Beruflich Dokumente
Kultur Dokumente
bank ltd.
LIQUIDITY ANALYSIS OF
NEPAL INVESTMENT BANK LTD.
Contents
Acknowledgement
.I
Table of contentII
List of table...III
Table of Contents
Chapter- one
1. Introduction
1.1. concept of banking
1.2. The banking in Nepal
1.3. List of commercial bank in Nepal
1.3.1. List of licensed commercial bank in Nepal
1.3.2. Functions of commercial bank
1.4. Overview of Nepal investment bank ltd.
1.4.1. Board of directors
1.4.2. Management team
1.4.3. Branches and Counters
1.4.4. Products and Services
1.5. Strategies and future plans of Nepal investment bank ltd.
1.6. Statement of problem
1.7. objectives of the study
1.8. Significance of the study
1.9. Limitations of the study
1.10. Scope and importance of the study
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Chapter -two
2. Review of Literature
2.1. Conceptual framework
2.1.1. Liquid Assets
2.1.2. Cash Reserve ratio(CRR)
2.1.3. Statutory Liquidity ratio(SLR)
2.1.4. Importance of the liquidity for the bank
2.1.5. Need of the liquidity for the bank
2.1.6. Demand for the liquidity
2.1.7. Supply for the bank liquidity
2.1.8.Criteria of measuring the bank liquidity
2.1.9. Liquidity to be maintained with the central bank
2.1.10. penalty for non-compliances
2.1.11. Applicable penalty rates
2.1.12. Composition
2.1.13 Basis for the liquidity Requirement prediction
2.1.14Review of related study
Chapter three
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3. Research methodology
3.1. Research design
3.2. Data collection techniques
3.3. Data analysis tools
3.3.1. Ratios
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Chapter Four
4.Data presentation and analysis
4.1. Participation of all deposits in the total deposit liability
4.2. Liquidity Ratio
4.2.1. saving deposit to total deposit ratio
4.2.2. fixed deposit to total deposit ratio
4.2.3. Cash and bank balance to current deposit ratio
4.2.4. Cash and bank balance to total deposit ratio
4.2.5. Cash and bank balance to total deposit
(Excluding fixed deposit ) ratio
4.2.6. Balance with NRB to current and saving
deposit ratio
4.2.7. Balance with NRB to fixed deposit ratio
4.2.8. Total investment to total deposit ratio
4.2.9. Liquid asset to total deposit ratio
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Chapter five
5. Summary, Conclusion and Recommendation
5.1. Summary
5.2 Conclusion
5.3. Recommendation
Bibliography
List of table
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Table No.
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Table Name
Pege no.
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CHAPTER ONE
INTRODUCTION
Generally, bank is an institution which accepts deposits, makes business loans, and offers related
services. Commercial banks also allow for a variety of deposit accounts, such as checking, saving,
and time deposit. There institutions are run to make a profit and owned by a group of individuals, yet
some may be members of the Federal Reserve System. While commercial banks offer services to
individuals, they are primary concerned with receiving deposits and lending to businesses.
In an economy the bank is regarded as one of
the economic backbone of the country for its development. Bank is a financial institution that deals in
money. The basic function of bank is collecting deposit and granting the loans. It involves in credit
creation that in related to creation of deposit and loan. In the economy, the banks collects small
saving of general people, accumulative it and lends the productive sectors of the society for the
overall economic development.
Various writers have been defined the word bank in different ways.
According to Scholars, The bank is defined as factory of money for credit where it does not
purchase goods and sells it rather produces credit inform of deposit and sells it inform of loans.
According to C.R. Crowther,A banks collects money from those who have it to spare or who are
saving it out of their income and lends this money to those who required it.
Thus in conclusion, we can say that bank is an organization which deals with the monetary
transactions for the mobilization of idle money or deposits in productive sectors, is essentially
essential for the development of the whole net.
