Mobilization of Deposit and Investment of Nabil Bank Ltd. by Sangita Neupane

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A STUDY ON MOBILIZATION OF DEPOSIT AND

INVESTMENT OF NABIL BANK LTD.
Submitted by
SangitaNeupane
Bachelor of Business Studies
Department of Management
Campus Roll No.:119
Symbol No.:703020241
T.U. Reg. No.: 7-2-475-67-2015
Submitted to
Office of the Dean
Faculty of Management
Tribhuvan University
Kirtipur, Kathmandu
In partial fulfillment of the requirement for the degree of

Bachelor of Business Studies. (B.B.S)
Kathmandu, Nepal
April-May, 2019
2
RECOMMENDATION
This is to certify that the thesis
Submitted by:
SangitaNeupane
Entitled
A STUDY ON MOBILIZATION OF DEPOSIT AND

INVESTMENT OF NABIL BANK LTD.
has been prepared as approved by this Department in the prescribed format of

Faculty of Management. This thesis is forwarded forexamination.
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DECLARATION
I hereby, declare that the work reported in this thesis entitled “A Study on
Mobilization of Deposit And Investment of Nabil Bank Ltd. ” submitted

to Faculty of Management, University Campus, T.U., Kirtipur is my original piece of
work done in the form of partial fulfillment of the requirement for the Bachelor’s
Degree in Business studies under the supervision and guidance of MrRajendraLamsar,
Faculty member LumbiniBanijya Campus.
........................
SangitaNeupane
Roll No.:703020241
Bachelor of Business Studies
LumbiniBanijya Campus
Rupendehi, Butwal
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ACKNOWLEDGEMENTS
This study is mainly concern with the analysis of "A Study on Mobilization
of Deposit and Investment Policy of Nabil Bank Ltd." During the course of my
study, I found myself fortunate enough to receive a good deal to help and inspiration
from various persons and institution. So I would like to express my sincere thanks to
all of them.
I would like to express my sincere gratitude to my Husband Mr Amar Gaudel,

Accountant of a freight forwarding company Named Zephyr Express situated in New
Delhi, India, for his valuable guidance and supervision to my study.
I am heartly thankful to all the respondents who have provided me with

various suggestion and responses to complete this project work.
I am thankful to my friends who directly or indirectly supported me during my

research. I am equally thankful to all the teachers and staffs of Department of
Management, LumbiniBanijya Campus &GalyangBaumukhi Campus for their help
and kind cooperation.
SangitaNeupane
May, 2019
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Table of Contents
S.N. Chapters Page No.

1. Introduction 1-47
1.1 Background of the study 10
1.1.1 Origin of Bank 10
1.1.2 Meaning of Bank 11
1.1.3 History of bank in Nepal 11
1.1.4 Commercial Bank 12
1.2 Introduction of Nabil Bank Limited 12
1.2.1 Branches of Nabil Bank Ltd. 13

1.3 Introduction of Deposit 14
1.3.1 Types of Deposit and its Account Opening Procedure 15
A. Types of Deposit 15
1.3.1.1 Interest Bearing Deposit 16
1.3.1.2 Non-interest Bearing Deposit 17
B. Account Opening Procedure 17
1.4 Statement of Problems 20
1.5 Objectives of the study 20
1.6 Limitations of the study 20
1.7 Significance of the study 20
1.8 Method of Research 20
1.8.1 Research Design 20
1.8.2 Sources of data 21
1.8.3 Data Processing Techniques 21
1.9 Organization of Report 22
1.10 A Method of Analaysis 54
1.11 B Financial Tools 54
1.12 Ratio Analaysis 54
A Liquidity Ratio 54
1.12.1 Current Ratio 54
1.12.2 Cash and Bank Balance to Total Deposit Ratio (Cash Reserve Ratio) 55
1.12.3 Cash and Bank Balance to Current Assets Ratio 55
1.12.4 Investment on Government Securities to Current Assets Ratio 56
1.12.5 Loan and Advance to Current Assets Ratio 56
1.13 B Assets Management Ratio (Activity Ratios) 56
1.13.1 Loan and Advances to total Deposit Ratio 56
1.13.2 Total Investment to Total Deposit Ratio 56
1.13.4 Loan and Advances to Working Fund Ratio 57
1.13.5 Investment on Government Securities to Total Working Fund Ratio 57
1.13.6 Investment on Share and Debentures to Total Working Fund Ratio 57
1.14 C Profitability Ratios 57
1.14.1 Return on Total working Fund Ratio 58
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1.14.2 Return on Loan & Advance Ratio 58
1.14.3 Total Interest Earned to total outside Assets Ratio 58
1.14.4 Total Interest Earned to Total Working Fund Ratio 58
1.14.5 Total Interest Paid to Total Working Fund Ratio 59
1.15 D Risks Ratios 59
1.15.1 Liquidity Risk ratio 59
Credit Risk Ratio 59
Capital Risk Ratio 60
E Growth Ratios 60
Statistical Tools 60
1.16 Trend Analysis 60
1.17 Co-efficient of Correlation Analysis 61
2. Data Presentation and Analysis 23-34
3. Summary, Conclusion and Recommendation 64-67

3.1 Summary 64
3.2 Conclusion(Major Findings) 64
3.3 Recommendation 65
Bibliography 68
I
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List of Tables
Table No. Headings Page No.

2.1 Total Deposit Position of NABIL 23
2.2 Current Deposit Position of NABIL 24
2.3 Saving Deposit Position of NABIL 24
2.4 Fixed Deposit Position of NABIL 25
2.5 Interest Bearing Deposit Trend of NABIL 26
2.6 Non-interest Bearing Deposit Trend of NABIL 27
2.7 Interest Expense on Deposit 27
2.8 Cost Position of NABIL 28
2.9 Deposit Lending Ratio 29
2.10 Ratio of Interest Bearing Deposit to Total Deposit 30
2.11 Ratio of Non-interest Bearing Deposit to Total Deposit 31
2.12 Ratio of Current Deposit to Total Deposit 32
2.13 Ratio of Saving Deposit to Total Deposit 33
2.14 Ratio of Fixed Deposit to Total Deposit 34
II
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List of Figures
Figure No. Heading of Figures Page No.

1 Equity Ownership Structure 4
2 Product and Services 5
2.1 Total Deposit Position of NABIL 23
2.2 Current Deposit Position of NABIL 24
2.3 Saving Deposit Position of NABIL 24
2.4 Fixed Deposit Position of NABIL 25
2.5 Interest Bearing Deposit Trend of NABIL 26
2.6 Non-interest Bearing Deposit Trend of NABIL 27
2.7 Interest Expense on Deposit 27
2.8 Cost Position of NABIL 28
2.9 Deposit Lending Ratio 29
2.10 Ratio of Interest Bearing Deposit to Total Deposit 30
2.11 Ratio of Non-interest Bearing Deposit to Total 31
Deposit
2.12 Ratio of Current Deposit to Total Deposit 32
2.13 Ratio of Saving Deposit to Total Deposit 33
2.14 Ratio of Fixed Deposit to Total Deposit 34
iii
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ABBREVIATION
C.A. = Current Assets
C.L. = Current Liabilities
M.S. = Marketable Securities
LTD = Limited.
NIDC = Nepal Industrial Development Corporation
NRB = Nepal Rastra Bank
iv
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CHAPTER-I
INTRODUCTION
1.1 Background of the Study
Nepal is a small country with unique physical setting surrounded by India in South,
East and West and by China in the North. It is a landlocked country. Nepal is one of
the least developed and poorest countries in the world. It has been laying emphasis on
the upliftment of its economy. The process of economic development depends upon
various factors. Financial institutions among others are viewed as catalyst in the
process of economic development and growth. They play an important role in
mobilizing saving, and put them into productive use.
Commercial banks are major financial institution, occupying an important place in the
economy of a country because the deposits collected by them provide much needed
capital for the development of industry, trade and commerce and other sectors,
thereby contributing to the economic growth of the nation. However, investment
activities are not without risks. They have to follow sound Principes of investment
policy, the rules and regulations, directives issued by the Central Bank. Diana
McNaughton in her research paper “Banking institutions in developing markets”
states that investment policy should incorporate several elements such as regulatory
environment, the availability of funds, the selection of risk, and loan portfolio balance
and term structure of the liabilities. (McNaughton, Diana, 1994:38) The loan provided
by commercial bank is guided by several principles such as length of time, their
purpose, profitability, safety etc. These fundamental principles of commercial bank’s
investment policy are needed to be considered while making investmentdecisions.
1.1.1 Origin of Bank:
It is very hard to collect the correct information of the origin of bank. The word “Bank” has derived from
the Italian word “Banco” which means accumulation of money of stock. It is believed that its origin is
from the French word “Banque” which means “beach” for keeping, lending and exchanging of money or
coin in the market place by money lenders or money changers. It is believed that the ancestors of modern
banking system were merchants, goldsmiths and moneylenders. Modern banking sowed its seed in the
medieval Italy despite strong Christian prohibitions against charging interest.
The bank had started in Italy in 12th century as a public bank. The Bank of Venice that was established in
1158 A.D. was the first bank in the history of banking. Following its establishment various banks such as
Bank of Barcelona, which was established in 1401 A.D was the second bank of the world. Similarly,
Bank of Geneva (1407), Bank of Amsterdam (1609), Bank of Hindustan (1770) were established. The
first central bank was the “Bank of England” which was established in 1844 AD.
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1.1.2 Meaning of Bank
Bank is a financial institution, which is engaged in monitory transaction. Bank has always been the most
importance and largest financial intermediates. Banks collect the scattered money from public providing
those interests and services. This collection becomes the capital for the bank to invest. “Banking means
the accepting of money for the view of lending or investment of deposit from the public repayable on
demand or otherwise and withdraw able by cheque, draft or otherwise”, is according to Banking
Regulation Act 1949 of India. World Bank says “Banks or a financial institution that accepts funds in the
forms of deposit repayable on demand or at short notice.”
Some important meanings of bank given by different scholars are as follows:
According to Walter leaf:-

"A bank is that institution or individual who is always ready to service money on deposit to be returned
against the cheque of their depositor.”
According to Harace White:-

“Bank is a manufactures of credit and machine for facilitating exchanges.”
According to G. Crowther:-
“A Bank is a dealer in debt in his own and other people are the bankers business is them to take the debt
of other people to otter his own in exchange and thereby to credit money.”
Therefore, the bank is a financial institution which accepts deposits from the general public and provides
loans to different sectors at different interest rates. Bank plays the vital role in the economical condition.
1.1.3 History of Bank in Nepal

In the context of Nepal, like as in the other countries the goldsmith and landlords where the ancient
banker. The Nepalese people were highly exploited by ‘Sahu Mahajan’ by charging higher interest rate,
compound interest rate and even by manipulating the principal amount. The introducing of
‘TejarathAdda’ during the tenure of the Prime Minister Ranoddip Sing (1993B.S.) was the first step
towards the institutional development of banking in Nepal. The first commercial bank ‘Nepal Bank
Limited’ was established on 30th Kartik 1994 B.S.and started to perform proper banking activities. With
the realization of central bank to develop monetary policy as well as to have proper control over
commercial banks and banking sectors Nepal Rastra Bank was established on 14th Baishak 2014B.S.
under Nepal Rastra Bank Act 2012 B.S. Likewise, RastraBanijya Bank under the full ownership of
government was established on Magh 2022 as per ‘RastraBanijya Bank Act 2012 B.S.’. The growths of
the banks accelerated only after the adoption of liberal economic policy by Nepalese Government .This
has attracted many new investors and encourage opening many new modern banks with joint venture of
foreign banks. Nepal Arab Bank was established on 29th Ashad 2041 B.S. as the first modern bank with
the joint venture of Dubai Bank Ltd. U.A.E. subsequently following its established Nepal Indo Suez Bank
France, Nepal Grinlands Bank England on 16th Marg 2043B.S. with its joint venture of Grinlands Bank
England, Himalayan Bank Ltd on 5th Marg 2049B.S. with the joint venture of Habib Bank of Pakistan,
Nepal SBI Bank Ltd. in28th Ashad 2050 B.S.with joint venture of State Bank of India Nepal Bangladesh
Bank Ltd. on 28th Jestha, 2050B.s. with the joint venture of International Finance Investment and
Commercial Bank, Everest Bank Ltd. on 1st Kartik 2051B.S. with joint venture of Punjab National Bank
Ltd of Kathmandu on 28th Falgun 2051B.S. with joint venture of the Siam Commercial Bank, Thailand.
Now, there are 23 commercial banks with 483 bank branches and 318 rural branches along with 45
financial companies and 5 Rural Development Banks.
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1.1.4. Commercial Bank
A commercial bank is a financial institution which collects saving from many persons and institutions and
provides credit or loan facility to different industrial and commercial business. Commercial banking
business consists of changing cash into hank deposit and bank deposit into cash, transferring bank deposit
form one person or institution to other, giving bank deposit in exchange for cheques, bills of exchange,
government securities etc.
Nepal Bank Limited established in 1994 BS is the first commercial bank in Nepal. Commercial banks
perform various functions. Among them, accepting various types of deposit is the main function of
commercial banks.
1.2 Introduction of Nabil Bank Limited
Nabil Bank Limited (Nabil) commenced its operation on 12 July, 1984 as the first joint venture bank in
Nepal, Dubai Bank Limited. Dubai (Later acquired by Emirates Bank International Limited, Dubai) was
the first joint venture partner of Nabil. Currently NB (international) limited. Ireland is the foreign partner.
Nabil Bank limited had the official name Nepal Arab Bank Limited till 3lst December 2001. Nabil is the
pioneer in introducing maims innovative products and marketing concept in banking sector of Nepal with
15 branches and 2 counters in all major cities. It is the only bank having its presence at
TribhuvanInternationalAirport of the country. Also, the number of outlets in the country is the highest
among the joint venture and private banks operating in Nepal. Success of Nabil is a milestone in the
banking history of Nepal as it paved the way for the establishment of many commercial banks and
financial institutions.
Nabil provides a full range of commercial banking services through its outlets spread across the nation
and reputed correspondent banks across the globe. Moreover, Nabil has a good name in the market for its
highly personalized services to the customers. At the time of commencement it had Rs 100 million as
Authorized Capital. Now, the Authorized capital of the bank is Rs. 500 million while the issued and paid
up capital is Rs. 49, 16, 54,400.
The share holding of NABIL Bank Ltd. is as following:
Subscription Percent Holding

