CHAPTER 1

INTRODUCTION

1.1Background of the Study

In the present world, finance has occupied the center-stage in the process of
economic advancement of the societies making the financial system large, efficient and
strong thus constitutes the sine-qua-non to the speedier economic advancement in all type
of economies. The pace of quality of the financial development not only affects the
efficiency of financial services delivery but also determines the rate of economic growth
and development in the country. In the present global environment of increasing economic
integration along with the rising competitiveness among the economies, the financial
system of a country needs to be made more capable and stronger even on a comparative
basis. Strengthening related institutions, maintaining sound macroeconomic policies and
pursuing prudent sectoral policies are necessary for strengthening the financial sector.
Taking the case of our own country, financial system is slowly bringing significant
macroeconomic policy transformation effect as well as multiplying financial fortunes of
the individual investors actively participating in financial markets. Moreover the
government role is proving vital to the growth of financial institutions and markets.
Altogether there exists at present 25 commercial bank. There are 58 development banks,
22 insurance companies. In addition to this, other 3 insurance companies are approved by
NRB to perform insurance function (Source: NRB smasher published on the auspicious
occasion of 53rd
Anniversary of establishment of NRB).In the process of development of financial markets
and institutions there exists more than 74 finance companies and more saving and credit
co-operatives.
However the scope and coverage of financial markets and institutions is not merely
confined to the banking system of the country. Significant developments have taken place
both in national and international financial system. Going beyond the functions and
practices of banks, financial system has given much needed attention to the growth of
other non-banking financial institutions. They tend to influence the proper functioning of
the financial market.
1.1.1 Concept of banking
A bank is a financial institution, which deals with money and credit. It accepts
deposits from the public and mobilizes the fund to productive sectors. It also provides
remittance facility to transfer money from one place to another .Generally, bank accepts
deposit from business institutions & individuals which is mobilized into productive
sectors, mainly business and consumer lending. Bank, is therefore, known as a dealer of
money. At present context bank is not confined to accepting deposits and disbursing loans.
In addition to this, a bank may be engaged in different types of functions such us
remittance, exchange currencies, Joint venture, underwriting, bank guarantee, discounting
bill etc. In short, the modern bank refers to an institution having the following features:
1. It deals with money; it accepts deposit and advances loans.
2. it also deal with credit; it has the ability to create credit by expanding its liabilities.
3. It is commercial institution; it aims at earning profit.
Banks are the principal source of credit for millions of individuals and families and
for many units of government. They are among the most important financial
institution in the economy. Moreover, for small local business ranging from
grocery stores to automobile dealer, banks are often the major sources of credit to
stock the shelves with merchandise. Banks grant more installment loans to
consumers then any other financial institutions.
Bank is a financial intermediary accepting deposits and granting loans. It
offers the widest menu of services of financial institutions.
Banks also are among the most important source of short term working
capital for business. They have become increasingly active in recent years in
making long term business loan for new plant and equipment. When business and
consumers must make payment for purchase of goods and services, more often
they use banks provided cheques, credit or debit cards or electronic accounts
connected to a computer networks. It is banker to whom they turn most frequently
for advice and council, when they need financial information's and financial
planning.

1.1.2 Historical development of banking system in Nepal

As the concept of bank and financial institution as compared to the
developed nation is left to the late in Nepal,the first formal establishment of bank
 in Nepal is remembered for1937A.D when the Nepal bank limited at the rulling era
of Maharaja Judda Samser was established as the first modern bank of Nepal.It is
taken as the milestone of modern banking of the country..Until mid 1940s, only
metallic coins were used as medium of exchange.So the H.M.G felt the need of
separate institution or body to issue national currencies and promote financial
organization in the country.Hence the Nepal Rastra Bank Act 1955 was
formulated,which was approved by H.M.G.Accordingly,the Nepal Rastra Bank
was established in 1956A.D.as the central bank of Nepal.

A sound banking system is important for smooth development of banking

system.It can play a key role in the economy.It gathers saving from all over the
coumtry and provides liquidity for industry and trade.In 1957 A.D.,Industrial
Development Bank was established to promote the industrialization in
Nepal,which was later converted into Nepal Industrial Development
Corporation(NIDC)in 1959 A.D
Rastriya Banijya Bank was established in 1865A.D as the second
commercial bank of Nepal. The financial shapes of these two commercial bank
have the tremendous impact on the economy. That is the reason why these Bnks
still exists in spite of their bad position.
As the agriculture is the basic occupation of major Nepalees,the
development of this sector plays the prime role in the economy.So separate
Agriculture Development Bank was established in 1968A.D.This is the first
institution in agricultural financing.