In the context of Nepal, like as in other country the goldsmiths and landlord was the
ancient banker. The Nepalese people were highly exploited by shahu mahajan by charging higher
interest rate that is compound interest rate and even by manipulating the principle amounts. If we try
to see the history of banking transaction in depth then evidence of money landing function are found
in practice before 8th century in 780 B.S.
1
gunakamdev the ruler of Kathmandu reconstructed Kathmandu valley by borrowing dept from the
people. In 14th century tankdhari system had been running in the period of ranodip shing
in Kathmandu established and office called tejarath adda. From the office the government distributed
salary to their employees and provided loan to government employment @5% of interest against the
security gold, silver etc.
Because of the development of economy activities in Nepal the above institutions could
not be fulfilled the need of people. So in kartik 30, 1994 B.S. Nepal bank was established as one of
the semi government commercial bank which had 10 million authorized capital and 842000 paid of
capital. it has done the pioneering function in function spreading the banking habits among the
people. Having felt a need of central bank to control and direct the commercial bank and help the
government for making monitory polices Nepal rastra bank was set up in 14 baishakht, 2013 B.S.
To fulfill the growing credit requirement of the country. The commercial bank i.e. Rastraya Banijya
bank was establishes in 10th bhadra 2022 B.S. this bank also provides facility for the economy
welfare of the general public. Nepal is an agricultural country to develop agriculture system. Industry
agriculture development bank and Nepal industrial development corporation was established in 2024
B.S. 2016 B.S. respectively.
The initiation of the financial sector; liberalization policy by Nepal rastra bank, a board of
joint venture banks entered with the view to accelerate the race of development of nation. At present,
there are many joint venture banks which are running successfully in a competitive environment. His
majesty government deliberates policy of allowing foreign joint venture banks to operate
in Nepal basically targeted, to encourage local tradition commercial bank to enhance their capacity
through competitors efficiencies mechanization modernization prompt customer service. Nepal Arab
bank ltd was established in 2041 as a first foreign joint venture bank.
Now in our country there are 31 commercial bank, 87 development bank, 79 finance company
and 21 micro credit development banks after mid July 2011(licensed by NRB)
The history of financial and economic development in Nepal is not very old. It has gone through
different stages, during the PM Ranodip shingh around 1972 A.D. TEJARATH ADDA was
introduced, which brought a reform in economic and financial section. The main purpose of
TEJARATH ADDA was to provide credit facilities to the general public at confessional rate.
However the installment of KHUSI KHANA as a banking agency during the king Prithivi Narayan
Shah could also be regarded as the first step towards banking in Nepal.
2
After that the first commercial bank of Nepal, Nepal bank
Limited (NBL) was lunched with the cooperation of imperial bank of India in November 1937. holding
51% government equity. The second commercial bank, Rastriya Banijya bank come into existence in
1966 A.D. with 100% government ownership. In early 1980, to meet the need of health completion in
the financial system, Nepal allowed to entry of foreign banks as joint ventures with up to maximum of
50% equity participation.
Nepal arab bank limited was the first joint venture bank which was established with the joint
venture of arab bank emirates in 1984. in 1986, Nepal grind lays bank limited (now chartered bank
limited) entered in nepali financial market as a joint venture with ANZ-Grind lays.
S.No.
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Source: www.nrb.org.np
Although profit maximization is a major objective of commercial bank, to achieve this objectives
commercial bank performs various functions under the mandatory rules and registrations and
directives of NRB and commercial Bank Act 2031(1974) which are:
Primary functions
a)
accepting Deposits:
Accepting deposits is the main function of commercial banks. Commercial banks collects money
from those who want to deposit in different types of deposits accounts such as:
Fixed deposit account
Current deposit account
Saving deposit account
b)
Advancing of Loans:
Commercial banks provide the required loan or credit to various sectors of economy such as
industry, trade, agriculture, business deprived sector etc. in this way bank creates facilities. It
provides loans from various procedures in different form such as:
Overdraft
Cash credit
Direct loan with collateral
Discounting bill of exchange
Loans of money at call and notice
Dealing in foreign exchange and financial foreign trade by accepting or collecting foreign bill of
exchange.