N.B. (International), Ltd., Ireland 50%
Nepalese Public 30%
NIDC 10%
RastriyaBeemaSansthan 9.67%
Nepal Stock Exchange Ltd. 0.33%
Total 100%
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Figure 1
Equity Ownership Structure
N.B. (International), Ltd.,
Ireland
Nepalese Public
9.67% 0.33%
10%
NIDC
50%
Rastriya Beema Sansthan
30%
Nepal Stock Exchange Ltd.
Nabil cordially invites you to visit its branches/counters to have the taste of fledge banking services
NABIL BANK LIMITED

HEAD OFFICE
Nabil House, Kamaladi,
Katmandu.
1.2.1. Branches Nabil Bank Ltd.
1. Kantipath Branch, Kantipath 9. Itahari Branch, Main Road, Itahari

2. Nabil House Corporate Banking, 10. Butwal Branch, Main road, Butwal
Nabil House, Kamaladi, Ktm.
3. New Road Branch, New Road 11. Bhalwadi Branch, Bhalwadi, Rupandehi
4. Jorpati Branch, Jorpati 12. Pokhara Branch, Chipledhunga, Pokhara
5. Lalitpur Branch, Kupondole 13. Bhairahawa Branch, Narayanpath
6. Airport Exchange Counter, TIA 14. Credit Card Counter, Lakeside, Pokhara
7. Credit Card Counter, Thamel, Ktm 15.Birgunj Branch, Adarshanagar, Birgunj
8. Biratnagar Branch, GoswaraRaod 16. Alau Branch, Alau, Parsa
The Board of Directors of Nabil consists of:-
Chairman Mr. SatyendraPyara Shrestha, NB(International) Limited

Director Mr. Supriya Gupta , NB(International) Limited
Director Mr. MukundaNathDhungel, Nepal Stock Exchange Limited
Director Mr. MohiuddinAhemd, NB(International) Limited
Alternate Director Mr. Manish Gupta, NB(International) Limited
Figure 2
Products &
Services
Deposits Credits cards Lending
Tele- Safe Deposit Transfer

banking Locker Fund
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Introduction Of Deposit
 Deposits
Following types of accounts can he opened at any NABIL branches upon completion of simple
documentary requirement. All the accounts can he opened in various currencies (against which rate are
provided) subject to ruled of opening and fulfilling the required documents.
 Savings
 Current
 Fixed
 Call
 Guarantees
NABIL Bank issues guarantees and Bonds on behalf of customers to the beneficiaries in Nepal. Upon
fulfillment of requirement, NABIL also arranges issuance of guarantees in the name of foreign
beneficiaries through reputed international banks.
 Credit Cards
NABIL is the first bank in Nepal to issue Rupee (valid in Nepal and India) and international valid
worldwide) Master card, cards in Nepal, a global prestigious service to its esteemed clients NABIL is also
expanding credit and facilities issuing visa credit card very soon.
 Tele-banking
Telephone banking is another product provided by NABIL bank to its customers. Under this arrangement
customer can know the balance of his account through telephone with out human assistance.
 Western Union Money Transfer
NABIL bank has established unique money remittance system with western union financial service
whereby money can be remitted anywhere in the world within minutes, through online computer system
funds can be transferred instantly to about 55000 locations in 165 countries of the world. Nepali wage
earners abroad can send money to their near and dear ones in Nepal within a very short time. By using the
above services, you can now send and receive money within minutes in 165 countries in the world.
 SWIFT (Society for Worldwide Inter Bank Financial Telecommunication)
NABIL has started worldwide transfer of fund by this fast and efficient funds transfer and messaging
system. Messaging and fund transfers are carried through SWIFT with minimum time and cost.
 Safe Deposit Locker
NABIL provides safe deposit lockers to keep valuables safety at a minimum cost. Presently, this facility is
available at Kantipath and Kamaladi offices.
 Automated Teller Machines (ATM)
NABIL has launched the ATM facility to its account holders to enable fast withdrawal of funds in account
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holder need not wait long hours for withdrawing money and sign cheques anymore. A simple card with a
unique PIN number known only to the account holder will suffice.
 Other facilities
The bank provides the facilities for the customer like deposit services, loans and advances, consumer
finance, cash management and remittance services etc.
1.3. Introduction to Deposit
Deposit collection is one of the main features of commercial bank. A commercial bank receives deposit in
different accounts namely current, fixed and saving. These are the direct deposits. When a bank receives
cash it grants a right to the depositors to withdraw it whenever they like Nepal Banijya Bank Act has
regulated all the deposit 2031. The act specifies “Deposit” means amount deposited in current, fixed and
saving deposit account of bank or financial institutions.
Among many functions of a commercial bank the main function is deposit function, which all the
commercial banks perform, in simple terms; deposit is a function of collecting surplus from savers. Bank
accepts deposit from those that can save but can’t utilize profitably. People know that by depositing in the
bank they could avail with many more facilities. By saving in the bank people have the opportunity of
earning interest, useful contingencies; avoid risk such as theft lost accidents, the deposit of commercial
banks is increasing because people know its importance. So banks accept money on current saving and
fixed deposit accounts. Deposits are the main source of capital for the lending activities of the banks.
Banks utilize efficiencies to attract more deposits to increase credit activities. Deposits are withdraw able
according to the terms of contract with the depositors to attract the people. The bank maintains different
types of deposit accounts.
1.3.1 Types of Deposit and its Account opening Procedure
Deposit is the major source of fund of commercial bank, which is generated in the hands of customers,
government, corporate bodies, public enterprises, individuals and others and a surplus.
Main features
 Purpose: saving, fixed or call (short term)
 With maturity or without maturity
 Interest bearing and non interest bearing
 It interest bearing:
 Calculation of interest on monthly minimum balance, or average balance
 Payment of interest quarterly or semi annually
 Special arrangement with any other deposit account
 Operate or non-operative
If operative:
Limitation on frequency and amount of withdrawal: yes or no
 Time liabilities or demand liabilities.

A.Types of Deposits
Deposits of commercial banks can he categorized into following two categories

A. Interest bearing deposit
B. Non- interest bearing deposit
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1.3.1.1. Interest Bearing Deposit
a. Saving Deposit
The pm pose of saving deposit is to encourage the habit of saving among the common people and
institutions. Saving deposits attract interest which is normal less than that of long-term deposit but more
than that of short-term deposit. There is restriction in this account to withdraw any amount. The customer
is restricted to withdraw his deposit to the maximum amount in each transaction by the bank regulation. In
this way as the withdrawal is limited in such account, in each transaction, the bank is provided with more
funds for the credit activities, interest is paid in this deposit account.
According to Commercial Bank Act, the saving account means an account of amounts deposited in a bank
for savings purposes.
Saving Account are generally opened for the savings of customers (individuals, nonprofit organization,
charitable trusts, clubs, associations and cooperative) who want to save for meeting future needs, Savings
accounts is suitable for the customers who do not want to withdraw frequently or who do not want to keep
certain amount for fixed long period
The main features of such accounts are as follows:

i. Interest bearing
ii. Restriction or limitation in respect of both the amount of withdrawal and frequency
withdrawal.
iii. Purpose and period of such deposit is for savings purpose for the individuals who do
not want frequent withdrawals and who do not want to keep money for fixed long period.
Fixed Deposit! Term Deposit
Another source of deposit is the fixed deposit account. Money in this account is deposited for a fixed
period of time, which cannot be withdrawn before the maturity of time. The rate of interest on this
account is higher than other accounts. It is also known as time deposit. General this is for three months to
five years.
According to Commercial Bank Act, fixed account means the account of amount deposit in a bank for a
certain period of time.
The main features of such accounts are as follows:

i. Specific period
Normally the bank is not bound to repay the amount until the maturity of the fixed deposit. However, on
request of the depositor, a banker may liquidate the fixed deposit and repay the amount; interest will be
paid at the discretion of the banker.
ii. Non operative

Fixed deposit account is non - operative i.e. depositing into or withdrawal from fixed deposit account as
in case of savings and current deposit account is not allowed.
b. Call Deposit
The banks may accept deposit for short period of time to meet the short fall and such deposits secured
from money market and having element of overnight stay is called call deposits. The rates of interest of
such funds are not fixed hut are dependent on demand and supply of funds in the money market. Such all
deposits become payable on demand and hence such deposits become payable demand and hence such
deposits are considered demand liabilities of the bank.
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i. Non-operative
ii. Short term: overnight stay
iii. Interest rate not fixed
iv. Payable at demand
c. Other Deposit
i. Bearer Certificate of Deposit
It is a scheme of special type of deposit where some specified amount of money for specific period of note
is accepted as deposit against a certificate given by the banker to a customer. A bank issues such
certificates without mentioning name address and any other particulars of the customer. The bank receives
the principal amount and will issue the will issue the certificate for such amount which will include the
interest payable at maturity on the amount deposited. On maturity date any person presenting the
certificate at the bank can encase the same. Such types of deposits are considered as time liabilities.
The major features of such deposit are as follow s:—

i. Negotiable with prepaid interest having fixed maturity.
ii. No particulars of the depositor contained in the certificate.
iii. Opening of account is not required.
iv. It could be discontented before maturity.
1.3.1.2. Non- interest Bearing Deposit
a. Current Deposit Account.

Current deposit is also known as demand deposit as the deposit is with draw able on demand. Current
deposits are withdrawn able on the demand of the customers. Banks have to make themselves ready to
pay the depositors at hand to pay according to the wish of the customer. If the bank cannot pay the
customer according to the demand, the reputation of the bank may fall of the banking activities may tail.
The business people, business institutions who have to withdraw at any time, normally open it. Since
banks have to maintain high liquidity to meet customers demand, no interest is paid on such deposit.
According to Commercial Bank Act, the current account means an account of amounts deposited in bank
that may be drawn at any time on demand.
i. No yield
As the cost of providing the facilities of current account becomes considerable to the banks do not pa any
interest on the balance of current account.
ii. Highly liquid and no limitation
There is no limitation on withdrawal and deposit of any amount within banking hours
Privileges
Overdraft facilities are provided to current account holder only. The banks normally sanction the loans
and advances through current accounts since they are not given in cash.
B. Account Opening Procedure
a) Application on the prescribed form
The customer who comes to hank with a desire to open an account in the bank should complete the
application from designed in prescribed format. NABIL Bank also has its own standard format. The
applicant is required to fill up the name, address, occupation, nationality etc. about the customer. The
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form is designed with a declaration that the applicant should accept that he should comply with the banks
rule on force from time to time for the operation of the account.
b) Reference Introduction
The selection of the customer is regarded to be done by the customer very carefully. After being satisfied
about the identity of the account opening individual or film, the banker should take further steps. It
becomes essential to present bank from opening of the accounts in the name of the fictitious person
incapable of making a valid contract. In such a case banker does not get any protection under Negotiable
Instrument Act and is considered guilty of negligence.
c) Specimen Signature
The bank has its own specimen signature card that is provided to the customer for putting one or more
specimen signatures of him. These cards are indexed and placed in a visa desk in numerical order. These
signature specimens are used by the bank bar issue and payment of cheques and for execution of
instructions given by customers such as stop payment of cheques, bills purchase etc. These specimen
signature cards require proper custody as to present them from filing into hands of unauthorized persons
and also to exclude the chance of replacements of it by fraudulent card.
d) Account Opening Mandate
The customer may authorize the third person to operate tile account for which clear instruction for
operation of the account shall he noted on both account opening form and specimen signature cards. The
name and the signature of the mandated must provide the copy of his/her citizenship certificate and must
also be presented in the bank.
Procedure for Opening Saving and Current Account.
1. The account opening form and specimen signature cards are required to be filled up mid
submitted I he details in the form shall he checked by the account opening official, signature in the
specimen signature card shall he verified. The proposed account opener must be percent at the time of
opening account in case of individual account and proprietorship account and should put signature in
specimen Signature ear in front of the account opening official
2. After being satisfied with the document and account and account opening from it is placed
before the manager for approval. The document required for current accounts are as follows.
They should provide a copy of:

i. For Proprietor business
a. Registration certificate
b. Income tax certificate
c. Citizenship certificate of the proprietor.
ii. For partnership business

c. Partnership deed
d. Citizenship certificate of the partners
iii. Limited companies

