBL has
good position in investment to total fixed deposit. This discrepancy arises because the
research has focused on fixed deposit only but this study is based on total deposit. As
well as the taken sample banks are different.

The analysis of growth of deposit SCBNL seems in the better position comparison to
EBL, HBL and RBB. The analysis of growth in loan and advances RBB seems in the
better position comparison to EBL, HBL and SCBNL. As well as the analysis of
growth of net profit RBB also seems in the better position than EBL, HBL and
SCBNL. In order to previous research Shrestha (2020) shows that the EBL has better
position in growth of deposit, loan and advances and net profit. This differences
caused by the time period that this study takes and the sample banks that this study

65
takes. The sample banks of this study is EBL, HBL, RBB and SCBNL as well as
previous research has taken EBL, HBL and NIBL as the sample bank. The previous
research has only focused on fixed deposit and this study has embodied total deposit.

The analysis of growth in investment RBB has better position but the previous
research Shahi (2014) shows that NBL has better growth than all joint venture banks.
The differences in result caused by the sample that has been taken by the previous
research and this study. The previous research has taken the sample bank NBL
comparison to joint venture banks and this study embodied selected sample banks
EBL, HBL, RBB and SCBNL.

66
 CHAPTER-5

SUMMARY, CONCLUSION

5.1 Summary
Principally, the entire research work focuses on the comparative study on deposit
mobilization of four commercial banks; Everest Bank Ltd., Himalayan Bank Ltd,
RastriyaBanijya Bank and Standard Chartered Bank Nepal Ltd. These three joint
venture and one government owned bank ate composed as per their deposit activities
by taking five years data from the year 2015/16 to 2019/20.

The study is mainly study based on secondary sources. All data are taken from
concerned banks annual report, literature publication, balance sheet, profit and loss
account, previous thesis report, different websites, related books and booklets,
journals and articles. After collecting data from different sources, it has been analyzed
by using financial and statistical tools. Findings are drawn by applying various
financial tools viz. liquidity ratio, assets management ratio, profitability ratio, growth
ratio, sources and uses of deposit. Similarly, statistical tools have been used viz.
mean, standard deviation, coefficient of variation, coefficient of correlation and least
square method. In an attempt to fulfill the objectives of the research work, all
secondary data are compiled, processed and tabulated as per necessity and figures,
diagrams, different types of chart have also been used.

This study suffers from different limitations; it considers four banks only and time
and resources are the constraints of the study. Therefore, the study may not be
generalized in all cases and accuracy depends upon the data collected and provided by
the organization. Researcher wants to prove that this research is an original one and
should be the foundation for the future researches to know about the problem of
deposit procedures of commercial banks. The bank should make continuous efforts to
explore to explore new, competitive and high yielding investment opportunities to
optimize their investment portfolio. The main source of commercial banks is
collecting deposit form public who do not need that deposit recently.

5.2 Conclusion

From the analysis of the liquidity position of EBL, HBL, RBB and SCBNL, it can be
concluded that the liquidity position of RBB is not satisfactory whereas EBL, HBL
and SCBNL is comparatively better than that of RBB. RBB has made enough
investment in government securities than other sample banks. Liquidity ratio of EBL,
HBL and SCBNL is more consistent than that of RBB. In view of assets management
side of sampled banks, it can be concluded that SCBNL is in weak position in
mobilizing the collected deposits as loan and advances.RBB is successful in
mobilizing its collected deposits on investment better than that of EBL, HBL and
SCBNL. RBB has also invested its funds efficiently on government securities and

67
share and debenture better than that of EBL, HBL and SCBNL. Assets management
ratio of EBL, HBL and SCBNL is more consistent than that of RBB.