Underwriting loans to be raised public bodied and corporations.
Providing safety vaults or lock for the safe custody of valuables and securities of the customers.
Remittance of money
Agency Functions
Apart from the above function, commercial banks also perform agency functions for which they act
as agent and claim commission on some facilities such as:
Collection of customers money from other banks.
Receipt and payment of dividend and interest.
Security brokerage service
Financial advisory services
To underwrite the government and private securities.
Nepal investment Bank Ltd. (NIBL), previously Nepal Indosuez bank Ltd., was established in 1986
as a joint venture between neplise and French partners. The French partner (holing 50% of the
capital of NIBL) was credit agricole Indosuez, a subsidiary of one the largest banking group in the
world.
With the decision of credit agricole Indosuez to divest, a group of companies comprising of
bankers, professionals, industrialists and business man, had acquired on april 2002 the 50% share
holding of credit agricole Indosuez in Nepal Indosuez bank Ltd.
The name of the bank has been change to Nepal investment bank Ltd.Upon approval of banks
annual general meeting, Nepal rastra bank and company registers office with the following share
holding structure.
Public director
Professional director
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NAME
Prithivi Bahadur Pande
Jyoti Prakash Pande
Rajan Kumar Amatya
Birendra Suwal
Anuj Mani Timlisina
Manju Basnet
Shreechandra Bhatta
Rabin Sijapati
POSITIONS
Chairman
General manager
Retail banking
Information technology
Corporate banking
Putalisadak Branch manager
Branch co-ordination cell
Credit quality control
Department
Trade finance
Legal
Cards and remittance
Accounts
Group A
Group A
Group A
Group A
Rastriya Bima
Sasthan,-group C
Group D
-
Sanjeeb Karki
Tul jungh pande
Sarbir SJB Rana
Sammit Bhandari
Binod kumar Upadhya
Shiv Nath Pande
6
1.4.3. BRANCH AND COUNTERS
Kathmandu head office,Darabarmarga
P.O. Box no. 3412, tel. no. 4228229, 42425309(DISA)
Fax no. 977-1-4226349, 4228927
SWIFT: NIBLNPKT
SEEPADOLE BRANCH , SURYABINAYAK, BHAKTAPUR
BIRGUNJ BRANCH , ADARSANAGAR
PULCHOCK BRANCH , LALITPUR
BANEPA BRANCH, KAVRE
JITPUR BRANCH , BARA
NEW ROAD BRANCH , KATHMANDU
BIRATNAGAR BRANCH , BIRATNAGAR
BUTWAL BRANCH , TRAFIC CHOCK,BUTAWAL
BHAIRAWA BRANCH , MAITRI ROAD , BHAIRAWA
POKHARA BRANCH, CHIPLE DUNGA , POKHARA
PUTALISADAK BRANCH , KATHMANDU
NARAYANGHAT BRANCH, NARAYANGATH
JANAKPUR BRANCH, MILS AREA, JANAKPUR
NEPALGUNJ BRANCH , DHAMBOJI NEPALGUNJ
THAMEL BRANCH, CHAKSABARI THAMEL
KALIMATI BRANCH , KALIMATI CHOCK,KALIMATI
BIRTAMOD BRANCH , TRAFIC CHOCK , BIRTAMOD
BATTISPUTALI BRANCH ,KATHMANDU
DHANGADI BRANCH, MAIN ROAD , DHANGADI
GANGABU BRANCH , GANGABU CHOCK, KATHMANDU
SURKHET BRANCH, NETA CHOCK , SURKHET
JUMLA BRANCH, KHALGA BAJAR , JUMLA
BOUDHA BRANCH , KATHMANDU
HETAUDA BRANCH , BANK ROAD , HETAUDA
PALPA BRANCH, TANSEN , PALPA
LUKLA BRANCH , CHAURIKHARKA, LUKLA
NAYABANESHWOR BRANCH, KATHMANDU
DHUMBARAHI BRANCH , PIPALBOT CHOCK , KTM
BHOTAHITY BRANCH, KATHMANDU
TULASIPUR BRANCH , DHANG
TRIPURESHWOR BRANCH , KTM
DAMAULI BRANCH , SAFA SADAK , DAMAULI
7
WALING BRANCH , SYANJA
Saving deposit
Current deposit
Fixed deposit
Call deposit
Lending
Documentary credits
Guarantee
Collections (agency functions)