From the very beginning of 2046B.S, when the H.M.G declared free
economy and privatization policy, the government of Nepal encouraged the foreign
banks for joint venture in Nepal. As a result 31 commercial bank has been
established and performing the commercial banking function till then:including
joint venture banks.(Source:Nepal Rastra Bank Samachar,published on the
auspicious occasion of 53rd anniversary of the establishment of NRB and chaired
by Krishnabahadur Manandhar)commercial bank approved by NRB to perform the
commercial bank functions till the date are as:
Name of Commercial Banks Year
S.N
of Establishment
 (A.D)

1. Nepal Bank Limited 1937

2. Rastriya Banijya Bank 1965
3. Agriculture Development Bank Limited 1968
4. NABIL (Nepal Arab Bank) 1984
5. Nepal Investment Bank (Nepal Indosuez Bank) 1985
6. Standard Chartered Bank (Grindlays Bank) 1986
7. Himalayan Bank Limited 1992
8. Nepal SBI Limited 1993
9. Nepal Bangladesh Bank Limited 1993
10. Everest Bank Limited 1994
11. Bank of Kathmandu Limited 1994
12. Nepal Credit and Commerce Bank (Nepal Bank of Ceylon) 1996
13. Lumbini Bank Limited 1998
14. Nepal Industrial and Commercial Bank 1998
15. Machhapuchchhre Bank Limited 2000
16. Kumari Bank Limited 2000
17. Laxmi Bank Limited 2001
18. Siddartha Bank Limited 2001
19. Global Bank Limited 2006
20. Citizen Bank International Limited 2007
21. Prime Bank Limited 2007
22. Sunrise Bank Limited 2007
23. Bank of Asia Nepal Limited 2007
24 NMB Bank 2008
25 Development Credit Bank 2008
26 Kist Bank 2009
27 Janata Bank Limited 2010
28 Mega Bank Limited 2010
29 Commerge and Trust Bank Limited 2010
30 Civil Bank Limited 2010
31 Century Commercial Bank Limited 2010
Source: The Boss Magagine, 2011, May
In the context of Nepal, like as in other countries, the goldsmiths, and landlords
were 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 'Tegarath Adda' during the tenure of the Prime
Minister Ronoddip Sing (1993 B.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 Rastriya Bank was established
on 14th Baisakh 2014 B.S. under "Nepal Rastriya Bank Act 2012". Likewise, Rastriya
Banijya Bank under the full ownership of government, was established on10 th Magh
2022, as per "Rastriya Banijya Bank Act 2012". The growth of banks accelerated only
after the adoption of liberal economic policy by Nepalese Government. This has attracted
many new investors and encourages opening many new modern banks with joint venture
of foreign banks. Nepal Arab bank Ltd was established on 29 th Ashad 2041 B.S. as the
first modern Bank with the joint venture of Dubai Bank Ltd. U.A.E. Subsequently
following its establishment, Nepal Indo Suez Bank Ltd. on 16 th Falgun 2042 B.S with
faint venture of Indo Suez Bank France, Nepal Grindlays Bank Ltd on 16 th Marg 2043
B.S with it joint venture of Grindlays Bank England, Himalayan Bank Ltd on 5 th Marg
2049 B.S. with the joint venture of Habib Bank of Pakistan, Nepal SBI Bank Ltd on 28 th
Ashad 2050 B.S. with the joint venture of State Bank of India, Nepal Bangladesh Bank
Ltd. on 28th Jestha, 2050 B.S. with joint venture of International Finance Investment and
commercial Bank. Bangladesh, Nepal Bangaladesh Bank Ltd on 1st Kartik 2051 B.S. with
the joint ventures of Punjab National Bank Ltd and Bank of Katmandu on 28 th Falgun
2051 B.S. with joint venture of Siam Commercial Bank . Thailand Now, there are 13
commercial banks with 483 bank branches and 318 rural branches along with 45 financial
companies and 5 rural Development Banks.