SCBNL profit earning capacity on loan and advances and working fund is better that
that of EBL, HBL and RBB. The return ratio of EBL, HBL and RBB is more
consistent than that of SCBNL. HBL seems stronger in earning interest from working
fund than that of EBL, RBB and SCBNL and it has also been successful to collect its
working fund from less expensive sources. Liquidity risk of EBL is higher than that of
HBL, RBB and SCBNL which indicates the lower degree risk and variability than
other sampled banks. SCBNL has maintained lower credit risk than that of EBL, HBL
and RBB.From the growth ratio of total deposits, it can be concluded that SCBNL has
more collected capacity than EBL, HBL and RBB. Growth rate of loan and advances
of RBB is too weak in comparison to EBL, HBL and SCBNL. Growth rate of total
investment of EBL, HBL and SCBNL seems too weak than RBB whereas it has better
position than that of sampled banks. Growth rate of net profit RBB seems in better
position than that of EBL, HBL and SCBNL. EBL has better in capital fund. RBB
has been more successful to collect deposit than that of EBL, HBL and SCBNL.
SCBNL borrowing is an indication that the internal fund management of SCBNL is in
satisfactory position towards meeting liquidity needs, EBL has more fund as liquid
and RBB is more successful in making investment in different sectors better than that
of EBL, HBL and SCBNL. SCBNL also provides more funds as loan and advances.

Correlation coefficient between deposit and total investment and deposits and loan
and advances of RBB is EBL indicates the positive relationship or there is high degree
of positive correlation. In most of the case it has been found that loan and advances
and investment decisions depends upon other variables. From the calculation of
regression between deposit and loan and advances it can be concluded that EBL,
HBL, RBB and SCBNL banks has significant values.By considering the trend values,
RBB and SCBNL seems to be more successful to utilize its total collected deposits in
investment than EBL and HBL. Deposit utilization trend in relation to loan and
advances of RBB and EBL is proportionately better than HBL and SCBNL.

5.3 Implication

The banks can make use of these implication and recommendations to overcome their
weakness, inefficiency and improve their present deposit and overall investment
policy. The ratio of cash and bank balance to total deposit and current assets EBL is
higher than RBB, HBL and SCBNL. It means EBL has idle cash and bank balance. It
may decrease over all profit of bank. So EBL is recommended to activate its idle cash
and bank balance in productive sector. The affecting factors of liquidity position may
be interest rate, supply and demand position of loan and advances as well as savings,
investment situation, Central bank directives, capability of management, lending
policies, strategic planning and funds flow situations. Banks are suggested not to be

68
surrounded and limited within the interest and status of big clients like multinational
companies, manufacturer and exporter. The banks have to preserve the banking and
saving habits of the low- income people of the kingdom. Because the main source of
the collecting deposit of commercial banks are from public sector. It is also
recommended to collect more funds as deposits through different schemes from
different level of public, through assortment of deposit schemes and facilities like
housing schemes, education loan, vehicle loan and deposit for house wife etc.

From the analysis, EBL, HBL and SCBNL have not invested more funds in
government securities in comparison to RBB. The bank has higher cash and bank
balance than RBB. Therefore, it is recommended to invest in government securities
instead of keeping idle and is not considered good from profitability point of view.
Investment on those securities issued by government is free of risk, highly and highly
saleable in the market place.The recovery of the loan is most challenging job for the
banks. Increasing in non-performing assets leads to failure of commercial banks in
recovery of loan. Therefore it has been recommended that EBL, HBL, RBB and
SCBNL should follow liberal lending, policy when sanction of loan and advances
have been done with adequate guarantee and should implement sound collection
policy, with proper identification of credit worthiness of customer, continual follow
up and legal procedure if required. Therefore, the bank must be very careful while
formulating credit policy. The credit policy is also associated with some legal
procedure.EBL, HBL and SCBNL is recommended to increase their investment on
share and debenture on different sector to earn more interest and to increase their net
profit.

Growth of commercial bank helps to develop the economic growth of the country. So
the services of the commercial banks should be expanding all over the country
through collection of idle saving from every territory of the country and should be
utilized for income generation purpose. Government should encourage the
commercial banks to expand banking service in rural areas and communities without
making unfavorable impact in their profit.All banks should be careful in increasing
profit of the bank to maintain the confidence of shareholders, depositors and all its
customers. EBL, HBL and SCBNL profitability position is not better than that of
RBB. So EBL, HBL and SCBNL is strongly recommended to utilize risky assets and
shareholders fund to gain high amount of profit.NRB has given directives to
commercial banks to invest their certain percentage of investment in deprive and
priority sector. All sampled banks have earned profit form profitable and private
sector. So, they are recommended to strictly follow up the directives issued by NRB
and should make investment on public utilities sector like health, sanitation,
education, drinking water, agriculture etc.