Credit card
Safe deposit locker
Fund transfer
Remittance
SWIFT member
ATM
Fast cash
Withdrawal
Pin change
Enquiry
1.5. STRATEGIES AND FUTURE PLANS OF THE NEPAL INVESTMENT BANK LTD.
The Nepal investment Bank Ltd.s mission is to be the Bank of the first choice to attain the goal to
be the Bank of the first choice, bank is concerting into the service of its customers and social
issues. So Nepal investment is the customer focus and goal oriented.
Bank needs to maintenance some seasonable level of liquidity to fulfill different commitments
such as provide money to depositors when they demand for administrative expenses, for
maintaining cash reserve ratio in the central bank etc. so, liquidity is defined as the banks capacity
to pay cash in exchange of deposits. Liquidity is crucial in the business like banking. Because if the
bank has the high liquidity it can no on a desired profit and if the bank has the shortfall of the liquidity
it can not satisfy its customers. Inadequate liquidity may lead to collapse of the bank while excess
liquidity is determinant to banks profitability in order to remove demerits associated with maintaining
inadequate and excess liquidity, bank should maintained and optimum level of liquidity. This possible
only when banks liquidity needs is correctly predicted. Prediction covers inflows and outflows of
liquidity. If prediction shows more outflows, bank should be prepared to cover the shortfall by
borrowing or by liquidating assets. If inflow is greater than outflows, bank should plan where to invest
so that income can be increase. Banks attach great importance short terms and long terms
predictions. Prediction of liquidity need should be in the form of primary and secondary reserve so
that bank generates income and at the same time does not compromise to liquidity. Banks got failure
because of wrongly analyzed liquidity position and wrongly predicated liquidity requirement and
management policy of liquidity. Thus to gain the trust of the customers and be success on the
operation, the bank should maintain and forecast the liquidity need for the period and optimum level
of liquidity based on the past liquidity position.
This report is prepared to analyze the liquidity position of Nepal investment bank. This
report comprises the date from 2005 to 2010. This would help the bank to observe the trend of the
liquidity position hold in those periods. Besides that, this study also evaluates the role of short term
obligation and the bank ability to pay the currently maturity obligation. Moreover, the study will check
the profitability of the bank. This will help the bank to take the corrective actions if there are any
errors on the past performance and the study aims to recommend correcting the division if the
standard has not been met.
Data contains mostly of the annuals reports of the bank through fiscal year2005/2006 to
2009/2010.
ii.
Only five years observation covering from fiscal year 2005/2006 to 2009/2010 is analyzed.
iii.
Analysis is based on the ratio and trend lines of the corresponding ratios only.
iv.
For the forecast of the liquidity requirement, daily and monthly data is needed. But due to time and
cost constraints, only the annual data is used for analysis.
v.
vi.
The study is only fulfill the requirement for the degree of bachelor in business studies, which can
not cover all the dimension of the all subjects matter and resource and time period is also limited.
To the investors
b)
To the creditors
c)
d) To the customers
e)
f)
And this study will be equally useful to the other readers, students of related subjects and other
people who are concern with banking field.
CHAPTER TWO
Review of Literature
This chapter deals with the theoretical aspects of the topic of financial analysis
of Nepal investment bank Ltd. in more detail and descriptive manner. For this study, journals,
articles, and some research reports related with this topic have been reviewed. This study has to
refer almost all books related with this topic published. Some of the prior reports by students of BBS
regarding this topic have also been reviewed.