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c. Board resolution for operation of account.
d. Memorandum and articles
e. Citizenship certificates of the directors
iv. NGO lobs school associations

a. Registration certification
b. Board resolution
c. By laws
d. Citizenship certification
(Those customers who fall under VAT payer should also provided a copy of VAT Registration certificate)
Note: Copy of citizenship certificate in case of individual saving (for opening saving account in the name
of associations, cooperatives, non-profit organizations like NGOs, charitable trust all the documents are
required are required as in point (iv) above in case of current account is required).
3. Then the account opening official should allot an account no from basic number register in
both the form and specimen signature card.
4. Account is opened in the computer also.
5. The particulars of account opening form and the account number is entered in the respective
account opened and register.
6. Against the request for cheques book as mentioned in account number is entered in the
cheques leaves are printed, blinded at the end of business hour and provided to the customer along with
letter of banks next day. The cheques book numbers shall be recorded in the cheque book issue register
and handed over to the part against his her acknowledgement.
7. The signature is scanned from the specimen signature card and placed fir final approval to the
manager.
8. After the final approval the account opening form is filed in numerical order in the respective
account type file.
Procedure for Opening Fixed Deposit Account
1. Separate account opening form for fixed deposit is designed. The customer wishing to open a
fixed deposit account shall till up such form and put the signature in the specimen card, which is same as
in the case of saving and current account opening.
2. The form contains the rate of interest, period, amount and the nominee account for crediting
the interest and two witnesses along with nominee form in the back.
3. The account opening official after being satisfied with the form allots a number from the basic
number register and puts in the form.
4. The accounts opened in the computer and details are entered.
5. The details such as name, date of opening, rate of interest, maturity date and nominee a/c for
interest should be recorded in fixed deposit register.
6. In case of fixed deposit being opened through the cheques, the official looking after the fixed
account does the transaction.
In case of fixed deposit account being opened through cash the customer is sent to the taller along with
the credit voucher. The taller will affix cash received stamp on the voucher against the receipt of the cash
and will sent it back to the account opening official.
7. Then the account opening official shall issue the fixed deposit receipt.
8. The account opening form, specimen signature card, fixed deposit receipt and the voucher are
placed before the manager for the final approval and signature.
9. Upon completion of full formalities as above the fixed deposit receipt is handed over to the
customer against his/her acknowledgement on the counterfoil of the fixed deposit receipt.
20
10. The account opening form is filed in the numerical order in a separate file. The specimen
signature card is placed is placed in the visa desk in numerical order once its gats scanned and approved
by the manager.
1.4. Statement of Problems
As we know that the main objective of any business organization e.g. Bank is profit maximization.
Deposit mobilization is the key factor to attain this objective: therefore, if the bank fails to employ its
funds suitably it is not possible to maximize profit. A bank has to make decisions with a framework of
statutory requirements of credit regulation by center bank, as well as the national objectives that are
determined in the matter of the provision of credit from time to time.
Through the banking system is making much progress, the progress has been set up with the problems and
hindrances. Another pressing problem is under developed country, lack of banking habit in people. Many
people are under the poverty line. Many people are not literate so people are not conscious about the
banking system and do not know the importance of bank. Bank concentrates only in the city so that the
villages have to take a loan from money Lander at a high rate of interest. Most of the people keep their
saving idle or give it to others to use it in greed of more interest.
1.5. Objective of the study
The objective of this fieldwork is to analyses deposits collected in NABIL. The study intends to present a
brief and clear picture of deposit and its utilization. The objective of the study includes.
- To find out deposit trend of NABIL bank.
- To find out the deposit mix.
- To analyses the cost of deposit
- To analyses whether the deposits are being properly utilized or not
1.6. Limitation of the study
The study does not present detailed analysis of deposit in NABIL due to lack of time relevant data and
resources. This study is limited to the information that was available from the bank and other sources.
- Annual reports of NABIL
- Annual reports of NRB
- Articles in Newspapers, journals, booklets, issues published by financial institution.
1.7. Significance of the study
Deposit collection is the major function of all commercial banks, which help to carry out almost all
transaction of the bank. Mostly among the various deposit features provided by commercial banks, fixed
and saving deposit are considered to be more important In the case of term deposit although the banker
pay interest (longer the period higher the interest) the funds are committed for longer periods, which can
safely be lent for long-term project. But in the case of current deposits although no interest is payable,
these deposits are repayable at demand and therefore banker must be cautious in lending such deposits.
Fixed and saving deposits are considered to be more suitable because this deposit can be invested in short
term loans with higher rate of return (interest) and hence it helps to earn high profits.
So the deposits in the commercial banks have a good contribution to the country economy. If deposits are
well collected and sell mobilized the person as well as country can benefit from it. This study however
intends to give general information regarding banking, deposits and prospects of the deposit and its
mobilization in the country, which may give the general idea about banking, and deposits
1.8 Methodology of Research
1.8.1. Research Design
The research methodology is the process of arriving to the solution of the problems through planned and
systematic dealing with the collection, analysis and interpretation of facts and figures. As the research
entirely considers about the about “Deposit Analysis of NABIL Bank” The main purpose of this study is
to show deposits and its utilization in NABIL with its financial positions, collection and uses of funds, its
21
prospects and its position in context of Nepal as well as to recommended suggestions for its improvement.
Those research methodologies have been used which proves helpful to deposit analysis. For the purpose
of achieving the objective, the following methodology is used. The data has been collected by acquiring
various kinds or reposts, bulletins and journals from the organization. Similarly data has been acquired
from NRB also.
The study report is based mostly on secondary information of NABIL. In addition to this, reference has
been made in library consult, class lectures,
Related books of banking, financial management and accounting during the preparation of this study.
1.8.2. Sources of Data
For the preparation of this report different kinds of books are followed. In this report, all the data collected
is secondary in nature. Almost all the data has been collected form published annual reports, brochures
etc. Mostly all the data are collected from the concerned bank.
 Primary Data Source:
Primary source of data is questionnaires, observation, interviewing personally in the site. The data
regarding the organization, its feature and structures were received primary through the officer of NABIL.
 Secondary Data Source:
In this study, the main source of data is secondary which are collected from pre-published data sources.
The secondary data sources used in this study are:
Internal source
 Annual reports of NABIL
 Interim performance report
External source
 Book publications
 Journals
 Articles from newspapers
 Annual reports of NRB
1.8.3. Data Processing Techniques
The data collected from the above stated sources has been classified tabulated and interpreted for easier
study.
Classification and Tabulation of Data
The data collected are classified, tabulated and arranged in manner to make it easily understandable with
the use of tables in chronological order. After classification the data is tabulated.
Diagrammatic Representation of Data
Various diagrams are used to present the data more clearly. The diagrams used are follows:
 Bar Diagram
 Pie Chart
22
 Line Graph
 Bar Graph
Tools for Analysis of Data

Various Financial Accounting and statistical tools have been used of analyses the collected data and
interpret the result obtained. The various tools used are:
Deposit Trend Deposit Lending Ratio
Deposit Mix Ratio of Interest Bearing Deposit to Total Deposit
Deposit Categorization Ration of Non interest Bearing Deposit to Total Deposit
Interest Expenses Ration of Fixed Deposit to Total Deposit
Cost of Deposit Ratio of Current Deposit to Total Deposit
Correlation Coefficient Ration Saving Deposit to Total Deposit
Trend Analysis
1.9 Organization of Report:
The report consists of three chapters. The first chapter is the introduction chapter that contains the
background of the study, information of Nabil Bank Ltd. introduction to deposit, statement of problems,
significance of the study, objectives of the study, limitations of the study, methodology of research and
finally organization of the report. The second chapter contains data presentation and analysis of the Nabil
Bank Ltd. and third chapter is regarding the summary, conclusion and recommendation regarding the
study.
23
Chapter 2
Data Presentation and Analysis
Table 2.1
Total Deposit position of NABIL (Rs. in million)
Year Fixed Current Saving Others Call & Total Growth
Short %
Deposit
2012/2013 3719 2851 4917 403 3948 15839 -0.006
2013/2014 2446 2704 4972 439 4945 15506 -2
2014/2015 2252 3034 5230 390 2541 13448 -13
2015/2016 2310 2688 5994 326 2801 14119 5
2016/2017 2079 2799 7026 342 2341 14587 3
2017/2018 3449 2910 8771 365 3851 19347 33
Source: NABIL Bank Ltd., Annual Financial Statement
Figure 2.1
Total Deposit position of NABIL
Amount in Rs.
Years
This table shows the total deposit mix of NABIL during the period of six years. During the last years the
current, margin or other deposits have a fluctuating collection in the deposit mix of NABIL. Here, total
deposit on NABIL in 2012/2013 was 15839 million which were 0.006% less than that of year 2000, in
2013/2014 by 2%. In the year 2014/2015 the deposit decreased by 13%. But in
the year 2015/2016 the total deposit increased by 5% to Rs.14119 million. In the year 2016/2017 the
deposit increased by 3% which reached to Rs.14587 million .In the year 2017/2018, the deposit increased
by 33% which reached to Rs.19347 million.
From above analysis, we have found the increasing trend of total deposit. But, the various accounts have a
fluctuating collection of deposit. So, such trend should be managed by implementing proper policies.
24
Table 2.2
Current Deposit Position of NABIL ( Rs. In Million)
Year Current Deposit Growth (Rs.) Growth %
2012/2013 2851 -30 -1
2013/2014 2704 -148 -5
2014/2015 3034 331 11
2015/2016 2688 -346 -13
2016/2017 2799 111 4
2017/2018 2911 112 4
Figure 2.2
Current Deposit
Amount in Rs.
Years
Above table shows that the current deposit of NABIL. In the year 2012/2013 was Rs.2851 million, which
was decreased by 1% than the previous year. There had been great decreased in current deposit during the
year 2013/2014 by 1% corresponding to Rs. 30 million. But there was a decrease in the year 2014/2015
by 5% and the current deposit reached Rs. 2704 million during year 2015/2016. In the year 2016/2017
current deposit was Rs. 3034 million n which is Rs. 331 million more than that of year 2017/2018.But in
the year 2015/2016 current deposit collection decreased by 15% corresponding to Rs.346 million
increases. In the year 2016/2017 current deposit collection increased by 4% corresponding to Rs.111
million increased. Now, in the recent year 2017/2018, the current deposit is increased by 4% i.e.Rs.112
million and has reached to Rs.2911 million.
From the above table it is seen that current deposit has an increasing trend but the increment is not
consistent. Sometimes it increases largely while it increases with a low rate.
Table 2.3
Saving Deposit Position of NABIL (Rs. in million)
Year Saving Deposit Growth Rs. Growth %
2012/2013 4917 767 18
2013/2014 4972 55 1
2014/2015 5230 257 5
2015/2016 5994 765 13
2016/2017 7026 1032 15
2017/2018 8771 1745 25
Source: NABIL Bank Ltd., Annual financial Statement
25
Figure 2.3
Saving Deposit
Amount in Rs.
Years
Here is the figure of saving deposit of NABIL. In the year 2012/2013 was Rs. 4917 million, which was
increased by 18% than in the year 2011/2012 corresponding to Rs.767 million. In 2013/2014 it was
increased by 1% and in the year 2014/2015 it was increased by 5%. In the year 2014/2015 saving deposit
was Rs.5230 million which is Rs.257 million less than of year 2013/2014. In the year 2015/2016 it again
increased by 13% and reached Rs. 5994 million. In the year 2016/2017 it again increases by 15% and
reached Rs. 7026 million. In the year 2017/2018, it continues to increase and reaches to Rs.8771 million
which is the increase by 25% i.e. Rs.1745 million.
From the above table, saving deposit trend is seemed to be increasing. Most of the people deposit their
fund in saving deposit account. So, NABIL should attract people towards saving deposit and manage its
incremental trend.
Table 2.4
Fixed Deposit Position of NABIL (Rs. in million)
Year Fixed Deposit Growth (Rs.) Growth (%)
2012/2013 3719 -3949 -106
2013/2014 2446 -1273 -2
2014/2015 2252 -195 -9
2015/2016 2310 58 3
2016/2017 2079 -231 -11
2017/2018 3449 1370 67
Figure 2.4
Fixed Deposit
Amount in Rs.
Years
26
Here fixed deposit of NABIL. In the year 2012/2013, 2000 it was increased by 31% to Rs.3719 million.
Similarly, in the year 2013/2014 it again decreased by 2% to Rs.2446. But there was decrease in fixed
deposit during the year 2014/2015. It decreased by 9% to Rs.2252. In the year 2015/2016 it was increased
by 3% and reached Rs.2310 million. In the year 2016/2017 it was increased by 11% and reached to
Rs.2079.In the year 2017/2018, it has again decreased by 67% and reached to Rs. 3449 million.
Above table shows that the growth in fixed deposits it is rather fluctuating. Since the fund of fixed deposit
can be utilized for long-term investment, it should be made consistent. So, such increase and drastic
decrease affects the profitability of the company.
Table 2.5
Interest Bearing Deposit Trend of NABIL (Rs. in million)
Year Interest Bearing Growth (Rs.) Growth (%)
Deposit
2012/2013 12585 3337 25
2013/2014 12363 -222 -2
2014/2015 10022 -2341 -23
2015/2016 11106 1084 10
2016/2017 11446 340 3
2017/2018 16071 4625 29
Source: NABIL Bank Ltd., Annual Financial Statements
Figure 2.5
Interest Bearing Deposit
Amount in Rs.
Years
Here Interest bearing deposit of NABIL .In the year 2012/2013 it was increased by 25% to Rs.12585.
Similarly, in the year 2013/2014 it again decreased by 2% to Rs. 12363. But there was decrease in interest
bearing deposit during the year 2014/2015 it decreased by 23% to Rs.10022. In the year 2015/2016 it was
increased by 10% and reached to Rs.11106 million. But there was increase in interest bearing deposit by
3% in year 2016/2017 and reached to Rs. 11446.In the year 2017/2018, it has increased to 29% and has
reached to Rs.16071 million.
The interest bearing deposit sometimes increases hugely and while sometimes decreases in low rate. But
with an increase trend of interest bearing Deposit Company can collect fund regularly and increasingly
27
but in decreasing Time Company cannot fulfill their target fund.
Table 2.6
Non Interest Bearing Deposit Trend of NABIL (Rs. in million)
Year Non Interest bearing Growth (Rs.) Growth (%)
deposit
2012/2013 3254 -97 -2
2013/2014 3142 -112 -3
2014/2015 3424 282 8
2015/2016 3012 -412 -14
2016/2017 3140 128 4
2017/2018 3276 136 4
Source: NABIL Bank Ltd, Annual Financial Statement
Figure 2.6
Interest Bearing Deposit
Amount in Rs.
Years
In above figure, the non-interest bearing deposit of NABIL In the year 2012/2013 was Rs. 3254
corresponding to 2% decreased in comparison to in the year 2011. Similarly during the year 2013/2014 it
was decreased by 3% and reached to Rs.3142. In the year 2014/2015 it increased by 8% Rs. reached
Rs.3424 million. In the year 2015/2016 the non-interest bearing deposit decreased by 14% million which
is corresponding to Rs.3012. And in the year 2017 the interest bearing deposit increased by 4% and
reached Rs.3140. Now, in the recent year 2017/2018, the non interest bearing deposit has increased by 4%
and reached to Rs.3276 million.
The non-interest bearing deposit is in increasing and decreasing trend.