Portfolio management is important for every investor. In each investment, risk is

involved. The greater the variability of returns of those projects, the more will be
riskier. So, it should be kept in mind while making investment that project should be

69
selected which will be low riskier and highly profitable. So, portfolio management
helps the investors in making investment in different areas by considering their risk
factor. Portfolio management of bank assets means allocation of fund into different
components of banking assets in such a way that the conflicting goal of maximum
yield and minimum risk can be achieved. So portfolio condition of EBL, HBL, RBB
and SCBNL should be examined carefully from time to time. Banks should make
continuous efforts to explore innovative, competitive and high yielding investment
opportunities to optimize their investment portfolio.The minimum bank balance and
the amount needed to open an account in the banks are very high. So, lower level
people and small depositors are very far from banking facilities providing by joint
ventures banks, so all the banks should open its door to small depositors for
promoting and mobilizing small depositors’ funds.

Implications for further studies

This study contains numerical secondary data to analyze quantitative factors to know
deposit mobilization of commercial banks with reference EBL, HBL, RBB and
SCBNL. The suggestions for further research can be presented in following research
area:

1) Further research should focus on one deposit types like fixed deposit, saving
deposit and analyze the trend of deposit.
2) The research can be conducted with government owned banks or joint venture
banks only.
3) The research could be conducted with taking longer time period.
4) This research is based on secondary data only so research can be conducted
with the help of primary data base also.
5) This study has taken only four samples of banks so research can be conducted
taking more sample size.
6) This result shows the deposit mobilization of commercial banks, further
research can be conducted while examining the impact of deposit mobilization
in profitability of commercial banks.

70
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Pant,P.R. & Wolff, H.K. (1999). A hand book of Social Research and Thesis writing.

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Subedi, J (2014). A comparative study of financial performance between Himalayan

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73
 Appendex-1

Cash and bank balance to current assets ratio

S. Name of the Fiscal Year

N Banks 2015/16 2016/17 2017/18 2018/19 2019/20
1 EBL
Cash & bank
206.02 183.2264 222.2975 238.5307 230.9787
balance
1155.117 1295.681 1435.454
Total deposit 937.3548 950.9446
1 5 8
Ratio(%) 21.9789 19.2678 19.24 18.4097 16.091

2 HBL
Cash & bank
63.7664 73.5706 101.4878 101.1477 187.4999
balance
1093.870 1252.643
Total deposit 873.3579 928.8111 989.8879
6 8
Ratio(%) 7.3013 7.9209 10.2525 9.2468 14.9683

3 RBB
Cash & bank
219.5514 163.18 96.4549 127.3349 179.8288
balance
1462.076 1535.809 1640.566 1891.408 2307.888
Total deposit
3 7 1 5 7
Ratio(%) 15.0164 10.625 5.8794 6.7323 7.7919

4 SCBNL
Cash & bank
31.7297 81.1669 88.1366 123.5761 61.9595
balance
Total deposit 557.2718 638.7289 670.6105 757.3153 950.2084
Ratio(%) 5.6938 12.708 13.1427 16.3177 6.5206

74
 Cash and bank balance to current assets ratio

S. Fiscal Year
Name of the Banks
N 2015/16 2016/17 2017/18 2018/19 2019/20
1 EBL
Cash & bank 183.226
206.02 222.2975 238.5307 230.9787
balance 4
992.112 1235.155 1436.193 1518.140
Current Assets 910.7265
5 2 7 6
Ratio(%) 22.6215 18.4683 17.9975 16.6085 15.2146

2 HBL
Cash & bank
63.7664 73.5706 101.4878 101.1477 187.4999
balance
853.096 1010.503 1122.434 1328.194
Current Assets 771.03
4 6 1 6
Ratio(%) 8.2703 8.6239 10.0433 9.0115 14.1169

3 RBB
Cash & bank
219.5514 163.18 96.4549 127.3349 179.8288
balance
1105.175 1234.78 1594.387 1559.914 2203.940
Current Assets
3 1 6 6 2
Ratio(%) 19.8658 13.2153 6.0497 8.1629 8.1594