Liquidity is also defined as the position or capability of a bank to meet the current obligation
of customers such as payment of cheque. Payment of demand drafts, disbursement of approved
loan etc. Bank needs to maintain some reasonable level of liquidity to fulfill different commitments
such as provide money to depositors when they demand for administrative expenses, for
maintaining cash banks capacity to pay cash in exchange of deposits. Liquidity is crucial in the
business like banking. Because if the bank has high liquidity, it can no earn a desire profit and if the
bank has the shortfall of the liquidity it cannot satisfy its customers. Inadequate liquidity may lead to
collapse of the banks while excess liquidity is detrimental to banks profitability. In order to remove
demerits associated with maintaining inadequate and excess liquidity, banks should maintain an
optimum level of liquidity. This possible only when banks liquidity needs is correctly predicted.
Prediction covers in present outflows of liquidity. If prediction shows more outflows, bank should be
prepared to cover the shortfall by borrowing or by liquidating assets. If inflow greater than outflow,
bank should plan where to invest so that income can be increase. Banks attach great importance
short term and long term predictions. Prediction of liquidity need should be in the firm of primary and
secondary reserves so that bank generates income and at the same time does not compromise to
liquidity.
2.1.1. Liquidity assets: the assets which can be converted into cash immediately with or without a
nominal loss of value. Liquidity can be in the firm of treasury bills, investments in government
securities, gold and silvers, inventories and marketable securities etc.
2.1.2. Cash reserve Ratio (CRR): Central banks the world over make banks maintains the certain
level of liquidity to total deposit liabilities in the form of the cash and bank balance. This ratio is
known as the cash reserve ratio or primary reserve.
2.1.3. Statutory liquidity ratio (SLR): Central bank orders to the banks to maintain the certain level
of liquidity to total deposit liabilities in the form of the cash and bank
11
balance and treasury bills and government securities and bonds. Such liquidity requirement is called
the statutory liquidity ratio.
2.1.4. Importance of liquidity for the bank: The liquidity is important for the bank for the motives
cited as follow:
Transaction motive
Speculative motive
Precautionary motive
Capital issue
Retained earning
Borrowings
Bond issue
Repayments of loans
Other incomes
i.
ii.
Whether CRR and SLR have been maintained as per instruction of the central bank?
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Balance at Nepal Rastra bank 7% current and saving deposit liabilities. 4.5% of
fixed
deposit liabilities.
Cash in vault 2 % of deposit liabilities
In the case of shortfall in maintenance of balance with Nepal Rastra bank but maintenance of cash
at vault more than 2%, then on such shortfall amount.
2)
In the case shortfall in maintenance of balance with Nepal Rastra bank but maintenance of cash at
vault more than 2%, up to 1% excess cash of total deposit is added in the balance with NRB, than
on such shortfall amount (after adding up to 1% excess)
3)
In the case of shortfall in maintenance of cash in vault as well as shortfall in balance held with Nepal
Rastra bank, than on total shortfall amount.
2.1.12. Composition:
a. Total deposit means current, saving and fixed deposit account as well as call money deposit
and certificate of deposit. For the purpose, deposits held in convertible foreign currency,
employees guarantee amount and margin account will not be included.
b. Fixed deposit means a deposit in local currency accepted under the condition to repay on
completion so stipulated time period.
c. Current and saving deposit means all deposit accounts other than the fixed deposits.
d. Cash in vault shall include only the local currency and foreign currency (except clearing
cheque etc.)
e. Balance held with Nepal rastra bank in ordinary account only will be eligible for liquidity
calculation. Special accounts opened with Nepal rastra bank for specific purpose and foreign
currency designated accounts will not be included for the purpose.
f.
For the purpose of liquidity examination, all branches of the bank shall constitute one unit.
13
Maturity of deposits
b.
Maturity of borrowings
h capital purchases
c.
Maturity of placement
d.
e.
f.