Nabil Bank Ltd is the 1st joint venture bank in Nepal, established in 1984 A.D. under the
company Act. Dubai Bank Ltd was the initial foreign joint venture partner with 50%
equity investment. The shares owned by DBL were transferred to Emirates Bank
International Ltd (EBIL), Dubai. Later on EBIL sold its entire holding to National Bank
Ltd, Bangladesh (NBLB). Nabil bank limited had the official name Nepal Arab Bank Ltd
till Dec31st 2001. Hence 50% equity shares of Nabil Bank Ltd are held by NBLB and out
of another 50%, financial institutions has taken 20% and remaining 30% were issued to
general public of Nepal. At present 19 branches are operated in different parts of the
country.

1.1.3 Function of Commercial Bank

 The primary functions of Commercial bank are concentrated on accepting deposit
from General public and advancing loan to industrialist, businessmen, and needy
individuals for expenditures. Besides that it also executes banking activities. All
commercial banks are authorized to transact various business which are considered as the
main function of commercial Bank .Commercial Bank has significant role in transferring
idle money of General Public to industrialists or businessman who generally use such
amounts in productive sectors. This major function of commercial bank plays a vital role
in the overall development of economy and the Nation too. Despite that, Commercial
bank provides wide range of agencies and other miscellaneous services by means of
branch expansion at different parts of the country, which were as follows: -
1. Accepting Deposits.
A commercial bank accepts deposits in different forms of account namely -
Saving, Current and fixed deposits.
a. Saving Deposit: -
It is one of deposit, generally collected from people, having low level of income.
The bank usually pays a minimum rate of interest to the depositors against their deposit.
The main purpose of this account is to increase saving habit of general public. Under this
account, the depositor has to maintain amount, as proscribed by the bank to open their
accounts. The depositor is allowed to withdraw money by cheques up to the amount
prescribed by bank. Amount collecting under this accounts should be invested is
purchasing marketable securities and short term investment.
b. Current Deposit:-
Another account provided by Commercial bank to deposit amount of
traders and businessmen is current deposit. The bank should make payment on demand of
the clients therefore; it is also called as demand deposit. There are no restrictions
regarding the number of deposits and withdraws. The bank does not pay any interest on
such amount.
c. Fixed Deposit:-
A fixed deposit is such type of account where the customer is required to keep the
amount with the bank for long period of time. Such account is opened by those who don't
need money for stipulated time. A high rate of interest comparison to saving deposit is
provided by the bank, on such amount. The customers are not allowed to withdraw
money before the matured period. In case of urgent need of money the customers are
permitted to borrow money from the bank on the security of fix deposit.
2. Advancing Loan:-
The major function of commercial Bank is to invest and lend of its funds collected
by means of different accounts into productive sectors. Enough consideration should be
given in choosing the project that ensures the receiving of interest regularly and
recoverable of loans after the matured period. Mainly loans are granted in four forms
overdraft, cash credit, and direct loan and discounting of bills of exchange.
a) Overdraft:-
This is a special facility provided by commercial bank, for only the trustee client
to overdraw his account against some collateral security. The customer is charged the
interest only on this amount by which his account is overdrawn. Generally bank charges
high rate of interest for providing such facility.
b) Cash Credit:-
The bank grants loan to the client against the security of commercial goods or
personal security which is called cash credit. The bank will not make direct payment in
cash but the amount of the loan is credited to the current account of the borrower. The
borrower can withdraw amount by issuing Cheque as per his/ her requirement but he is
responsible to pay interest on the whole amount of agreement.
c) Direct Loan:-
The commercial bank may disburse loan to its clients against the security of
movable and immovable assets. Under this the borrowers are required to pay interest on
the entire amount of loan sanctioned from the data of taking loan to the data of
repayment. The borrower should pay the amount of loan in a lump sum on the due date.
d) Discounting Bills of Exchange:-
Due to expansion of business now a day major part of transaction are carried on
credit by means of issuing bills of exchange. If a creditors holding bill of exchange needs
money immediately, the bank, may provide him/ her money by discounting bill of
exchange. The balance amount of bill after deducting banking charger is deposited in the
current account of bill holder. Generally the mature date of bill of exchange is 90 days.
3. Agency Services:-
A bank performs a number of services on behalf of its customer as an agent.
Mainly commercial bank undertakes the payment of subscriptions, insurance premium,
rent etc. and collection of cheques, bills, salaries, pensions, dividend, remittance of
money from one place to another etc. For these different services provides by commercial
bank it charges a small amount of commission.
4. Miscellaneous Services:-
Apart from those above mentioned services the bank also provides some other
useful services.
 It helps to increase the area of foreign trade by discounting the bill drawn by exporter
on the foreign importer in home currency.
 It provides the facility of safe custodian to the customers for the protection of jewelry,
document of title of goods a letter of commencing the business and other valuable
documents.
 It increases the external and internal tourism by issuing traveler cheque.
 With the acceptance of Nepal Rastriya bank, it may provide the facility of exchanging
foreign currencies.
 Commercial bank has conducted research programs regularly regarding the financial
and economic condition by which it can collect various data and information. It can
help to its clients by providing such data and information's.
 It helps to issue the share of new company by performing underwriting function
 It provides the facility of bank guarantee to its customers which reduce the tension of
contractors to deposit amount in submitting the tender.