4 SCBNL
Cash & bank
31.7297 81.1669 88.1366 123.5761 61.9595
balance
608.155 1023.757
Current Assets 413.4494 775.5817 806.1817
6 5
Ratio(%) 7.6744 13.3464 11.3639 15.3286 6.0522

75
 Investment on Government securities to currents Assets ratio

Fiscal Year
S.
Name of the Banks 2016/1
N 2015/16 2017/18 2018/19 2019/20
7
1 EBL
Investment on Govt. 103.617 85.379 144.828 205.751 317.772
Securities 7 6 8 4 9
910.726 992.11 1235.15 1436.19 1518.14
Current Assets
5 25 52 37 06
Ratio(%) 11.3775 8.6058 11.7256 14.3262 20.9317
2 HBL
Investment on Govt. 79.656
94.1227 53.7225 62.8788 77.3302
Securities 2
853.09 1010.50 1122.43 1328.19
Current Assets 771.03
64 36 41 46
Ratio(%) 12.2074 9.3373 5.3164 5.602 5.8222
3 RBB
Investment on Govt. 291.713 266.85 225.515 379.432 721.345
Securities 2 02 9 2 2
1105.17 1234.7 1594.38 1559.91 2203.94
Current Assets
53 81 76 46 02
21.611
Ratio(%) 26.3952 14.1444 24.3239 32.7298
1
4 SCBNL
Investment on Govt. 45.375 126.947
72.8134 42.2047 112.66
Securities 4 9
413.449 608.15 775.581 806.181 1023.75
Current Assets
4 56 7 7 75
Ratio(%) 17.6112 7.4611 5.6976 13.9747 12.4002

76
 Appendix-2

Loan & Advance to total deposit ratio

S. Name of the Fiscal Year

N Banks 2015/16 2016/17 2017/18 2018/19 2019/20
1 EBL
1120.071 1190.692
Loan & Advances 679.9511 772.8776 941.8225
8 4
1155.117 1295.681 1435.454
Total deposit 937.3548 950.9446
1 5 8
Ratio(%) 72.5394 81.2747 81.5348 86.4465 82.9488

2 HBL
1067.265
Loan & Advances 677.4598 763.9426 861.6021 974.7007
4
1093.870 1252.643
Total deposit 873.3579 928.8111 989.8879
6 8
Ratio(%) 77.5695 82.2495 87.0404 89.1057 85.201

3 RBB
1021.615 1214.601
Loan & Advances 817.7817 1465.6 1552.546
5 4
1462.076 1535.809 1640.566 1891.408 2307.888
Total deposit
3 7 1 5 7
Ratio(%) 55.9329 66.5197 74.0355 77.4875 67.2713

4 SCBNL
Loan & Advances 313.0295 392.6369 466.9618 556.3359 569.3775
Total deposit 557.2718 638.7289 670.6105 757.3153 950.2084
Ratio(%) 56.1718 61.4716 69.6323 73.4616 59.9192

77
 Total investment to total deposit ratio

S. Name of the Fiscal Year

N Banks 2015/16 2016/17 2017/18 2018/19 2019/20
1 EBL
Total Investment 181.9874 119.6456 155.5419 217.6968 292.1357
1155.117 1295.681 1435.454
Total deposit 937.3548 950.9446
1 5 8
Ratio(%) 19.415 12.5818 13.4655 16.8017 20.3514

2 HBL
Total Investment 193.0607 179.2927 118.5226 169.7112 190.1725
1093.870 1252.643
Total deposit 873.3579 928.8111 989.8879
6 8
Ratio(%) 21.1056 19.3035 11.9733 15.5147 15.1817

3 RBB
Total Investment 437.383 382.7647 249.0548 405.9431 751.769
1462.076 1535.809 1640.566 1891.408 2307.888
Total deposit
3 7 1 5 7
Ratio(%) 29.9152 24.9227 15.181 21.4625 32.5739

4 SCBNL
Total Investment 230.9462 156.3203 46.6099 115.3516 130.5868
Total deposit 557.2718 638.7289 670.6105 757.3153 950.2084
Ratio(%) 41.4423 24.4736 6.9504 15.2317 13.743