Table 2.7
Interest Expenses on Deposit (Rs. in million)
Year Interest on Deposit Total Deposit Rs. Ratio %
2012/2013 565 15839 3.57
2013/2014 457 15506 2.94
2014/2015 307 13448 2.28
2015/2016 265 14119 1.88
2016/2017 244 14587 1.67
2017/2018 359 19347 1.86
Average 14.2
28
Figure 2.7
Interest Expenses on Deposit
Amount in Rs.
#REF!
Years
#REF!
Here, the interest expenses on deposit are presented. In the year 2012/2014 and Rs. 565 which was 3.5%
of total deposit collected in the years. In the year 2013/2014 the total collection of deposit was Rs.15506
while interest on deposit was Rs. 457 of the total deposit, which is 2.29% ratio. In the year 2014/2015
total deposit and interest of rate on deposit are Rs. 12448 and Rs. 307, which is 2.28% of total deposit. In
the year 2015/2016 the total collection of deposit was 14119 while interest on deposit was 265, which is
only 1.88% of total deposit. In current year 2016/2017 the collection of deposit was 14587 while interest
on deposit was 244 which is 1.67%. In the year 2017/2018 the collection of deposit was 19347 and
interest on deposit was 359 which is 1.86. This shows that NABIL has average 14.2% of interest expenses
in total deposit.
So with similar policies adopted NABIL should manage to reduce the interest expenses in the future.
Reduction in interest expenses increases the company's profitability.
Table 2.8
Cost of Deposit of NABIL (Rs. in million)
Year Total Deposit Total Deposit Interest bearing Cost of
Expenses Deposit Deposit %
2012/2013 15839 565 12585 4.5
2013/2014 15506 457 12363 3.7
2014/2015 13448 307 10022 3.06
2015/2016 14119 265 11106 2.4
2016/2017 14587 244 11446 2.13
2017/2018 19347 359 16071 2.23
Average 3
29
Figure 2.8
Total Deposit
Amount in Rs.
Statemen
t of…
Fiscal Yea r
Formula:
Interest Expenses
Cost of Deposit = Interest Bearing Depsit
Here, cost of NABIL in the year 2012/2013 was 4.5% corresponding to Rs.401. During the year
2013/2014 the cost of deposit was Rs.457, which is 3.7% of total interest bearing deposit of Rs. 12363. In
the year 2014/2015 the cost of deposit decrease slightly with decrease in deposit was 3.06% i.e. Rs.307
million when the total interest bearing deposit is Rs.10022 million. In the year 2015/2016 the cost of
deposit decreased in deposit and it was 2.4% i.e. Rs.265 million when the total interest bearing deposit is
Rs.14119 million. In current year 2016/2017 total deposit is 14587 while a total deposit expense is 244
and interesting bearing deposit is 11446. In the year 2017/2018 total deposit is 19347 while a total deposit
expense is359 and interest bearing deposit is 16071 and the ratio is 2.23% Therefore, cost of deposit
reached at 3%.
The above analysis shows the cost of deposit if 100% of the deposits are utilized. Of the cost of deposit is
reduced, he company can earn more profit. So by implementing good plans, company should reduce the
cost of deposit.
Table 2.9
Deposit Lending Ratio (Rs. million)
Year Total Deposit (Rs.)
Total Loans And Deposit Lending %
Advance (Rs.)
2012/2013 15839 8324 52.55
2013/2014 15506 7438 47.96
2014/2015 13448 7756 57.67
2015/2016 14119 8189 57.99
2016/2017 14587 10586 72.57
2017/2018 19347 12922 66.79
Average 59.26
30
Figure 2.9
Deposit Lending Ratio
Amount in Rs.
Principles of
Sound Lending
and Investing
Policy
Fiscal year
Formula:
Total Loans and Advnces
Deposit Lending Ratio = Total Deposit
The above analysis shows the ratio of total loans and advances to total deposits if 100% deposits are being
utilized. Here, deposit-lending ratio of NABIL in the year 2011 was 57.39%. Similarly during the year
2012 the deposit-lending ratio was 52.55% of total deposit. The ratio decreased by 47.96% of total deposit
in the year 2013 and reached Rs. 7438.In the year 2014 the total deposit decreased but the loans and
advances could be increased. Total loans and advances in the year 2016 were 57.99% of total deposit
corresponding to Rs.8189.In the year 2017, both total deposit and loan and advances has been increased
.Therefore, the deposit-lending ratio has reached to 72.57% of total deposit.
The above analysis shows that the deposit-lending ratio of NABIL is average of 57.69%. The deposit
lending ratio should be maintained properly so that it would not affect organization's performance.
Table 2.10
Ratio of Interest Bearing Deposit to Total Deposits (Rs. in million)
Year Interest bearing Total deposit Ratio %
deposit
2012/2013 12585 15839 79.45
2013/2014 12363 15506 79.73
2014/2015 10022 13448 74.52
2015/2016 11106 14119 78.65
2016/2017 11446 14587 78.47
2017/2018 16071 19347 83.07
Average 79.98
Source: NABIL Bank Ltd, Annual Financial Statement.
31
Figure 2.10
Ratio of Interest Bearing Deposit to Total
Deposits
Amount in Rs.
Principles of
Sound Lending
and Investing
Policy
Fiscal year
Formula:
Ratio of Interest Bearing Deposit to total deposit = Interest Bearing Deposit
Total Deposit
In the above table, ratio of interest bearing deposit to total deposits of NABIL, in the year 2012/2013 was
79.45% of total deposits. But in the year 2013/2014 it was 79.73% corresponding to Rs.15506. In the year
2014/2015 both the interest bearing deposit and total deposit decreased and the interest bearing deposit
shared 74.52% of total deposit of Rs. 10022. It again decreased in year 2015/2016 and the ratio was
78.65% of total deposit. In the year 2016/2017 interest-bearing deposit is Rs.11446 corresponding to Rs.
14587 by 78.47%.Now, in the year 2017/2018, both the interest bearing deposit and total deposit has
increased. But the ratio reached to 83.07% of total deposit.
The above table shows that the interest bearing deposit of NABIL, contributes by an average of 79.98% of
total deposit.
Table 2.11
Ratio of non-interest bearing deposit to total deposit (Rs. in million)
Year Non Interest bearing Total Deposit Ratio%
deposit
2012/2013 3254 15839 20.54
2013/2014 3142 15506 20.26
2014/2015 3424 13448 25.46
2015/2016 3012 14119 21.33
2016/2017 3140 14587 21.53
2017/2018 3276 19347 16.93
Average 21
32
Figure 2.11
Ratio of non-interest bearing deposit to total
deposit
Amount in Rs.
Principles
of Sound
Lending and
Investing Policy
Fiscal year
Formula:
Ratio of non-interest bearing deposit = Non-Interest Bearing Deposit
Total Deposit
In the above table, ratio of non-interest bearing deposit to total deposits of NABIL, in the year 2012/2013
the ratio is 20.54 % of total deposits corresponding to non-interest bearing deposit Rs.3254.But in the year
2013/2014 it was 20.26% corresponding to Rs.3142. Similarly in the year 2014/2015 non-interest bearing
deposit shared 25.46% of total deposit Rs. 13448. In year 2015/2016 non-interest bearing deposit shared
only 21.33% of total deposit as only Rs.3012 million was collected. In the year 2016/2017 non-interest-
bearing deposit is shared only 21.53% of total deposit corresponding to Rs.3140.Now, in the current year
2017/2018, it shared to 16.93% of total deposit where non-interest bearing deposit and total deposit are
Rs.3276 and Rs.19347 million respectively.
The above table show that the non-interest bearing deposit of NABIL, contributes by an average of 21 %
of total deposit.
Table 2.12
Ratio of current deposit to total deposit (Rs. in million)
Year Current deposit Total Deposit Ratio%
2012/2013 2851 15839 18
2013/2014 2704 15506 17.44
2014/2015 3034 13448 22.56
2015/2016 2688 14119 19.04
2016/2017 2799 14587 19.19
2017/2018 2911 19347 15.04
Average 18.54
Figure 2.12
33
Ratio of current deposit to total deposit
Amount in Rs
Years
Current deposit
Formula: Ratio of Current deposit = Total deposit
From the above table, in the year 2012/2013 current deposit contributed total deposit by 22.5%. In the
year 2013/2014 current deposit was Rs.2851, which is 17.43%. The current deposit collection was
Rs.2704 million in 2014/2015. In the year 2015/2016 current deposit increased and shared total deposit by
22.56%. The current deposit collection was Rs.3034 million this year. In the year 2016/2017 current
deposit decreased to 19.19% the amount of Rs.2688.Now, in the year 2017/2018 current deposit increased
to 15.04% where current deposit and total deposit are Rs. 2799 and Rs. 19587 million respectively.
Therefore it is seen that current deposit shares an average of 18.54% of total deposit collected in NABIL.
Table 2.13
Ratio of saving deposit to total deposit (Rs. in million)
Year Saving deposit Total Deposit Ratio%
2012/2013 4917 15839 31.04
2013/2014 4972 15506 32.07
2014/2015 5230 13448 38.89
2015/2016 5994 14119 42.45
2016/2017 7026 14587 48.17
2017/2018 8771 19347 61.13
Average 42.3
Figure 2.13
Ratio of saving deposit to total deposit
Amount in Rs.
Principles of
Sound Lending
and Investing
Policy
Fiscal year
34
Formula:
Ratio of Saving Deposit = saving deposit
Total deposit
From the above table, in the year 2011 saving deposit contributed total deposit by 31.04%. The saving
deposit collection was Rs.4917 when total deposit collection was Rs.15839. In 2012, saving deposit
Rs.4972 million which was 32.07% of total deposit of Rs.15506 million. In the year 2013 saving deposit
Rs.5230 million which was 38.89% of total deposit of Rs.13448 million. In the year 2014 the saving
deposit Rs.5994 million which was 42.45% of total deposit of Rs.14119 million .Similarly, in the year
2015 saving deposit Rs.7026 million which was 48.17% of total deposit of Rs.14587 million. And in the
year 2016, saving deposit has increased to 61.13% of total deposit. Here, saving deposit and total deposit
amounted to Rs.8771 and Rs.14347 million respectively.
Therefore it is seen that saving deposit shares an average of 42.3% of total deposit collected in NABIL.
Table 2.14
Ratio of Fixed deposit to total deposit (Rs. in million)
Year Fixed deposit
Total Deposit Ratio%
2012/2013 3719 15839 23.48
2013/2014 2446 15506 15.77
2014/2015 2252 13448 16.75
2015/2016 2310 14119 16.36
2016/2017 2079 14587 14.25
2017/2018 3449 19347 17.82
Average 21.56
Figure 2.14
Ratio of Fixed Deposit to Total Deposit

Amount in Rs.
a)
Deposit
Years
Formula:-
Ratio of fixed deposit = Fixed Deposit
Total Deposit
From the above table, in the year 2012/2013 fixed deposit contributed total deposit by 48.41% where
fixed deposit was Rs.7668. It had reached to15.77 % in the year 2013/2014. In the year 2014/2015, the
fixed deposit collection was Rs.2252 when total deposit collection was Rs.13448 and its ratio was
16.75%.Similarly, in 2015/2016 fixed deposit contributed total deposit of Rs.14119 million by Rs.2310
million which is 16.36% of total deposit. In the year 2016/2017 fixed deposit contributed total deposit of
Rs.14587 million by Rs.2079 which is 14.25% of total deposit .Now, in the current year 2017/2018; fixed
deposit contributed total deposit by 17.82%. Here, the fixed deposit and total deposit amounted to
Rs.3449 and Rs.19347 million respectively.
Therefore it is seen that fixed deposit shares an average 21.56% of total deposit collected in NABIL.
Therefore from the above calculation we can say that the total deposit collection of NABIL is in
35
increasing trend. It is gradually increasing year by year. From the calculation we can say that in the year
2018 the collection of deposit would increase more than that of 2017.
SWOT Analysis
None of the organizations is perfect in each and every way. I here are some weaknesses and threats, which
affect the organization’s performance. It may have lots of strength to be proud of but besides with some
weakness and threats as well. And the organization does not remain same forever there will be lots of
opportunities in order to expand the transactions. So NABIL has also its strength to be proud, some
weakness to be recovered and threats to be faced patiently.
Strength
a. NABIL has 250 correspondent relationships besides numerous drawing arrangements with 75
banks in 40 countries of the world. Nabil has also drawing arrangement with the exchange companies and
bank besides many others like Habib Qatar International Exchange Limited, Doha, Qatar.
b. To add its strength NABIL has vast network system in the nation thus helping customer to transact
through bank from place to place. It has 17 branches nationwide which is the highest number of any joint
venture bank in Nepal. It is the only bank to operate inside international airport of arrival and departure
lounges.
c. Nabil is well known for providing highly personalized services to its customers. It provides
different services like ATM, credit cards, Tele banking service, safe deposit locker etc. It has also
introduced a number of attractive deposit skills.
d. Human resources in NABIL are well trained and they are dedicated to the bank too. NABIL is
providing high remuneration and other benefits as well to its staff.
e. NABIL is well supplied with latest technology. Computer does most of banking services. Thus the
services of the bank are prompt and accurate. The bank is capable to maintain the standard.
Weaknesses
a. The Increase in the number of branches increases the cost operation. Administration expenses for
personnel etc. are increased.
b. The political instability in the country can he considered another weakness of the bank.
c. Too much dependency in computers is not considered to be reliable.
d. NABIL pays high interest rates on deposits. For this reason the bank also charges high interest
rates on credit, which has bad impact in investment situation in nation.
e. Staff is unwilling to give even required information. It seems that they don’t want to cooperate
with once who are not really its customers.
Opportunities
a. A lot of people deposit their fund in this bank due to its skill in attracting people by adopting
attractive policies like high interest rate, prompt services, credit card service, ATM etc.
b. Staff can perform their work more efficiently with the help of computers. The environment of the
bank is sound which helps to enhance its stall bar its better profitability.
c. People in various sectors get employed through this bank, which has highest number of branches
among joint venture banks in the nation.
d. Citizens of underdeveloped country like Nepal get the favorable chance to show their inner skills
and talent.
e. The policies of the HMG and NRB rules and regulation always give confidence to the banking
sector to uplift the economy of the nation.
36
Threats
a) Banks must land and invest its fund to parties having good reputation. Otherwise the bank will
have to regret later on.
b) Excess government pressure may create irregular banking transaction, which leads to bad
reputation of the bank.
c) The economic condition of country is deteriorating.
d) There is increasing number of competitions. Now there are 13 commercial banks, which include 9
joint venture and 45 finance companies.
e) The bank should be discouraged to open account for the individuals or firms having bad
reputation. It may be a threat, which can ruin the bank.
Investment Pattern of Nepalese Commercial Banks
The development of banking in Nepal is of relatively recent origin. The establishment