1.1.4 Legal provisions of commercial Bank in Nepal

Being a part of society, commercial bank should operate under the existing rules
and regulation of HMG of Nepal. It should operate under the strict control and
supervision of Nepal Rastriya Bank .It should be legally liable to implement the
directions, plans and policies formulate by central Bank regarding the operations of
commercial Bank. In Nepal commercial banks are operating under commercial Bank Act
2031.
 Commercial Bank can be established under the Company Act. in the form of
company having limited liabilities with the acceptance of Nepal Rastriya bank. It is
essential for commercial bank to submit the prescribed documents and particulars
to N.R.B. The bank is legally liable to follow the terms and conditions determined
by N.R.B. Taking approval of N.R.B., it has fully right to determine the place of
central office and it can expand its branches, counters and other offices.
 The all functions of commercial bank including planning decision making and
strategy formulating etc. are carried on by the board of directors. In optimum, there
are 9 members of directors who are appointed by meeting of shareholders. The
meeting of board of directors is being chaired by the president who is elected by
the member of directors on the basis of majority among themselves. In case of the
bank having fully government ownership, all board of directs including the
president are appointed directly by the government. If government holds more than
50% share in commercial bank than the government will appoint more than 50%
directors. In other commercial banks, the government can appoint two members of
directors, that authority of N.G. can be delegated to N.RB.
 Beside the works to be performed by the general meeting of shareholders, all the
works of commercial bank under C.B.A. 2031 are performed by the board of
directors which can delegate its whole or partial authority to the president,
managing director, sub-committee of directors, general manager or other staffs of
the bank.
 The chairman can call the meeting at pre determined place and time. Such meeting
should be called at least once within two months and at least 12 times within a
year.
 In case of the bank established by issuing of share to general public, the president
of such bank. Should call the general meeting of shareholders within 18 months of
its establishment and then the general meeting of shareholder to be called yearly
within 180 days after ending of its closing date at the place where the central office
is.
 The paid up capital of commercial bank should not be less than 30 millions.
 The paid up and issued capital should not be less than the half of issued capital and
authorized capital respectively.
 The bank can increase the authorized capital, issued capital and paid up capital
with the approval of N.R.B.
 The bank should prepare the statement of Balance sheet and profit and loss
Account in the prescribed form of N.R.B. and the work of auditing to be completed
within 5 months of its closing date. The chief executive Chief account officer and
more than 50% of board of directors should sign the statements properly and to be
published in the main newspaper for the public information.
 N.R.B. can inspect or supervise any branch or office of commercial Bank at any
time. This is the responsibility of the staff of bank to submit the statement of
account and information regarding the bank demanded by the supervisor of N.R.B.
 The commercial bank can collaborate with other commercial bank in foreign
country or it can be collaborated with other foreign bank with the approval of
N.R.B.

1.2Objectives of the Study

The main objectives of the study are an s follows
To evaluate the structural position of NABIL with the help of Capital structure.
 To evaluate the composition of capital structure of NABIL
 To measure the shareholder's return and risk and the market value of shares.
 To reflect the financial decision of the firm
 To provide information of NABIL in banking sector
 To evaluate the NABIL 's ability on modern financial sector (to evaluate
interest coverage ratio)
1.3 Limitations of the Study
The limitations of the study are as follows
 Among the various joint ventures banks the study focuses only NABIL
 This study examines only capital structural position of the NABIL .
 The study is based on secondary data, provided by the bank.
 Only past 5 year data are included in this study.
 Capital structural analysis is not only the analytical tool.