78
 Loan and Advances to total working fund ratio

Fiscal Year
S.
Name of the Banks 2015/1
N 2016/17 2017/18 2018/19 2019/20
6
1 EBL
679.951 772.877 941.822 1120.07 1190.69
Loan & Advances
1 6 5 18 24
Total working fund(CA- 805.085 1124.39 1251.58 1313.85
904.235
CL) 7 98 08 58
Ratio(%) 84.457 85.4731 83.7622 89.4926 90.6258

2 HBL
677.459 763.942 861.602 974.700 1067.26
Loan & Advances
8 6 1 7 54
Total working fund(CA- 749.995 832.804 992.356 1094.65 1292.74
CL) 5 3 7 98 42
Ratio(%) 90.3285 91.7313 86.8238 89.0414 82.5581

3 RBB
817.781 1021.61 1214.60 1552.54
Loan & Advances 1465.6
7 55 14 6
Total working fund(CA- 1145.90 1509.44 1490.50 2105.54
998.436
CL) 71 07 6 64
Ratio(%) 81.9063 89.1534 80.467 98.329 73.736

4 SCBNL
313.029 392.636 466.961 556.335 569.377
Loan & Advances
5 9 8 9 5
Total working fund(CA- 399.105 591.439 759.371 785.608 1003.46
CL) 2 1 5 3 1
Ratio(%) 78.4328 66.3867 61.4932 70.8159 56.7414

Where:

Working fund = Current Assets – Current Liabilities

79
 Investment on Government Securities to total working fund ratio

Fiscal Year
S.
Name of the Banks 2015/1
N 2016/17 2017/18 2018/19 2019/20
6
1 EBL
Investment on Govt. 103.61 144.828 205.751 317.772
85.3796
Securities 77 8 4 9
Total working fund(CA- 805.08 1124.39 1251.58 1313.85
904.235
CL) 57 98 08 58
12.870
Ratio(%) 9.4422 12.8805 16.4393 24.1863
4

2 HBL
Investment on Govt. 94.122
79.6562 53.7225 62.8788 77.3302
Securities 7
Total working fund(CA- 749.99 832.804 992.356 1094.65 1292.74
CL) 55 3 7 98 42
12.549
Ratio(%) 9.5648 5.4136 5.7441 5.9819
8

3 RBB
Investment on Govt. 291.71 266.850 225.515 379.432 721.345
Securities 32 2 9 2 2
Total working fund(CA- 998.43 1145.90 1509.44 1490.50 2105.54
CL) 6 71 07 6 64
Ratio(%) 29.217 23.2872 14.9404 25.4566 34.2593

4 SCBNL
Investment on Govt. 72.813 126.947
45.3754 42.2047 112.66
Securities 4 9
Total working fund(CA- 399.10 591.439 759.371 785.608 1003.46
CL) 52 1 5 3 1
18.244
Ratio(%) 7.672 5.5578 14.3405 12.651
2

80
 Investment on Share and Debenture to total working fund ratio

Fiscal Year
S.
Name of the Banks 2015/1
N 2016/17 2017/18 2018/19 2019/20
6
1 EBL
Investment on Share&
0.7585 0.7585 0.276 0.276 0.9423
Debenture
Total working fund(CA- 805.08 1124.39 1251.58 1313.85
904.235
CL) 57 98 08 58
Ratio(%) 0.0942 0.0839 0.0245 0.0221 0.717

2 HBL
Investment on Share&
2.0391 2.0391 0.0634 0.1748 0.2248
Debenture
Total working fund(CA- 749.99 832.804 992.356 1094.65 1292.74
CL) 55 3 7 98 42
Ratio(%) 0.2719 0.2448 0.0064 0.016 0.0174

3 RBB
Investment on Share&
2.0585 2.7066 4.0195 6.3719 8.2239
Debenture
Total working fund(CA- 998.43 1145.90 1509.44 1490.50 2105.54
CL) 6 71 07 6 64
Ratio(%) 0.2062 0.2362 0.2663 0.4275 0.3906

4 SCBNL
Investment on Share&
0.5599 0.5599 0.5599 0.5599 0.5599
Debenture
Total working fund(CA- 399.10 591.439 759.371 785.608 1003.46
CL) 52 1 5 3 1
Ratio(%) 0.1403 0.0947 0.0737 0.0713 0.0558