International federation of accountants has recommended the measuring the liquidity of bank by:
Liquidity of the bank should be maintained according to standard; excel liquidity as well as lack of
the liquidity indicates that a bank is serious financial problems. The implication of the financial
problem results losing of deposits, which erodes its supply of cash and forces the institutions to
dispose of its safer and more liquid assets. On the other hand, other banks that are strong in liquidity
will be increasingly reluctant to lend the problem bank liquid funds at higher interest rates. Thus, we
can say that it is optimism necessity of the bank to maintain a proper balance between high liquidity
and low liquidity.
The tools used for analysis are:
Cash and bank balance to total deposit ratio
Current deposit to total deposit ratio
Saving deposit to total deposit ratio
Investment to total deposit ratio
And fund fluctuation trend line
CHAPTER THREE
Research Methodology
The method which is use in the research is called research methodology. How the data is
collected and which source the research use for getting the data is under the research methodology.
Research methodology covers the data analysis tools as well.
A research design is the arrangement conditions, for the collection and analysis of data in a
manner that aims to combined relevance to the research purpose with economy in procedures.
This study aims on the financial analysis of the Nepal investment bank Ltd. This
study is mainly based on primary data and secondary data. The primary data, which are collected
directly from the question answer, direct interview with customer and office staffs. The secondary
data are collected from respective annual reports especially from the Nepalinvestment banks web
sites and various other journals and from security bond Nepal (SUBO) and Nepal stock exchange
(NEPSE).
3.3.1. Ratios:
An arithmetical relationship between two figures is called ratio. It is the most useful and
analytical tools to evaluate in respect to one variable over another. Here, for our purpose, only the
liquidity related ratios are calculated.
1)
Liquidity ratio
2)
3)
4)
5)
6)
7)
8)
9)
CHAPTER FOUR
4.1. PARTCIPATION OF THE ALL THE DEPOSIT IN THE TOTAL DEPOSIT LIABILITY:
Fiscal year
2005/06
Current deposit
1705668495
Saving deposit
8081980512
Fixed deposit
5412969595
Total deposit
15200618592
2006/07
2007/08
2008/09
2009/10
2175020657
3138669428
3756570350
4025820180
10742331625
13688766549
17066252467
14324255897
7516686866
7944232558
11633380218
16825148284
20424048148
24771668535
32456203035
35175224361
17
In the above table and chart, we see that, in fiscal year 2005/06, the current deposit account
occupied 11%, saving deposit account 53%, fixed deposit account 37%.in fiscal year 2006/7 the
current deposit account occupied 10%, saving deposit account53%, fixed deposit account 36%
occupied. In fiscal year 2007/08 the saving deposit account occupied 13%, saving deposit account
53%, fixed deposit account 37% occupied. In fiscal year 2008/09 the current deposit account
occupied 13% saving deposit account55%, fixed deposit account32% occupied. In fiscal year
2009/10 the current deposit account occupied 11%, saving deposit account42%, fixed deposit
account occupied 48%.
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Saving deposit
8081980512
10742331625
13688766549
17066252467
14324255897
Total deposit
15200618592
20424048148
24771668535
32456203035
35175224361
Ratio
0.53
0.53
0.55
0.53
0.41
Fiscal year
From the above table and trend line chart, the ratio is fluctuating state. In the fiscal year 2005/06, the
bank has the saving deposit of 0.53 times of total deposit liability. And 0.53, 0.55, 0.53, 0.41 times of
total deposit liability in fiscal year 2006/07, 2007/08, 2008/09, 2009/
10 respectively.
18
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Fixed deposit
5412969595
7516686866
7944232558
11633380218
16825148284
Total deposit
15200618592
20424048148
24771668535
32456203035
35175224361
Ratio
0.36
0.37
0.32
0.35
0.48
Fiscal year
From the above table and trend line chart, the ratio is fluctuating in increasing and decreasing trend.
The highest ratio is 0.48 times in year 2009/10 and lowest ratio is 0.32 times in fiscal year 2007/08.
And 0.36 times, 0.37 times and 0.35 times in year 2005/06, 2006/07, and 2008/09 respectively.