1.4 Significance of the Study

Since this study has been conducted on Banking and Insurance for meeting
the requirement of partial fulfillment of BBS level, it constitutes the following
importance.
 It will help to complete BBS level.
 It will be useful for concerned company as the study has provided suggestions.
 This study may serve as the guideline for future researchers.
 It will also be useful for library use for general readers.
1.5 Organization of the study:
This study has been organized in to three chapters which are as follows
Chapter I: Introduction
Chapter II: presentation and analysis of data
Chapter III: Summary and conclusion.
1.6 Research Methodology
In order to achieve the objective, following methods are used in the study .The data
are collected from "Sixth Annual Report" that is second source. The study attempts
to have answer for the following questions.
1. What kind of trend is in share capital?
2. What kind of trend is in reserve & surplus of NABIL ?
3. What kind of trend is in Net worth of NABIL ?
4. What kind of trend is in accumulating deposit?
5. What kind of trend is in EPS?
6. What kind of trend is in total liabilities?
7. Show a pre chart of total capital structure
1.6.1Nature of Data
All the data collected to analyze in the study are conducted in the basis of
secondary data. The study is based on the facts collections from Balance sheet of
NABIL .
1.6.2Period covered
It only covers five years starting from 2062/63 to 2066/67.
1.6.3Tools used
This study is to have a descriptive analyst's with percentage ratios a long with trend
of the variables. The capital is classified in capitals reserves, borrowing, deposits
and total liabilities in consideration with current liabilities.

The analysis has tried to show the trend of variable. The statistical tool such as
average growth rate and correlation are used to analyze the components.
 CHAPTER 2
PRESENTATION AND ANALYSIS OF DATA
The chapter entitled "Presentation and Analysis of data" has been organized to
present the result and analysis them accordingly. This chapter covers the descriptive
analysis, graphical presentation and study the result of NABIL , along with other dictators
of the capital structure.
2.1. Descriptive Analysis and Graphical Presentation:
This section of the study explains the reserves, deposits and total liabilities. It
ignores the borrowing because borrowings are not available up to 5 years of the study
period.
Table No. 1
Share capital trend of NABIL
in '000
Year Share/Paid-up capital Yearly change % or growth rate

2062/63 60000 0

2063/64 114121 90.20

2064/65 116352 1.95

2065/66 117767 1.22

2066/67 238163 102.23

Average growth rate 39.12

Source: Annual Report of NABIL

Figure No. 1
Trend of paid up capital
 This table represents the trend of shave capitulator i.e. paid up capital of NABIL .
The mean growth rate of the 5th year of the study period i.e.102.23% and least on 1st year
of the study period i.e. growth rate. In beginning year there is no increment in paid up
capital it is constant at RS 60000000.
Table No. 2
Reserve & surplus trend of NABIL
in' 000
Year Reserve and surplus Growth rate

2062/63 11246 171.12

2063/64 57048 407.27

2064/65 121397 112.80

2065/66 155981 28.49

2066/67 211194 35.40

Average growth rate 151.06

Source: Annual Report of NABIL

Figure No. 2
Trend of reserve and surplus of NABIL

This table represents the trend of reserve and surplus of NABIL of past five years.
The average growth rate of reserve and surplus is 151.06%.The reserve and surplus in year
1999/2000 has least growth rate is move fluctuation. The reserve is being move because
the bank wants reserve is contingent conditions.
 Table No. 3
Net worth or shareholder's equity trend of NABIL
in '000
Year Net worth Growth rate

2062/63 105350 30.81

2063/64 237105 126.06

2064/65 335412 41.46

2065/66 550032 63.99

2066/67 879048 59.82

Average growth rate 64.43

Source: Annual Report of NABIL

Figure No. 3
Trend of Net worth of NABIL

The paid up capital and reserve are in increasing trend so we can say that share
holder's equity or Net worth is also in increasing trend. The average growth rate of Net
worth is 64.43%
 Table No. 4
Deposit trend of NABIL
in '000
Year Deposit Growth rate

2062/63 1348981 46.20

2063/64 2365439 75.35

2064/65 4152704 75.56

2065/66 6467194 55.73

2066/67 8600812 32.99

Source: Annual Report of NABIL

Figure No. 4

Trend of Deposit

The paid up capital and reserve are in increasing trend so we can say that share
holder's equity or Net worth is also in increasing trend. The average growth rate of Net
worth is 64.43%

Correlation between net worth and Total liabilities.