of “TejarathAdda” during the year 1877 A.D. was the first step in institutional
development of banking sector in Nepal. TejarathAdda did not collect deposit from
public but granted loans to public against the collateral of bullions. Consequently the
major parts of the country remained untouched from these limited-banking activities.
The development of trade with India and other countries increased the necessity of the
institutional banker, which can act more widely to enhance the trade and commerce
and to touch the remote non-banking sector in the economy. Reviewing this situation,
the “UdhyogParishad” was constituted in 1936 A.D. Nepal Bank Limited was
established under Nepal Bank Act in 1937 A.D. as a first commercial bank of Nepal
with 10 million authorized capital.
Modern banking practices emerged with the establishment of Nepal Bank Limited in
1937 A.D. However the stand of Nepal Bank Limited alone in total monetary and
financial sector was not sufficient and satisfactory. Thus Nepal Rastra Bank was set
upin1956A.D.(2013.01.14)asacentralbankunderNepalRastraBankAct,1956
A.D. (2012 B.S.). Similarly, in 1966 A.D. (2022.10.10) RastriyaBanijya Bank was
established as a fully government owned commercial bank. With the emergence of
RBB, banking services spread to both the urban and rural areas but customers failed
to have taste of quality and competitive service because of excessive political and
bureaucratic interference. For industrial development, Industrial Development Center
was set up in 1956 A.D (2013 B.S.) which was converted to Nepal Industrial
Development Corporation (NIDC) in 1959 A.D. (2016B.S.). Similarly, Agriculture
Development Bank (ADB) was established in 1976 A.D. (2024 B.S.) with an
objective to provide agricultural loans so that agricultural productivity could be
enhanced through introduction of modern agricultural techniques. As the country
37
moved towards economic liberalization since 1980 A.D. foreign banks were permitted
to operate in Nepal. The financial scenario has changed with the establishment of joint
venture banks from 1984. The number of commercial banks has been increasing.
Since then, various financial institutions like JVBs, Domestic Commercial Banks,
Development Banks, Finance Companies, Co-operative Banks, Credit Guarantee
Corporation, Employee Provident Funds, National Insurance Corporation, and Nepal
stock Exchange have come into existence to cater the financial needs of the country
thereby assisting financial development of thecountry.
In 1990 A.D. after the restoration of democracy in Nepal, government highlighted the
agenda of economic liberalization policies and emphasized to invite Foreign Direct
Investment (FDI) in the Banking sector of Nepal. Therefore the development of CB’s
in Nepal is categorized in three phases on the basis of financial policies adopted by

the country from time to time. Theyare:
 CB’s prior to1980’s

 CB’s of1980’s
 CB’s1990’s
There were only two commercials banks prior to 1980’s. They are NBL and RBB. All
the three CB’s of 1980’s were established as joint venture bank. Similarly six
commercial banks of post 1990 have also came into operation as joint venture banks.
They included Nepal Arab Bank Ltd (now Nabil Bank Ltd), Nepal Grindlays Bank
(now Standard chartered Bank Nepal Ltd), Nepal Indosuez Bank (now Nepal
Investment Bank ltd), Nepal Bank of Ceylon (now Nepal credit and commerce Bank
ltd).
Taking an overview of financial institutions providing banking facility in Nepal, there

are 31CB’s 79 Development banks, 7Rural Development banks, 91 Finance
companies, 20 Co-operatives, 46 non-government finance firms licensed by NRB.
After the announcement of liberal and free market economic based policy, Nepalese
banks and financial sectors are having greater network and access to national and
international markets. They have to go with their portfolio management very
seriously. Fighting various challenges in order to increase their regular basis of
income as well as to enrich the quality base of service for the attraction of good
clients. In this competitive and market oriented open economy, each and every
commercial banks and financial institutions have to play a determining role by
widening various opportunities for the sake of expanding provisions of best service to
38
their customers and by making themselves as a strong and potential financial
intermediaries as per country’s need of present scenario to obtain the desired level of
economic development of nation
Joint venture banks are the mode of trading to achieve mutual of goods and services
for sharing competitive advantage by performing joint investment scheme between
Nepalese investors, financial and non-financial institutions as well as private investors
and their parent banks, each supplying 50 percent of total investment. The parent
banks, which have experiences in highly merchandised and efficient modern banking
services in many parts of the world have come to Nepal with higher technology,
advance management skills. Joint venture banks are established by joining different
force and with ability to achieve a common goal and with each of the partners. They
are more efficient and effective monetary institutions in modern banking fields than
other old types of banks in Nepalese context (Thapa, 2001:6).
In Nepal, commercial banks play a vital role in the economic growth. Its investment
ranges from small-scale cottage industries to all types of social and commercial loans
and large industries. Generally the investment of the CBs include the investment on
government securities, like treasury bills, development bonds, national saving bonds,
foreign government securities, shares of government owned companies and non-
government companies and investment on debentures, similarly the CBs used their
funds as loan and advances.
Profile of Concerned Banks
In this section, general introduction of the banks under study is being attempted to
furnish for the easy reference of the samples to research.
Nabil Bank Limited
Nabil Bank Ltd, the first commercial bank was incorporated in 1984. Dubai Bank Ltd.
Was the initial joint venture partner with 50% equity investment. The shares owned
by Dubai Bank Ltd. (DBL) were Transferred to Emirates Bank International Ltd.
(EBIL) Dubai. Later on EBIL sold its entire stock to national Bank Ltd, Bangladesh
(NBLB).
The present configuration consists of 50% share capital by National Bank Ltd,
Bangladesh. 10% NIDC, 9.66% RastriyabeemaSansthan, 0.34% Nepal Stock
Exchange and 30% Nepalese public. At present 40 branches of this bank are operate
39
in different parts of the country. Authorized capital and paid up capital of Nabil Bank
Ltd are Rs. 1600 million and Rs. 965.74million.
Nabil Bank Ltd undertakes the following activities and services:
 Tele Banking
 Credit card Facilities
 SWIFT
 DepositLocker
 Western Union MoneyTransfer
 ATM
International Trade and Bank Guarantee This bank is awarded the “Bank of year 2004”.
Statement of Problem
Establishment and expansion of a number of banks and other financial institutions in

Nepal has created keen competition among themselves. This has created a lot of
challenges to them. The problems the commercial banks are facing in Nepal include
the problems of resources mobilization, poor investment climate, heavy regulatory
procedure, uncertain government policy, and NRB’s directives etc.
Lack of sound investment policy is another reason for commercial banks not utilizing
its deposits that is making loan and advances or lending for a profitable project. This
condition may even lead the commercial banks to the position of liquidation.
Commercial banks invest their funds in limited areas to achieve highest amount of
profit. They are found to be more interested to invest in less risky and highly liquid
sectors i. e. treasury bills, development bonds and other securities. There is hesitation
to invest on ling-term projects because commercial banks are much more safety
minded. So, they seem to follow conservative and un-effective investment policy.
In Nepal, every commercial bank has invested in the similar sectors. These major
sectors include tourism, garments, and trading as well. But given the current situation
of the country it is not up to them to decide in which sector they want to invest. The
main factors for success of any organization is the secured situation. Once the
economic and political situation is stabilized, then only commercial banks can
consider rationally as to where they should invest and grow. Till then it is a question
of moving into sectors as and when things develop. So, security problem is the big
problem for every commercial bank to invest their funds in anysectors.
Nepalese commercial banks do not seem to have formulated their investment policy in
40
an organized manner They mainly rely upon the instructions and guidelines of Nepal
Rastra Bank. They do not have clear view towards investment policy. Furthermore,
the implementation of policy is not done in an effective way. Lack of farsightedness
in policy formulation and absence of strong commitment towards its proper
implementation has caused many problems to commercialbanks.
Definition of Investment
Investment is nothing but deploying our saving in a manner that ensures safety of our
money and provides a sustained return to supplement our regular income. (Delhi stock
exchange, January 2002) The term investment covers a wide range of activities. It is
commonly known fact that an investment is only possible where there is adequate
saving. If all the incomes and saving are consumed to solve the problem of hand to
month and to the other basic needs, then there is no existence of investment.
Therefore, both saving and investment are interrelated.
Investments are made in assets. Assets in all are of two types, real assets (land,
building, factories etc) and financial assets (stock, bond, T-bill etc). These two
investments are not competitive but complementary. Highly developed institutions for
financial investment greatly facilitate real investment. (Bhattarai, 2004:3). A number
of definitions regarding investment are available. But we can simply say that
investments are the use of disposable funds with a view to achieving additional
income or growth invalue.
Principles of Sound Lending and Investing Policy
Some of the principles of sound lending and investment policies which the banks have
to keep in mind are mentioned below:
I) Safety and Security
While selecting the sectors for investing the funds a bank should be very much
conscious regarding the safety and security of its funds. It should never invest in
securities, which are too volatile because a little difference may cause a great loss.
Similarly, the businessman who is expected to be bankrupt at once or earn a million in
a minute should not be financed at all. The banks must invest its funds in legal
securities only. The bank should accept those types of securities, which have
marketability; ascertain ability, stability and transferability and it also should accept
those securities, which are commercial, durable and of high market prices. For the
41
safety and security in investing funds the bank can use the investment portfolio tools
also.
II) Liquidity
Liquidity generally refers to the cash or any assets that can be converted in to cash
immediately. Generally, people deposit money in the bank under different account
with confidence that bank will repay their money whenever it is needed. In order to
maintain the confidence to the depositors, the bank must always be ready to meet the
current or short-term obligation when they become due for repayment. Liquidity is the
capacity of bank to pay cash against deposits. Hence, the liquidity position of a bank
is such an importantfactor.
III) Profitability
Commercial banks invest on those sectors from where more and more return can flow,
through maximizing the returns on its investment; bank can maximize its volume of
wealth. Hence, the investment of granting loans and advances by them are highly
influenced by the profit margin. Generally the profit of commercial bank depend upon
the interest rate of the bank, volume of loan provided, time period of loan and
natureof investment on different securities. Profitability is only the term, which
always motivated commercial banks to invest its money more and more.
IV) Suitability
A bank should always know why a customer is in need of a loan. If a borrower

misuses the loan granted by the bank, he will never be able to repay the loan and bank
will possess heavy bad debts. Therefore, in order to avoid such circumstances
advances should be allowed to select a suitable borrowers and it should demand all
the essential detailed information about the scheme of the project. Bank must keep in
mind the overall development plans of the nation and credit policy of thebank.
V) Diversification
The bank should be careful that while granting loan; it should not be invested in one
sector only. To minimize risk and maximize profit, a bank must diversify its
investment on different sectors. Diversification of loan helps to sustain loss-according
law of average because if securities of a companies. In this way, the loss can be
recovered.
42
Sources of Funds for the Investment
There are different sources of funds for the investment of the bank.
a) Capital
Capital is the lifeblood of the trade and commerce. Capital is needed for the operation
of the bank as in other business. But it is only a nominal source. Still it can be used
for the investment purpose. The capital fund consists of two elementslike
i) Shares
ii) GeneralReserves
i) Shares
Sources of fund to invest. By increasing the issue of share, the bank can increase its
capital.
ii) GeneralReserves
The bank is required to assign certain percentage of its profit to the reserves. This
reserve is also invested.
b) AccumulatedProfit
When there is a need of more funds for investment, the bank can retain the
accumulated profit. The bank invests invest its accumulated profit.
c) Deposit
Deposit are the main source of funds. By providing certain rate of interest,
commercial banks call for the deposit from the customer. Mainly, banks accept three
types of deposits i.e. current deposit, fixed deposit, saving deposit. These different
types of deposits are used for lending the money to different sectors like agriculture,
productive work, trade, irrigation and industry. The deposits will lead to increase in
the working capital of thebank.
d) External and InternalBorrowings
The funds can be collected by borrowings money through different banks or different
institutions. In a developing country like Nepal, borrowing is very important. The
commercial bank may not have sufficient fund to invest in different sector. In that
43
case it has to borrow from other bank or other institutions. Generally the commercial
bank borrows from two sources i.e. external and internal. Generally external
borrowing means the borrowing from foreign banks, and foreign government.
Internally, the commercial bank borrows mainly from Nepal Rastra Bank. So the
commercial bank cannot provide loan or investment without the funds. From the
above different source of fund the commercial bank grantsloan.
Review of Articles
Under this heading, effort has been made to examine and review some of the related
articles published in different economic journal, bulletin of World Bank, dissertation
papers, magazines, newspapers and other related books.
F. Morris, in his discussion paper on, “Latin American’s Banking System” in the
1980’s has concluded that most of the banks are concentrated on compliance with
central bank’s rules on reserve requirements credit allocation (investment decision)
and interest rates. While analyzing loan portfolio quality, operating efficiency and
soundness of bank investment management has largely been overlooked.
He further adds that mismanagement in financial institution has involved inadequate

and overoptimistic loan appraisal, high risk diversification of loan portfolio and
investments, high risk concentration, related parties lending etc. are major causes of
investment and loan that has gone bad (Morris, 1990;pp81)
Sunity Shrestha in her article, “Lending operation of Commercial Banks of Nepal and
its impact on GDP” has presented with the objectives to make an analysis of
contribution of commercial banks lending to the gross domestic product (GDP)of
Nepal. She has set hypothesis that there has been positive impact of lending of
commercial banks to GDP. In research methodology, she has considered GDP as the
dependent variable and various sectors of viz. Agriculture, industrial, commercial
service and general multiple regression technique has been applied to analyze the
contribution.
The multiple analyses have shown that all the variables except service sector lending
have positive impact on GDP. Thus, in conclusion she has accepted the hypothesis i.e.
44
there has been positive impact by the lending of commercial banks in various sectors
of economy, except service sector investment. (Shrestha, 2005; 23-27).
Shree Prasad PoudelDeputy Director, NRB in his article “Government Security