81
 Appendix-3

Return on Equity

Fiscal Year
S.N Name of the Banks
2015/16 2016/17 2017/18 2018/19 2019/20
1 EBL
Net profit after tax 17.3021 20.0625 25.8168 30.5412 25.1624
Shareholder's Equity 27.426 46.0643 80.2686 80.2686 84.7021
Ratio(%) 63.09 43.55 32.16 38.05 29.71

2 HBL
Net profit after tax 19.3591 21.7823 18.7561 27.6385 25.8672
Shareholder's Equity 44.9915 64.9162 81.1453 85.2026 93.7228
Ratio(%) 43.03 33.76 23.11 32.44 24.6

3 RBB
Net profit/loss 23.5529 27.7631 36.5927 50.4658 43.7732
Shareholder's Equity 29.321 48.3641 80.2632 80.2686 84.0231
Ratio(%) 80.32 57.4 45.59 62.87 52.1

4 SCBNL
Net profit after tax 12.9249 14.216 21.899 24.3466 19.8739
Shareholder's Equity 28.1243 40.0572 80.1143 80.1143 80.1143
Ratio(%) 45.96 35.49 27.33 30.39 24.81

82
 Return on Investment

Fiscal Year
S.N Name of the Banks
2015/16 2016/17 2017/18 2018/19 2019/20
1 EBL
Net profit/loss 17.3021 20.0625 25.8168 30.5412 25.1624
Total working fund(CA- 805.085 1124.399 1251.580 1313.855
904.235
CL) 7 8 8 8
Ratio(%) 2.15 2.22 2.3 2.44 1.92

2 HBL
Net profit/loss 19.3591 21.7823 18.7561 27.6385 25.8672
Total working fund(CA- 749.995 1094.659 1292.744
832.8043 992.3567
CL) 5 8 2
Ratio(%) 2.58 2.62 1.89 2.52 2.23

3 RBB
Net profit/loss 23.5529 27.7631 36.5927 50.4658 43.7732
Total working fund(CA- 1145.907 1509.440 2105.546
998.436 1490.506
CL) 1 7 4
Ratio(%) 2.36 2.42 2.42 3.39 2.08

4 SCBNL
Net profit/loss 12.9249 14.216 21.899 24.3466 19.8739
Total working fund(CA- 399.105
591.4391 759.3715 785.6083 1003.461
CL) 2
Ratio(%) 3.24 2.4 2.88 3.1 1.98

83
 Appendix-4

Growth ratio of Total deposit

Total Deposit
Banks Growth Rate(%)
2015/16 2016/17 2017/18 2018/19 2019/20
EBL 937.35 950.94 1155.1171 1295.68 1435.45 11.24
HBL 873.36 928.81 989.89 1093.8706 1252.64 9.44
RBB 1462.08 1535.81 1642.1 1892.55 2309.03 12.1
SCBNL 557.27 638.73 670.61 757.32 950.21 14.27

Growth ratio of Loan and advances

Total Deposit Growth

Banks
2015/16 2016/17 2017/18 2018/19 2019/20 Rate(%)
EBL 679.55 772.88 941.82 1120.07 1128.97 13.53
HBL 677.46 736.94 861.6 974.7 1067.27 12.03
RBB 817.78 1021.62 1465.6 1552.55 1214.6 10.39
SCBNL 312.03 392.64 466.96 556.34 569.36 16.22

Growth ratio of Total Investment

Total Deposit Growth

Banks
2015/16 2016/17 2017/18 2018/19 2019/20 Rate(%)
EBL 181.99 119.65 155.52 217.49 291.93 12.54
HBL 193.06 179.29 118.5 169.71 230.17 4.49
RBB 437.68 382.76 249.57 405.94 751.77 14.48
SCBNL 230.95 156.32 46.61 11.35 130.59 -13.28

Growth ratio of Net Profit

Total Deposit Growth

Banks
2015/16 2016/17 2017/18 2018/19 2019/20 Rate(%)
EBL 17.3 20.06 25.82 30.54 25.16 9.82
HBL 19.36 21.78 18.76 27.64 25.88 7.53
RBB 5.89 27.76 36.59 50.47 43.77 65.11
SCBNL 12.92 14.22 21.9 24.35 19.87 11.36