Suppose, Growth rate of reserve be 'X' and of total liabilities be 'Y'
 xy
Correlation (r) =
x y2 2

Where x = X- X
 Y = Y- Y

X = X
N

Y = Y
N
Table No. 5
Correlation between net worth & Total Liabilities
Year X X- (X - X )2 Y Y- (Y - Y )2 (X - X )(Y - Y )
X Y

2062/63 30.81 -33.62 1130.30 50.27 -9.74 94.87 327.46

2063/64 126.06 61.63 3798.26 77.27 17.26 297.91 1063.73

2064/65 41.46 -22.97 572.62 80.45 20.44 417.79 -469.51

2065/66 63.99 -0.44 0.1936 54 -6.01 36.12 2.65

2066/67 59.82 -4.61 21.25 38.08 -21.93 480.92 101.08

X =64.43 (X Y =60.0  (Y  (X

2
 X )2 Y)  X )(Y  Y )
% 1 =1025.43
=5447.62 = 1327.61

 xy
Correlation (r ) =
x  y
2 2

1025.43
= 5447.62 1327.61

1025.43
=
73.81x36.44
=0.3813
Low degree of correlation coefficient.
Relation between net worth and total liabilities
The relation between net worth a total liability in positive. That means if one
increased other also increased and vice verse. The correlation coefficient between
noteworthy a total liabilities in 0.3813. It in low degree of correlation coefficient it means
high increment results to low increment and vice verse.

Table No. 6
Correlation between share capital and total liabilities.

Suppose, Growth rate of share capital be 'X' and of total liabilities be 'Y'
 Year X X- x (X- x )2 Y Y- y (Y- y )2 (X- x )( Y- y )

2062/63 0 -39.12 1530.37 50.27 -9.74 94.87 381.03

2063/64 90.20 51.08 2609.17 77.27 17.26 297.91 881.64

2064/65 1.95 -37.17 1381.61 80.45 20.44 417.79 -759.75

2065/66 1.22 -37.9 1436.41 54 -6.01 36.12 227.78

2066/67 102.23 63.11 3982.87 38.08 -21.93 480.92 -1384

x  ( x  x) 2
= y =  ( y  y )  ( x  x)( y  y )
2

=39.12% 60.01 = 1327.61

10940.43 =-653.31

 xy
Correlation (r ) =
x  y
2 2

653.31
= 10940.43 1327.61

 653.31
=
3811 .50
= -0.1714
Negative correlation coefficient.

Relation between share capital and total liabilities.

There is negative relation between share capital (paid up capital) and total
liabilities. The correlation coefficient is -0.1714 which is least correlated, it means high
increment result low decrement high decrement results low increment.
 Table No. 7
Correlation between reserve and surplus and total liabilities.
Suppose, Growth rate of reserve be 'X' and of total liabilities be 'Y'

Year X X- x (x - x )2 Y Y- y (y - y )2 (x - x )(y - y )

2062/63 171.12 20.06 1130.30 50.27 -9.74 94.87 327.46

2063/64 407.27 256.21 3798.26 77.27 17.26 297.91 1063.73

2064/65 112.80 -38.26 572.62 80.45 20.44 417.79 -469.51

2065/66 28.49 -122.57 0.1936 54 -6.01 36.12 2.65

2066/67 35.40 -115.66 21.25 38.08 -21.93 480.92 101.08

x =151.06  ( x  x) 2
= y =60.01  ( y  y) 2
 ( x  x)( y  y )
% = 1327.61 =1025.43
5447.62

 xy
Correlation (r ) =
x  y
2 2

6717.84
= 95910.43 1327.61

6717.84
=
309.69 x36.44

= 0.595
Moderate degree of correlation coefficient.
Relation between reserve and surplus and total liabilities.
This relation shows between reserve and surplus and total liabilities. It has
moderate degree of correlation coefficient at 0.595. It shows equal increment in ratio while
change in increment and decrement.