Markets Rational and Development in Nepal” has concluded that the security markets
are center of the financial system. Debt securities markets in Nepal are highly
dominated by government debt securities. Debt statistic’s evidenced that Nepal
remained debt free nation till 1950’s. From the beginning of 1960’s foreign loans and
domestic loans have been alternative means of debt financing in Nepal as a result,
total debt as a percentage of GDP widened from 1% 1960’s to 654.3% in2000.
According to poudel, government debt consists of treasury bills (TBs), national saving
certificates (NSCs), development bonds (DBs), special bonds (SBs) and citizen saving
certificates (CSCs).
He further added that NRB and commercial banks are the main holders of government
bonds. In his article he suggested following improving area in debt securities market
in Nepal:-
 To make government securities active instruments of open market operation.

Coupon rate on government securities has to be fixed closely to the market
rate ofinterest.
 Exchange of government securities at market price has to beencouraged.
 Products of government debt securities need to be diversified to meet

investor’sdemands.
 Like equity shares the marketable government securities need to be exchanged

in the floor of Nepal stock exchange at competitive price. (poudel, 2059; 45-
51)
Bodhi B. Bajracharyahas mentioned in article, “Monetary policy and deposit

mobilization in Nepal” has concluded that the mobilization of domestic saving is one
of the monetary policies in Nepal. For this purpose commercial banks stood as the
vital and active financial intermediary for generating resources in the from of deposit
of the private sector so far providing credit to the investors in different aspects of the
economy. (Bajracharya, 199; 93-97)
45
Review of Research papers
Under this heading, reviews of research papers of researchers are analyzed to find out
about the investment policies of commercial banks.
GovindaBhadurThapa, expresses his views in his research paper “Financial System

of Nepal” that the commercial banks including foreign joint ventures bank seem to be
doing pretty well in mobilizing deposits. Likewise, loan &advances of these banks are
also increasing. But compared to high credit needs particularly by newly emerging
industries, the banks still seem to lack adequatefunds.
Out of all commercial banks (excluding recently opened regional commercial banks),
Nepal Bank Ltd and RastriyaBanijya Bank Ltd are operating with a nominal profit.
Because of non-recovery of accrued interest, the margin between interest income and
interest expenses is declining.
The foreign banks have been functioning in an efficient way. They are making profit
year after year and have been distributing bonus to their employees and dividends to
their shareholders.
He concludes that by its very nature of the public sector, the domestic banks couldn’t
compete with the private sector banks, so only remedy to the problems of these banks,
as the government decided, is to hand over the ownership as well as the management
of these banks to the private hands (Thapa, 1994,PP29-37).
Radhe S. Pradhan in his research paper “Role of saving, investment and capital
formation in economic development. A case of Nepal ,” has analyzed about the strong
role and impact of saving, investment and capital formation on economic
development of Nepal. This study is based on secondary data only. The necessary
data on saving, investment and capital formation and gross domestic product has been
collected for the period of 1974\75 to 200\01. The role and impact of saving,
investment and capital formation on economic development were analyzed by using
various regression models. The regression equations used in this study have been
46
estimated at current price as well as in real terms with the entire study period divided
into different subperiod.
The result presented in this chapter suggest that in all cases GDP is significantly
associated with saving, investment and capital formation both at current prices and in
real terms. The results of the empirical analysis led to three conclusions: First, saving,
investment and capital formation have positive impact on economic development.
Second the current values and past value of saving, investment and capital
formationhave positive impact on economic development but the current values have
the largest impact. Third, there is a strong role played by saving and capital formation
on economic development while weak role-played by investment. (Pradhan,
2003;PP123-133).
47
Review of Master Degree and P.H.D.Thesis
Several thesis work have been conducted by many students regarding the various
aspects of commercial banks such as lending policy, investment policy, investment
planning, liquidity and investment position, trends of saving investment and capital
formation, investment on priority sectors etc. Some of them are suppose to be relevant
for the study is presented below;
RamalaBhattarai, in her thesis, “Lending policy of commercial Banks in Nepal ,”

has made an effort to examine the landing policy of commercial banks. She has
concluded that efficient utilization of resources is important than the collection of the
resource. Lower investment means lower capital formation which hampers the
economic development of the people and the nation. So, she recommended that banks
give emphasis on efficient utilization of resources. (Bhattarai, 1978)
Sunity Shrestha has conducted a study on “Investment planning of Commercial

Bank in Nepal” with the objectivesof:
 To evaluate the financial performance of commercial banks inNepal.
 To examine the investment of commercial banks of Nepal with reference to
securities, loan &advances.
 To establish the relationship of bank portfolio variables with thenational
income and interestrates.
The research finding of the study are summarized as:

 The general trend of commercial bank’s asset holding. Deposits have been a
major sources of funds. The excess reserve level of banks allows idle money
and loss of opportunity. Debt equity ratios are very high, greater than100%.
 The return ratios are on average higher for foreign joint venture banks than for
the Nepalese banks but return of asset found to be statistically same. Risk
taking attitude is higher in foreign joint venture banks.The total management
achievement index is higher in case of forign banks in comparison to the

Nepalese banks.
 The hypothesis that commercial banks have non-professional style of decision
making in investment have been accepted. The investment of commercial
banks in share and securities is normal and not found to have strategic
decision towards investment in shares and securities. Yield from the security
48
has been found to besatisfactory.
 Investment in various economic sectors shows industrial and commercial
sector taking higher shares of loan till1990.
 Investment in various sectors has a positive impact on the national income
from their respectivesectors.
 Lending in priority sector should cottage and small industry sector sharing
higherloans.
 Priority sector lending showed positive impact on nationalincome.
The secured loan analysis showed commercial loan as being very important followed
by social and industrial loans. The loan loss ratio has been found to be increases with
low recovery of loan. Demand of bank credit has been found to be affected by the
national income and lending & Treasury bill rate. The investment of commercial
banks in government securities is observed to be affected by total deposit, cash
reserve requirements and treasury bill and lending rates. Interest rates, lending rate
and deposit rate were found to constitute as set of significant variables affecting the
bank portfolio composition. (shrestha,1993)
KishorPoudel, in his thesis paper “Liquidity and investment position of Joint Venture
Commercial Banks in Nepal” has made an attempt to evaluate liquidity and
investment of joint venture banks special reference to Everest Bank Ltd and Nabil
Bank Ltd. He has concluded that liquidity position of EBL is better than that of
Nabil’s. Growth rate of investment is higher in EBL than Nabl. He further found that
the banks do not have constant and consistent liquidity and investment policy. There
is no standard and uniform rate or ratio for maintaining liquid assets by the
commercial banks. A commercial bank at its own judgment may decide to maintain
an appropriate level of liquid assets. So he has recommended exploring such
investmentandtoincreaseitsinvestmentonshareanddebentureandthebankshould
49
have laid down policy for timely review of portfolio and to maintain risk and return.
(Poudel, 2002).
SharadWaglein his thesis, “A Study on Trends of Saving, Investment and Capital

Formation in Nepal,” has concluded that in Nepal there is a large gap between saving
and investment rate. The low saving rate implies that majorities of people are poor.
Low rate of saving and investment has been the continuing characteristics of the
Nepalese economy as compared to some selected asian countries. The need for the
improving internal savings and investment performance in the country has been high
in the agenda of Nepalese policy declarations but the performance has remained rather
poor. The rate of investment and capital formation is low in Nepal because of saving.
He has recommended that the government should review existing restriction on
foreign direct investment. (Wagle, 2000).
RabinaBajracharya, in her thesis paper entitled, “Investment of CBs in priority

Sector” has made an effort to examine the banking procedures and services in
disbursing loan in priority sector. She has found that:
 RastriyaBanijya Bank has met the target of 12% investment of total
outstanding liabilities in priority sector and 3% out of which invested in
deprivedsector.
 The trend of investment are continued to increase in the followingyears.
 Investment on agriculture is higher than investment on industry andservice
sector because investment on agriculture benefited a higher number of
households. (Bajracharya,2000)
Kul Chandra Panditin his thesis, “A study on the investment policy analysis of
S.C. Bank Ltd in comparison to Nabil and Nepal Bangladesh Bank” has mainly found
that S.C.’s loan & advances to total deposits ratios are significantly lower than that of
Nabil and Nepal Bangladesh Bank. S.C. is recommended to follow a liberal lending
policy, invest more portion of deposit as loan & advances. He has further stated that
beside giving priority in investing on government securities, S.C. is recommended to
invest its fund in the purchase of shares and debentures of other financial, non-
financial companies, hotel and government companies. This also helps in the
maintenance of a sound portfolio of the banks. (Pandit, 2003)
50
Mukunda Prasad Lamichhanein his thesis, “Investment policy of the Joint Venture
Banks in Nepal” has analyzed between investment policy and different variables like
deposits, commission & discount, net profit, interest on loan and investment. He
applied correlation, ratio analysis, t-test and standarddeviations.
He concluded that there is significant relationship between deposit and loan &
advances as well as outside assets and net profit but not deposits and total investment
in case of Nabil and other joint venture banks. Most of the joint venture banks have
focused their banking services especially to big clients such as to purchase shares and
debenture of other financial and non-financial companies. (Lamichhane, 2000)
Review of Legislative Provisions
In this section, review of legislative framework under which the commercial banks
are operating has been discussed. This legislative environment has significant impact
on the commercial bank’s establishment, their mobilization and utilization of
resources. All the commercial banks have to conform to the legislative provisions
specified in the Commercial Bank Act, 2031 and the rules and regulations formulated
to facilitate the smooth running of commercialbanks.
Investment Management Regulation
“A commercial bank formulating a written policy may decide to invest in shares and
securities of an organized institution. However, such investment is restricted to 10%
of paid up capital of the organization. However, the cumulative amount of such
investment in all the companies in which the bank has financial interest shall be
limited by 20% of the paid up capital of the bank. But the total amount of investment
in share and securities of organized institution is to 30% of the paid up capital of the
bank.” (Directive to commercial banks, directive no. 8, NRB banking operation
department81-82)
Likewise, commercial banks are not allowed to invest in any share, securities and
hybrid capital instruments issued by any banks and financial institutions, licensed by
NRB, where such investment exists prior to issuance of this directive, such investment
should be brought within the restrictive limitations by the FY 2060\61. But
investment on rural micro finance development banks’ shares do not come undersuch
51
restriction. A commercial bank is directly related to the fact that how much fund must
be collected as paid up capital while being established at a certain place of the nation,
how much fund is needed to expand the branch and counters, how much flexible and
helpful the NRB rules are important. But, we discuss only those, which are related to
investment function of commercial banks. The main provisions, established by NRB
in the from of prudential norms in above relevant area are briefly discussed here
under:
i) Provisions for investment in the deprived sector
Some rules, which are formulated by NRB, affect the areas of credit and investment
extension to the deprived sector by the commercial banks.
According to the new provision, with effect from 3rdquarter of FY 1995\96,