Ending Value - Beginning Values

Growth Percentage =  100
Beginning Value

84
 Appendix 5

Correlation between deposit and loan and advances

Banks Correlation
Deposit Loan & advances
EBL Deposit 1
Loan & advances 0.99 1

Deposit Loan & advances

HBL Deposit 1
Loan & advances 0.98 1

Deposit Loan & advances

RBB Deposit 1
Loan & advances 0.91 1

Deposit Loan & advances

SCBNL Deposit 1
Loan & advances 0.89 1

85
 Appendix 6

Regression analysis of between deposit & loan and advances

Regression Statistics
Banks Multiple R R Square Adjusted R Standard Error Observation
EBL 0.99 0.98 0.97 34.08 4
HBL 0.98 0.95 0.94 37.69 5
RBB 0.91 0.82 0.76 166.07 5
SCBNL 0.89 0.78 0.71 80.23 5

ANOVA
Banks df SS MS F Significance F
Regression 1 125967.24 125967.24 108.43 0.0091
EBL Residual 2 2323.45 1161.73
Total 3 128290.69

Regression 1 85821.30 85821.30 60.42 0.0044

HBL Residual 3 4261.29 1420.43
Total 4 90082.58

Regression 1 386330.78 386330.78 14.01 0.0333

RBB Residual 3 82733.85 27577.95
Total 4 469064.63

Regression 1 70472.66 70472.66 10.95 0.0454

SCBNL Residual 3 19308.26 6436.09
Total 4 89780.92

86
 Coefficien Standard P- Lower Upper
Bank t Stat
t Error value 95% 95%
Intercept 110.085 106.928 1.030 0.411 -349.989 570.160
EBL 10.41
679.95 1.092 0.105 0.009 0.641 1.544
3

Intercept 215.397 105.830 2.035 0.135 -121.401 552.196

HBL X Variable
0.935 0.120 7.773 0.004 0.552 1.317
2

Intercept 530.415 338.933 1.565 0.216 -548.222 1609.052

RBB X Variable
1.019 0.272 3.743 0.033 0.153 1.886
3

Intercept 154.512 173.089 0.893 0.438 -396.335 705.359

SCBN
L X Variable
1.219 0.368 3.309 0.045 0.047 2.391
4

Regression analysis between deposit and investment

Regression Statistics
Banks Multiple R R Square Adjusted R Standard Error Observation
EBL 0.853 0.728 0.637 130.440 5.000
HBL 0.112 0.013 -0.317 172.194 5.000
RBB 0.796 0.633 0.510 239.600 5.000
SCBNL 0.367 0.135 -0.154 160.918 5.000

ANOVA
Banks df SS MS F Significance F
Regression 1 136411.099 136411.099 8.017 0.066
EBL Residual 3 51043.944 17014.648
Total 4 187455.043

Regression 1 1130.562 1130.562 0.038 0.858

HBL
Residual 3 88952.022 29650.674

87
 Total 4 90082.583

Regression 1 296839.933 296839.933 5.171 0.108

RBB Residual 3 172224.699 57408.233
Total 4 469064.632

Regression 1 12097.530 12097.530 0.467 0.543

SCBNL Residual 3 77683.387 25894.462
Total 4 89780.916

Bank Coefficient Standard P- Lower Upper

t Stat
s s Error value 95% 95%
Intercept 612.493 200.251 3.059 0.055 -24.795 1249.781
EBL X Variable
2.805 0.991 2.831 0.066 -0.348 5.957
1

Intercept 933.139 489.408 1.907 0.153 -624.376 2490.654

HBL X Variable
0.555 2.840 0.195 0.858 -8.485 9.594
2

Intercept 1114.838 306.639 3.636 0.036 138.976 2090.701

RBB X Variable
1.467 0.645 2.274 0.108 -0.586 3.520
3

Intercept 826.684 178.773 4.624 0.019 257.747 1395.621

SCBN
L X Variable -
-0.823 1.204 0.543 -4.653 3.008
4 0.684

88