Table No. 8
Correlation between Deposit and total liabilities.
 Suppose, Growth rate of Deposit be 'X' and of total liabilities be 'Y'

Year X X- X (X- X ) 2 Y Y- Y (Y- Y ) 2 (X- X )

(Y- Y )

2062/63 46.20 -10.97 120.34 50.27 -9.74 94.87 106.85

2063/64 75.35 18.18 330.51 77.27 17.26 297.91 313.75

2064/65 75.56 18.39 338.19 80.45 20.44 417.79 375.89

2065/66 55.73 -1.44 2.0736 54 -6.01 36.12 8.65

2066/67 32.99 -24.18 584.67 38.08 -21.93 480.92 530.27

X =57.1 (X  X )2 Y =60.0  (Y  Y ) 2 (X - X)(Y  Y )

7% =1375.78 1 = 1327.61 = 1335.45

 xy
Correlation (r ) =
x  y
2 2

1335.45
= 1375.78 1327.61

1335.45
=
37.09 x36.44
= 0.988
Nearly perfectly positive correlation coefficient.
Relation between deposit and total liabilities.
There relation between deposit and total liabilities is approximately perfectly
positive correlated. It means that increment or decrement results to increment or
decrement in same proportion. Here correlation coefficient is 0.988, which is near to 1.

Table No. 9
Correlation between current liabilities and total liabilities.
Suppose, Growth rate of current liabilities be 'X' and of total liabilities be 'Y'
Year X X- X (X- X ) 2 Y Y- Y (Y- Y ) 2 (X- X )
(Y- Y )

2062/63 113.41 -2.54 6.45 50.27 -9.74 94.87 24.74

2063/64 180.70 64.75 4192.56 77.27 17.26 297.91 1117.59

2064/65 150.07 34.12 1164.17 80.45 20.44 417.79 697.41

2065/66 30.67 -85.28 7272.68 54 -6.01 36.12 512.53

2066/67 104.92 -11.03 121.66 38.08 -21.93 480.92 241.89

X =115.9 (X  X )2 Y =60.  (Y  Y )2  (X - X)(Y  Y )

5% = 01 = 1327.61 =2594.
12757.49 16

 xy
Correlation (r ) =
x  y2 2

2594.16
= 12757.49 1327.61

2594.16
= = 0.6303
112 .95 x36.44
Moderate degree of correlation coefficient.
Relation between current liabilities and total liabilities:
The correlation coefficient of two variables is 0.6303, which is moderate degree of
correlation coefficient.
Note: Correlation Coefficient is calculated as Karl Pearson's Correlation Coefficient.

Table No. 10
Earnings per share Trend of NABIL
Year NPAT '000 No. of share EPS growth rate
'000

2062/63 21137 1200 17.61 222.53

 2063/64 60786 1200 50.65 187.62

2064/65 82728 1200 68.94 36.11

2065/66 139535 1200 116.28 62.87

2066/67 198752 2400 82.81 -28.78

Average growth rate 96.07

Source: Annual Report of NABIL

Figure No. 5
Earnings per share of NABIL

EPS = NPAT No.ofshares

The Above trend in indicates the trend of EPS which is highly fluctuating
.Average of mean growth rate is 96.07 this means than on average the Banks EPS is
growing doubly. The EPS on the year 1999/2000 is highest but in year 2000/2001
decreased due to the issue of bonus share.
Interest coverage ratio = Net profit before interest and tax (APBIT)
Interest

Table No. 11
Interest coverage ratio of NABIL
Year NPBIT Interest Interest growth rate
coverage
2062/63 85890 66714 0.861 20.59

2063/64 176980 175736 1.007 16.98

2064/65 238177 278719 0.85 15.59

2065/66 388585 414993 0.936 10.12

2066/67 564155 515848 1.094 16.88

Average growth rate 90796%

Source: Annual Report of NABIL

The above table is calculated to see whether NABIL is capable for paying back the
interest or not. From above table NABIL ’s profit position is not satisfactory to pay
interest. In year 1999/00, 2001/02 and 2002/03 NABIL is unable to pay interest by its
gross profit. After the year 2000/001 coverage ratio is satisfactory than before. The
average growth rate is 9.796%. The maximum growth rate is 20.59 on the 1st year of the
study period. And on 3rd year it is minimum to -15.59% of the study period.
Table No. 12
Return on shareholder's equity trend of NABIL .
Year NPBIT Interest Interest Growth rate
coverage