investment in shares of the rural development bank by CBs, which used to be counted
for the priority sector lending, now is to be included under the deprived sector
lending.
According to the new provisions effective from FY 1997\98, NBL, RBB, NABIL,
NGBL, NIBL are required to invest 3%, HBL, NSBL, NBBL, EBL are required to
invest 2%, Bank of Katmandu is required to invest 1.75%, NCBL is required to invest
0.75% while new commercial banks are required to invest 0.25% of their total loan &
advances a to deprived sector.
ii) Provision for credit to the priority sector
NRB requires commercial banks to extend loan & advances amounting at least 12%
of their total outstanding credit to the priority sector. Commercial banks’ credit to the
deprived sector is also a part of priority sector. Under priority sector, credit to
agriculture, cottage & small industries and credit to the service are counted
commercial banks’ loan to the co-operative licensed by NRB is also to be computed
as the priority sector credit form the FY 1995\96onwards.
iii) Provision for the investment in productive sector
Nepal, being a developing country needs to develop infrastructure and other primary
productive sectors like agriculture, industry, etc. For this, NRB has directed
52
commercial banks to extend at least 40% of their total credit to the productive sectors.
Loans to priority sector, agriculture sector, & industrial sector have to be included in
productive sector investment.
iv) Provision for the single borrower credit limit
With the objective of lowering the risk of over concentration of bank loans to a few
borrowers and also to increase the access of small and middle size borrower to the
bank loans, NRB directed CBs to set an upper limit on the amount of loan financed to
an individual, firm, company or group of companies. According to this, CBs are
required not to exceed the single borrower limit of 35% in the case of fund-based
credit and 50% in the case of non-fund based credit such as letter of credit, guarantee,
acceptance letter, & commitment.
Similarly, NRB has graded six foreign joint venture banks now as the prestigious
class “A” bank, which are NABIL, NGBL, NIBL, HBL, SBI, & NBBL. These banks
have been kept outside the purview of the single borrower creditlimit.
Likewise, in the case of consortium financing, commercial banks are permitted to

extend an additional 10% credit above the limit fixed by the NRB as before. In
addition, Nepal Oil-corporation, Agriculture-inputs Corporation and Nepal Food
Corporation for there imports of their imports of petrol, diesel, kerosene, fertilizer and
foodstuff have been removed from the restrictions of single borrower limit.
v) Provision for minimization of liquidity risk
Commercial banks are required to monitor their liquidity risk. This is to minimize risk
inherent in the activities and portfolio of the banks. According to the regulations, a
gap fund between maturing assets and liabilities is the liquidity risk. They are
monitoring their assets and liabilities on the basis of maturity period. Maturity periods
such as 0-90, 91-180, 181-270, 271-365 days and above year classified for the
purpose ofchecking.
vi) Cash reserve requirements(CRR)
To ensure adequate liquidity in the commercial banks to meet depositors’ demand for
cash at anytime and to inject the confidence in depositors regarding the safety of their
53
deposited funds, commercial banks are required to have maximum CRR. In this
regard, NRB has directed commercial banks to deposit minimum 8% of current and
saving and 6% of fixed deposits in the NRB as primary cash reserve. The commercial
banks are further required to have 3% cash of total deposit in their own bank as
secondary reserve.
vii) Loan classification and loss provision
With a view of improving the quality of assets of commercial banks NRB has directed
commercial banks to classify their outstanding loan & advances, investment and other
assets into six categories. The classification is done in two days. The loans of more
then one lakh are to be classified as debt service ratio, repayment situation, and
financial condition of borrower, management efficiency, and quality of collateral. The
loans of less than one have to be classified as per maturity period.
viii) Directive regarding interest rate spread
The interest rate spread, the difference between interest charged on loan and advances
and the interest paid to the depositors, has widened significantly in the aftermath of
deregulation in interest rates. This has caused lower financial intermediation.
Therefore, NRB has required commercial banks to limit interest rate spread between
deposit and lending rates to a maximum extent of 5%. NRB has also provided
commercial banks with new calculation method of interest spread for certain period
recently.
54
1.1 A. Method of Analysis
Various financial, accounting and statistical tools are used to make the analysis more
effective, convenience, reliable and authentic. The analysis of data is done according
to the pattern of data available because of limited time and resources. Simple
analytical statistical tools such as percentage, Karl Person’s coefficient of correlation,
regression, and the method of least square and test of hypothesis are used in this
study. Similarly, some accounting tools such as ratio analysis and trend analysis have
also been used for financial analysis. The various tools applied in this study have been
briefly presented asunder:
1.11 B. Financial Tools
Financial tools are used to examine the financial strength and weaknesses of bank in
this study.
1.12. Ratio Analysis
Ratio analysis is the relationship between two accounting figures expressed

mathematically. It is computed by dividing one item of relationship with the other.
Management itself can use these parameters to improve the organization’s
performance. The knowledge regarding strengths and weakness is necessary
forexploiting maximum benefits and to repair the weaknesses to meet the challenges.
The financial ratios, which are calculated and analyzed in this study, are asfollows:
A) Liquidity Ratios
Liquidity ratios measure the firm’s ability to meet current obligations. It reflects the
short-term financial strength of the business. It is the measurement of speed with
which a bank’s assets can be converted into cash to meet deposit withdrawal and other
current obligations. A bank should ensure that it does not suffer from luck of liquidity
and also it does not have excess liquidity. Both condition of liquidity are not in favor
of the banks. The following ratios are evaluated under liquidity ratios.
1.12.1 Current Ratio
The ratio between current assets and current liabilities is known as current ratio. It
shows the relationship between current assets and current liabilities. Current assets are
55
those assets, which can be converted into cash within short period of time, normally
not exceeding one year. Current liabilities are those obligations, which are payable
within a short period, normally not exceeding one year.Mathematically it is expressed
as,
Current Ratio = Total Current Asset

Total current Liabilities
Higher the current ratio better is the liquidity position. The widely accepted standard
of current ratio is 2:1 but accurate standard depends on circumstances in case of
seasonal business ratio.
This ratio measures the bank’s short-term solvency i.e. its ability to meet short-term
obligations. As a measure of creditors versus current assets, it indicates each rupee of
current assets available for each rupee of current liability.
1.12.2 Cash and Bank Balance to Total Deposit Ratio (Cash Reserve Ratio)
Cash and Bank Balances are the most liquid current assets. This ratio measures the
percentage of most liquid fund with the bank to make immediate payment to the
depositor. This ratio is calculated by dividing the cash and bank balance by the
amount of total deposits. Mathematically, it is express edas,
Cash Reserve Ratio= Cash and Bank Balance
Total Deposit
Hence, cash and bank balance includes cash on hand, foreign cash on hand, cheques
and other cash items, balance with domestic and abroad banks whereas the total
deposits include current deposits, saving deposits, fixed deposits, money at call and
short-term notice and other deposits.
1.12.3 Cash and Bank Balance to Current Assets Ratio
This ratio measures the proportion of most liquid assets i.e. cash and balance among
the total current assets of the bank. Higher ratio shows the banks’ ability to meet its
demand for cash.
This ratio is calculated by dividing cash and bank balance by current assets.
Mathematically, it is expressed as,
Cash and Bank Balance to Current Assets Ratio = Cash and Bank Balance
Current Assets
56
1.12.4 Investment on Government Securities to Current Assets Ratio
Investment on government securities includes treasury bills and development bonds

etc. This ratio is calculated to find out the percentage of current assets invested in
government securities.
This ratio is calculated by dividing investment made on government securities by

current assets. Mathematically it is expressed as,
Investment on Government Securities to Current Assets Ratio =
Investment on Government Securities
Current Assets
1.12.5 Loan and Advance to Current Assets Ratio
Loan and advances to current assets ratio shows the percentage of loan and advances
in the total current assets, where loan & advances by current assets.
Mathematically it is expressed as,
Loan and Advances to Current AssetsRatio= Loan andAdvances

Current Assets
1.13 B. Assets Management Ratio (Activity Ratios)
Activity ratios are employed to evaluate the efficiency with which the firm manages
and utilizes its assets. Assets management ratio measures how efficiently the bank
manages its resources.
The following ratios are used under asset management ratio.
1.13.1 Loan and Advances to total Deposit Ratio
This ratio is calculated to find out that which banks are able to utilize their total
deposits on loans and advances for profit generating purpose. This ratio can be
obtained by dividing loan and advances by total deposits, which can be statedas,
Loan and Advances to Total Deposit Ratios = Loan andAdvances
Total Deposit
1.13.2 Total Investment to Total Deposit Ratio
This ratio implies the utilization of firm’s deposit invested in government securities
and share & debentures of other companies and bank.
This ratio can be calculated by dividing total investment by total deposit. It can be
stated as,
57
Total Investment to Total Deposit Ratio = Total Investment
Total Deposit
1.13.3 Loan and Advances to Working FundRatio
Loan and advances indicates the ability of any bank to canalize its deposits in the
form of loan and advances to earn high return. This ratio is computed by dividing loan
and advances by total working fund, which can be statedas,
Loan and Advances to Working Fund Ratio = Loan and Advances

Working Fund
Where, total working fund consists of current assets, net fixed assets, loan for
development banks and other miscellaneous assets.
1.13.4 Investment on Government Securities to Total Working Fund Ratio
This ratio shows that banks’ investment on government securities in comparison to

the total workingfund.
This ratio is calculated by dividing investment on government securities by total

working fund, which can be stated as,
Investment on Government Securities to Total Working Fund Ratio =

Investment on Government Securities
Total Working Fund
Investment on government securities includes treasury bills and development bonds
etc.
1.13.5 Investment on Share and Debentures to Total Working Fund Ratio
This ratio shows the banks’ investment in shares and debenture of subsidiary and
other companies.
This ratio can be computed by dividing investment on shares and debentures by total
working fund, which can be stated as,
Investment on share and Debentures to total working fund Ratio =
Investment on shares and Debentures
Total Working Fund
1.14 C. Profitability Ratios
Profit is the difference between revenues and expenses over a period of time. A
company should earn profit to survive and grow over a long period of time. Therefore,
the financial manager should continuously evaluate the efficiency of its company in
58
terms of profits. The profitability ratios are calculated to measure the operating
efficiency of a company. It is the indicator of the financial performance of any
institution. This implies that higher the profitability ratio, better the financial
performance of the bank and vice versa.
The following ratios are taken into account under this heading.
1.14.1 Return on Total working Fund Ratio

This ratio measures the overall profitability of all working funds I.e. total assets. A
firm has to earn satisfactory return on assets or working fund for its survival. This
ratio is calculated by diving net profit by total working fund.
This can be expressed as,
Return on Total Working Fund Ratio = Net profit
Working Fund
1.14.2 Return on Loan & Advance Ratio
This ratio indicates how efficiently the bank has employed its resources in the form of
loan and advances. This ratio is computed by dividing net profit by loan and
advances.
This ratio can be expressed as,
Return on Loan & Advances Ratio= Net Profit
Loan & Advances
1.14.3 Total Interest Earned to total outside Assets Ratio
This ratio measures the interest earning capacity of the bank through the efficient
utilization of outside assets. Higher ratio implies efficient use of outside assets to earn
interest. This ratio is calculated by diving total interest earned by total outside assets.
It is expressedas,
Total Interest Earned to Total Outside AssetsRatio= Total InterestEarned
Total outsideAssets
1.14.4 Total Interest Earned to Total Working Fund Ratio

This ratio is calculated to find out the percentage of earned to total assets (working
fund). Higher ratio implies better performance of the bank in terms of interest earning
on its total working fund. This ratio is calculated by diving total interest earned by
total working fund.
It can be expressed as,
Total Interest Earned to Total Working FundRatio= Total InterestEarned
Total Working Fund
59
Where, total interest earned includes, interest on loan, advances and overdraft,
government securities, investment debentures and other inter-bank loans.
1.14.5 Total Interest Paid to Total Working FundRatio
This ratio is calculated to find out the percentage of paid on liabilities with respect to
total working fund. This ratio is calculated by dividing total interest paid by total
working fund which is expressed as,
Total Interest Paid to Total Working Fund Ratio = Total Interest Paid
Total Working Fund
Where, total interest paid includes total expenses on deposits, loan and advances,
borrowings and other deposits.
1.15 D. Risk Ratios
Risk taking is the prime business of banks’ investment management. It increases

effectiveness and profitability of the bank. These ratios indicate the amount of risk
associated with the various banking operations, which ultimately influences the
banks’ investmentpolicy.
The following ratios are taken into account under this heading.
1.15.1 Liquidity Risk ratio
This ratio measures the level of risk associated with the liquid assets i.e. cash, bank
balance etc. that are kept in the bank for the purpose of satisfying the depositors’
demand for cash. Higher the ratio, lower is the liquidity risk.
Mathematically it is presented as,
Liquidity Risk Ratio = Total Cash & Bank Balance
Total Deposit
Credit Risk Ratio
This ratio measures the possibility that loan will not be repaid or the investment will
deteriorate in quality or result in loss to the bank. By definition, it is expressed as the
percentage of non-performing loan to total loan & advances.
Mathematically it is presented as,
Credit Risk Ratio = Total Loan & Advances
Total Assets
60
Capital Risk Ratio
This ratio indicates how much asset values may decline before the position of
depositors and other creditors jeopardize. The capital risk is directly related to the
return on equity (ROE). Higher the ratio, low is the capital risk.
Mathematically this ratio can be stated as,