19
4.2.3 CASH AND BANK BALANCE TO CURRENT DEPOSIT RATIO:
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Current deposit
1705668495
2175020657
3138669428
3756570350
4025820180
Ratio
0.48
0.49
0.62
0.95
0.87
Fiscal year
From the above table and trend line chart, the ratio is fluctuating in not normally. In fiscal year
2005/06, the bank has the liquidity against current deposit is 0.48 times. And the bank has the
liquidity against current deposit are0.49, 0.62, 0.95, 0.87times in year 2006/07, 2007/08, 2008/09,
2009/10 respectively.
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Total deposit
15200618592
20424048148
24771668535
32456203035
35175224361
Ratio
0.05
0.05
0.08
0.11
0.10
20
Fiscal year
From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2005/06, the bank
has the liquidity for total deposit in the ratio of 0.05 times. And in fiscal year 2006/07, 2007/08,
2008/09, and 2009/10, the bank has the liquidity for the total deposit in ratio of 0.05, 0.08, 0.11 and
0.10 times respectively.
DEPOSIT)
RATIO:
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Total deposit
9787648997
12917361282
16827435977
20822822817
18350076077
21
Fiscal year
Ratio
0.08
0.08
0.11
0.17
0.19
From the above table and trend line chart, the ratio is fluctuating in increasing state. In fiscal year
2005/06, the bank has the liquidity against current and saving deposit account deposit account
liability in the ratio of 0.08 times. And in fiscal year 2006/07, 2007/08, 2008/09, and 2009/10, the
bank has the liquidity against current and saving deposit account liability in the ratio of 0.08 times,
0.11 times, 0.17 times and 0.19 times respectively.
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Current + saving
9787648997
12917361282
16827435977
20822822817
18350076077
22
Ratio
0.16
0.11
0.11
0.16
0.18
Fiscal year
From the above table and trend line chart, the ratio has been maintained in fiscal year 2005/06 by
0.16 times. And the bank has been maintained its ratio in fiscal year 2006/07, 2007/08, 2008/09,
2009/10 by 0.11 times, 0.11 times, 0.16 times and 0.18 times respectively.
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Fixed deposit
5412969595
7516686866
7944232558
11633380218
16825148284
Ratio
0.28
0.18
0.23
0.38
0.19
23
Fiscal year
From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2005/06, the bank
has the balance with NRB against fixed deposit liability in the ratio of 0.28 times. And in fiscal year
2006/07, 2007/08, 2008/09, 2009/10, the bank has the balance with NRB against fixed deposit
liability in the ratio of 0.18 times, 0.23 times, 0.38 times and 0.19 times respectively.
Fiscal year
2005/06
2006/07
Total investment
5602808649
6505679987
Total deposit
15200618592
20424048148
Ratio
0.37
0.32
2007/08
2008/09
2009/10
6874023625
7399811700
8635530125
24771668535
32456203035
35175224361
0.28
0.23
0.25
24
Fiscal year
From the above table and trend line chart, the ratio is fluctuating. In fiscal year 2005/06, the bank
has invested 37% of the deposit in investment. In fiscal years 2006/07, 2007/08, 2008/09, 2009/10,
the bank has invested 32%, 28%, 23% and 25% of the deposit in investment respectively.
Fiscal year
2005/06
2006/07
2007/08
2008/09
2009/10
Liquidity assets
4068425766
5203482662
5403444347
5561846381
5683996571
Total deposit
15200618592
20424048148
24771668535
32456203035
35175224361
25
Fiscal year
ratio
0.26
0.51
0.51
0.50
0.48
From the above table and trend line chart, the ratio is fluctuating slightly except fiscal year 2005/06
in fiscal year 2005/06; the bank has invested 26% of the deposit in the liquid assets. In fiscal year
2006/07, the bank has invested 51% of deposit in liquid assets. In fiscal year 2007/08, 2008/09 and
2009/10, the bank has invested 51%, 50%, and 48% of the deposit in the liquid assets respectively.
CHAPTER FIVE
Nepal is one of the least developed countries of the world. For most of the developing
process, it is financially depending upon the foreign countries. It is economically too weak. Thus, the
economic condition of the people is weak. In Nepal 85% of the people are depended upon
agricultural sector which is unable to provide full employment to the people. Nepal government has
to activate people in the nations development through overall industrialization of nation. For this
purpose, development of sound banking system is essential.
In neplese banking sector, commercial banks including ventures banks are operating at
present. In the absences of modern banking any country cannot develop the economic activity.
Therefore, it is essential to find out whether or not the banks are serving an important contribution to
develop sectors of economy. Liquidity is said to be general business of fund, which shows the bank
ability to meet cash requirement. In this record, this study has been based upon the objective to
evaluate the liquidity position of Nepal investment bank ltd.
5.2. CONCLUSION
a)
The saving deposit account is nearly constant trend. The highest ratio is 0.55 times in fiscal year
2007/08 and the lowest ratio is 0.41 times in fiscal year 2009/10. But the ratio is not satisfactory due
to the last year ratio was decline.
b)
Fixed deposit is fluctuated. The lowest ratio is 0.32 times and highest ratio is 0.48 times. It is
decrease up to fiscal year 2007/08 and grows up then. And it is 0.48 times on 2009/10. It is
satisfactory. Bank made good ratio after 2007/08.
c)
From the cash and bank balance to current deposit liability is fluctuating. The ratio is moving around
between 0.48 times to 0.95 times. It is satisfactory.
d) Cash and bank balance to total deposit ratio is fluctuating. But the ratio is somehow satisfactory
even though the ratio is higher than the central banks prescription. The ratio is moving around the
between 0.05 times to 0.11 times.
e)
Cash and bank balance to total deposit (excluding fixed deposit) ratio is fluctuating in increasing
state. The ratio is satisfactory. It is moving around between 0.08 times to 0.19 times.
f)
The ratio of balance with the NRB to current and saving deposit has been fluctuating. The ratio is
declined in year 2006/07 and constant in 2007/08 and then it is grow up. so, the ratio is satisfactory.
g)
The balance with the NRB to fixed deposit ratio is fluctuating. It is moving around between 0.18
times to 0.39 times.
h)
The investment to total deposit ratio is fluctuating adversely. Since the ratio is fluctuating the bank
has unsatisfactory result. However the investment from source of deposit is
27
higher. It will give a higher return without risk only if the ratio is stabilized.
i)
The liquid assets to total deposit ratio is fluctuating slightly except fiscal year 2005/06. However the
ratio is higher and somehow may be considered satisfactory.
5.3 RECOMMENDATION
a)
The overall results are satisfactory. But in some case the Nepal investment Bank should take
certain steps to improve the bank current financial condition. Therefore some recommendations are
being put forward for its improvement along with its development of the country.
b)
The proportion of the saving deposit account is high in total deposit liability. So, it is recommended
that the bank should utilize the amount collected from the saving deposit account carefully. It should
be invested in the higher yielding areas.
c)
The cash and bank balance in the Nepal investment bank is satisfactory. It is higher a bit though.
Bank should analyze the opportunities for short term investment.
d) Balance with NRB to current plus saving deposit should be maintained at the below than 0.11 times.
e)
Investment to deposit ratio is fluctuating adversely. It may harm the operation of the bank. So, the
investment from the deposit source should always be aware of liquidity need and keep in mind to
maintain the optimum liquidity.
f)
Bank should not spend too much in the fixed assets because it yields only a nominal portion, almost
no yield.
28
BIBLIOGRAPHY
Bajracharya, B.C. (2053), Business statistics & mathematics, M.K. publishers and Wistributors.
Brigham, Weston, Essentials of Managerial Finance, Eleventh Edition, University Publishers, USA.
Kothari, C.R., Research Methodology, Mc. Grow Hill Company, second Edition.
Shekhar and Shekhar Banking Theory & Practice, Eighteenth Revised Edition, 1996.
http:// www.nrb.org.np
http://www.nibl.com.np