Capital Risk Ratio = Capital (Paid up + Reserves)
Risk Weighted Assets
E. Growth Ratios
Growth ratios measure how well the firm is maintaining its economic position in its
industry. It is directly related to the fund mobilization and investment management of
a commercial bank. The following growth ratios are calculated in this study.
 Growth ratio of totaldeposit
 Growth ratio of loan &advances
 Growth ratio of totalinvestment
 Growth ratio of netprofit
Statistical Tools
Some important statistical tools are used to achieve the objective of this study. In this
study, statistical tools such as trend analysis of important variables, co-efficient of
correlation between different variables as well as test of hypothesis have been used
which are as follows:
1.16 Trend Analysis
This topic analyzes the trend of loan and advances to total deposit ratio and trend of
total investment to total deposit ratio of NABIL & SBI bank from 2005\2006 to
2009\2010 and makes the forecast for the next five years. Under this topic following
sub- topic have been presented.
1.17 Trend analysis of loan and advances to total deposit ratio.
1.18 Trend analysis of total investment to total depositratio.
61
1.17 Co-efficient of Correlation Analysis
This analysis identifies and interprets the relationship between the two or more
variables. In the case of highly correlated variables, the effect on one variable may
have effect on other correlated variable under this topic. Karl Pearson’s co-efficient of
correlation has been used to find out the relationship between the following variables.
i.) Co-efficient of correlation between deposit and loan and advances.
ii.) Co-efficient of correlation between deposit and totalinvestment.
iii.) Co-efficient of correlation between total outside assets and net profits.
These tools analyze the relationship between these variables and help the banks to
make appropriate policy regarding deposit collection, fund utilization (loan &
advances and investment) and maximization of profit.
62
SUMMARY, CONCLUSION AND RECOMMENDATIONS
In this chapter we present the summary and conclusions flown form the analysis in the
preceding chapter. Then, based on the finding and our conclusion we recommend
certain measures for further improvement. With the help of some important financial
as well as statistical tools, the researcher has tried to make a comparative analysis of
various of the investment of the concerned commercial banks.
After completing the basic analysis required for the study, the researcher has tried to
point out some problems and errors and also has some suggestions for further
improvement. This study may be helpful for the management of concerned bank to
initiate the action and achieve the desired result.
3.1 Summary
The economic development of a country depends upon the development of the

commerce and industry. There is no doubt that banking promotes the development of
commerce because banking sector itself is the part of commerce. The process of
economic development depends upon various factors. However, economists are now
convinced that capital formation and its proper utilization plays a paramount role for
rapid economic development.
The economic growth was quite sluggish during the first three and a half decade
during the Maoist insurgency and later on, the growth rate has been quite dismal. At
present, overall economic growth rate is still declining year by year. Reasons behind
such decline are insecure economic condition, decrease in the tourist arrival
decreasing production and export of carpet, garment and pashmina industry and
political situation of thecountry.
The evolution of the organized financial system in Nepal has recent history than in
any other countries of the world. In Nepalese context, the history of banking is hardly
seven decade. However, after the announcement of liberal and free market economy
based policy, Nepalese banks and financial sectors started having greater network and
access to national markets. Commercial banks play a vital role, which deals withother
63
people’s money, and stimulate saving by mobilizing idle resources to those sectors
where the objectives opportunities as available. Modern banks provide various
services to their customers in view of facilitating their economic and social life.
The objective of the commercial banks is always to earn more profit by investing or
granting loan & advances to the profitable, secured and marketable sectors. But they
should be careful while performing the credit creation function; the banks should
never invest its funds in those securities, which are of fluctuating nature. And,
commercial banks must follow the rules and regulations as well as different directions
issued by central bank and ministry of finance while mobilizing the funds. For the
purpose of the present study two commercial banks namely Nabil and SBI, were
taken.
In this study, the word investment covers analysis wide range of activities i.e. the
investment of income, saving or any other collected fund. If there is no savings, there
is no existence of investment. Saving and investment are inter-related. Investment
policy is a facet of the overall spectrum of policies that guides banks’ investment
operations and it ensures efficient allocation of funds to achieve the economic
development of the nation. A sound and viable investment policy attracts both
borrowers and lenders, which helps to increase the volume and quality of deposit,
loan and investment. Therefore, the investment policy should be carefully planned
andanalyzed.
Some sources of funds for the investment of bank are capital, general reserves,
accumulated profit, deposits and internal & external borrowings. Similarly, some
important banking terms, which are frequently used investment this study are loan and
advances, investment on government securities, shares and debentures, deposits, etc.
For the analysis and interpretation of the data of this study, different financial &
statistical tools are used. In the financial tools liquidity ratios, asset management
ratios, profitability ratios, risk ratios and growth ratios have been used. The statistical
tools such as mean, standard deviation, co-efficient of variation, mainly; the
secondary data are used for the analysis in this study. The data are obtained annual
report of concerned banks; likewise, the financial statement of five years i.e.
2005/2006 to 2009/2010 was selected for the purpose ofevaluation.
64
3.2 Conclusion
The above-mentioned major findings led this study to the following conclusions:
 The liquidity position of Nabil is comparatively lower than other bank but it has
the highest investment in government securities to current assetsratio.
 Nabil bank has highest ratio in investment to total deposit and government
securities to total working fund but lower into shares and debentures to total
workingfund.
 Analyzing the profitability of these two banks, we found that return on total
working fund and return on loan and advances of Nabil is higher than that of other
bank. But, total interest paid to total working fund of Nabil is lower than that of
otherbank.
 From the viewpoint of the risk ratio, liquidity risk and credit risk of Nabil is lower
than that of commercial bank whereas it is higher in case of capitalrisk.
 From the analysis of growth ratio we found that, Nabil has lower growth rate in
total deposit, loan & advances and total investment but it has average growth rate
in netprofit.
 Through the help of the trend analysis we come to know that, loan and advances
to total deposit and total investment to total deposit ratios of Nabil bank are
greater than that of SBI bank. It suggests that the position of Nabil bank may be
higher than the otherbank.
 Through the analysis and findings we can summarize that investment policy of
Nabil bank is better in every sector and profitability ratio is good. Similarly, trend
analysis of loan &advances and total investment to total deposits show that the
position of Nabil will be better in the future. However, liquidity position and
growth rate is not satisfactory and it has average riskratio.
 SBI bank has good liquidity position and riskratio.

65
3.3 Recommendations
On the basis of above analysis and conclusion, following recommendations are made;
 Besides giving priority on government securities, Nabil bank is recommended

to invest its fund investment purchase of shares and debentures of other
financial companies. government securities offer lower interest rate than
others. So investment in shares and debentures helps to maintain the sound
portfolio of thebank.
 Profitability is the main indicator of the financial performance financial

institutions. In this study, we can see that profitability ratio of Nabil is good
form the angle of return but it is not able to earn higher interest through the
use of outside assets and working fund. So, Nabil is recommended to increase
its interest earning capacity by investing more and more fund in loan and
advances and different types ofsecurities.
 A commercial bank must maintain its satisfactory liquidity position to meet

the credit need of its customers; however, internal as external factors affect the
liquidity position of the banks. As Nabil has maintained lower ratio of cash
and bank balance to total deposit and current assets than other bank, Nabin is
recommended to increase cash and bank balance to meet the requirement of
cash for various purposes. SBI bank is able to maintain higher liquidity ratio
but it should be enough careful that it’s more than requiredlevel.
 If a bank expects high return on its investment, it has to accept risk. The risk
taken by Nabil, from the angle of capital risk is an average whereas liquidity
risk and credit risk is lower than that of other bank. Its consistency is highly
volatile which may result in higher loss. The bank should not take high risk.
Nabil should carefully analyze the above risks to achieve higherreturns.
 The growth ratios represent how well the commercial banks are maintaining
their economic and financial position; it is directly related to the fund
mobilization and investment. SBI bank’s growth ratio is better than that of
Nabilbank.Nabilbankhasveryfluctuatinggrowthrate.Nabilis
66
recommended to increase its growth ratio into deposits, loan & advances,
investment and net profit.
 Co-efficient of correlation analysis interprets the relationship between two or

more variables. Co-efficient of correlation between outside assets and net
profit of Nabil is negative, which shows that there is negative relationship
between these two variables. It reveals that Nabil is not able to earn net profit
by mobilizing its total outside assets. So Nabil should innovate new strategy to
improve its presentconditions.
 In the light of growing competition in banking sector, the business of the bank
should be customer oriented. The bank is recommended to adopt new
technology and services. All most all commercial banks in Nepal are
providing various facilities such as financial switch system (SWIFT),
automatic teller machine (ATM) cards, visa electron debit card, international
credit card, locker services, lending against gold and silver services, parking
services, 24-hour services etc. Beside these facilities bank should be involved
in different kind of social and community development activities. The bank
should be able to provide more personalized services and a better environment
for itscustomers.
 To get success in the competitive banking environment, depositor’s money

must be utilized as loan and advances. The largest item of bank in the must be
utilized as loan and advances. If it is neglected, then it would be the main
cause of liquidity crisis in the bank. Nabil’s loan and advances to total deposit
ratio and loan and advances to total working fund ratio of lower than that of
SBI bank. To overcome this situation, Nabil is strongly recommended to
follow liberal lending policy and invest more and percentage of total deposit
and total working fund in loan and advances.
 In order to collect more funds, Nabil is suggested not to be surrounded and

limited only by big clients i.e. multination companies, large industries,
manufacturer companies, NGO’s and INGO’s etc. It should give emphasis to
general people also. It should be able to collect small savings of people too to
meet its needs forcash.
67
Direction for Future Researcher
This thesis has not covered all investment policy. Because of various limitations this
study has covered only two bank’s comparative investment policy. This study is
simply a partial study for the fulfillment of MBS degree. Following research topics
may provide for further researcher:
1. Investment theory and practices adopted by commercialbanks.

2. Investment management of commercialbanks.
3. Investment analysis andmanagement.
68
BIBLIOGRAPHY
Books:
Basu, A.K. (1996). Fundamental of Banking Theory and Practice. Calcutta: A.K. Mukharjee Publications.
Bhattarai, R. (2009). Investment Theory and Practices. Kathmandu: Buddha Academic Publications.
Charles, J.P. (1999). Investment Analysis and Management. Bombay: Himalayan Publication House.
Crosse, H.D. (1963). Management Policies for Commercial Banks. Eaglewood: Cliffs, N.J., Prentice Hall
Inc.
Gitman, L.J. and Joehnk (1990). Fundamentals of investment. New York: Harper and Row.
Pandey, I.M. (2000). Financial Management. New Delhi: Vikash Publishing House Pvt. Ltd.
Radhaswamy, M. and Vasudevan S.V. (1997). A Textbook of Banking. New Delhi: S. Chand and
Company Ltd.
Singh, P. (1992). Investment Management. New Delhi: Himalayan Publication House.
Journals and Periodicals:

Bajracharya, B.B. (2047), "Monetary Policy and Deposit Mobilization in Nepal," Rajat Jayanti Smarika,
RBB, Kathmandu,
McNaughton, Diana (1994), "Banking Institution in Developing Markets," Works Bank Publication.
Poudel, S.P. (2059), "Government Security Markets Rational and Development in Nepal," Nepal Rastra
Bank Samachar. 97
Pradhan, R.S. (2003), "Role of Saving, Investment and Capital Formation in Economic Development: A Case
of Nepal", Research in Nepalese Finance.
Shrestha, S. (2055), "Lending Operation of Commercial Banks of Nepal and Its Impact on GDP," The
Business Voice of Nepal, A Special Issue of Banijya Sansar, T.U.
Thapa, G.B. (1994), "Financial System of Nepal", Development Vision, Patan Multiple Campus, Lalitpur, vol.
13.
Dissertations:
Bajracharya, R. (2000), Investment of Commercial Banks in Priority Sector, An Unpublished Master Degree
Thesis, T.U.
Bhattarai, R. (1978), Lending Policy of Commercial Banks in Nepal, An Unpublished Master Degree's Thesis,
T.U.
Lamichhane, M.P. (2000), Investment Policy Joint Venture Banks in Nepal, An Unpublished Master Degree's
Thesis, T.U.
Pandit, K. (2003), A Study on the Investment Policy Analysis of S.C. Bank Ltd., An Unpublished Master
Degree Thesis, T.U.

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1

A STUDY ON MOBILIZATION OF DEPOSIT AND

In partial fulfillment of the requirement for the degree of

This is to certify that the thesis

A STUDY ON MOBILIZATION OF DEPOSIT AND

has been prepared as approved by this Department in the prescribed format of

Mobilization of Deposit And Investment of Nabil Bank Ltd. ” submitted

I would like to express my sincere gratitude to my Husband Mr Amar Gaudel,

I am heartly thankful to all the respondents who have provided me with

I am thankful to my friends who directly or indirectly supported me during my

S.N. Chapters Page No.

1.2.1 Branches of Nabil Bank Ltd. 13

2. Data Presentation and Analysis 23-34

3. Summary, Conclusion and Recommendation 64-67

Table No. Headings Page No.

Figure No. Heading of Figures Page No.

C.A. = Current Assets

C.L. = Current Liabilities

M.S. = Marketable Securities

NIDC = Nepal Industrial Development Corporation

NRB = Nepal Rastra Bank

1.1 Background of the Study

1.1.2 Meaning of Bank

Some important meanings of bank given by different scholars are as follows:

According to Walter leaf:-

According to Harace White:-

1.1.3 History of Bank in Nepal

1.2 Introduction of Nabil Bank Limited

The share holding of NABIL Bank Ltd. is as following:

Subscription Percent Holding

Nepal Stock Exchange Ltd.

NABIL BANK LIMITED

1.2.1. Branches Nabil Bank Ltd.

1. Kantipath Branch, Kantipath 9. Itahari Branch, Main Road, Itahari

Chairman Mr. SatyendraPyara Shrestha, NB(International) Limited

Deposits Credits cards Lending

Tele- Safe Deposit Transfer

 Western Union Money Transfer

 SWIFT (Society for Worldwide Inter Bank Financial Telecommunication)

 Safe Deposit Locker

 Automated Teller Machines (ATM)

1.3.1 Types of Deposit and its Account opening Procedure

Deposits of commercial banks can he categorized into following two categories

The main features of such accounts are as follows:

Fixed Deposit! Term Deposit

The main features of such accounts are as follows:

ii. Non operative

The major features of such deposit are as follow s:—

1.3.1.2. Non- interest Bearing Deposit

a. Current Deposit Account.

ii. Highly liquid and no limitation

B. Account Opening Procedure

a) Application on the prescribed form

d) Account Opening Mandate

Procedure for Opening Saving and Current Account.

They should provide a copy of:

ii. For partnership business

iii. Limited companies

iv. NGO lobs school associations

Procedure for Opening Fixed Deposit Account

1.8.1. Research Design

1.8.2. Sources of Data

 Primary Data Source:

 Secondary Data Source:

1.8.3. Data Processing Techniques

Classification and Tabulation of Data

Diagrammatic Representation of Data