2062/63 21137 105350 20.06 146.44

2063/64 60786 237105 25.64 27.82

2064/65 82788 335412 24.66 3.82

2065/66 139535 550032 25.37 2.88

2066/67 198752 879048 22.61 10.88

Average growth rate 32.49%

Source: Annual Report of NABIL

Return on equity =

The above table represents the return on share holder's equity. Early percentage change
on 3rd and 5th year of the study period is negative .It is because more fund is used on
reserve and surplus. 1st, 2nd and 4th year of the study period has positive increment in
equity.
CHAPTER 3
 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
3.1. Summary:
The basic objective of the study is to analyze the composition and trend among
some of components of capital. In this study some of the financial tools such as ration
percentage, mean and correlation coefficient as well se graph have been issued to analyze
the facts.
The capital of NABIL was composed of shave capital, reserve and surplus,
provision for loan loss, profit and loss a/c and deposit (customer deposit borrowing and
other current liabilities. Among these deposit is the major portion of the capital than its net
worth or shareholders equity. The summary is presently in the tabular form below:

Liability Maximum Year Minimum Year Average Nature of

trend

Share 102.23% 2066/67 No 2065/66 1.22% Fluctuating

Capital Growth

Reserve 407.27% 2066/67 28.49 2065/66 151.06% Highly

fluctuating

Net worth 126.06% 2066/67 30.81 2065/66 64.43% Fluctuating

Deposit 75.56 2066/67 32.99% 2065/66 57.17% Fluctuating

Current 180.70 2066/67 30.67 2065/66 45.95% Fluctuating

liability

EPS 223.53 2066/67 28.78 2065/66 96.67% Fluctuating

3.2. Conclusion:
1. The total liabilities of NABIL were fluctuating and the growth rates of every
component of liabilities were increasing up to 3 year of study period from the
beginning and then decreasing. Decreasing liabilities can create good
opportunity in Bank. The growth rate of the share capital was highly increased
amount all variables due to issuing bonus share in the rates 1:1 in the year
2066/2067.
2. The trend of reserve and surplus was highly increasing in average of 151.06%
it has increased by more than two times. His relationship between reserve and
surplus and total liabilities is of moderate degree. It means that doubly
increment in ratio in Reserve and surplus results singly increment in rate or
vice versa.
3. Deposit was also in fluctuating trend. It was increased by early 6.38 times and
average growth rate was 57.17%. The relationship between deposit and total
liabilities in nearly perfectly positive i.e 0.988. The two variables that is
 perfectly correlated mean that their change be proportionately equal deposit
have a vital role to the capital structure.
4. Regarding current liabilities, it has increased 18.80 times till the year 2066/67,
compared that base year it 2065/66. Average growth rate was 115.95% during
the study period. The trend of current liabilities in highly fluctuating. The
correlation between current liabilities and total liabilities was 0.6303, which is
moderate degree of correlation coefficient.
5. The trend of EPS was also fluctuating. Fluctuation in EPS was directly affected
by the fluctuation share capital. During the study period, Profit was capitalized
resulting the fluctuation of EPS. During the study period of 5 years average
growth rate is 96.07%, which means in every year EPS was approximately
doubled.
6. Regarding interest coverage it is not so satisfaction. In almost year to so below
1, which means that bank, is not able to pay its interest from net profit.
7. Return on Share holder's equity is very much important to shareholders and
those who are willing it but and sell the shares on the year 2066/2067 rate in
decreased is NPAT has not increased much as compared to shareholder's equity.
This is because of issue of bones share.
3.3. Recommendations:
 NABIL has maintained 18.43% CRR in average which is much high then the
legal requirement. The excess of CRR indicates that Laxmi Bank Limited fund
remains idle and has not been managed properly. Therefore, it is suggested to
Laxmi Bank Limited to reduce CRR ratio about 12% in future and investment
amount into productive sector.
 The decreasing ratio of investment to other deposit indicates that Nepal
Bangladeshi Bank has not been able to mobilize its available fund properly
therefore, it is suggested to Laxmi Bank Limited to mobilize the fund properly.
 The percentage of saving deposit out of total deposit is very low therefore, it is
recommended to Laxmi Bank Limited to formulate different plans and policies
in order to attract more depositors towards saving deposit.
 Being a part of society, it has a great responsibility in the social development;
therefore it is recommended to Laxmi Bank Limited to participate in social
events such as in education health program environment protection etc.
 TABLE OF CONTENTS

Recommendation
Acknowledgement
Table of Contents
List of Tables
List of Figures
Abbreviations
Page no.
CHAPTER 1
INTRODUCTION 1
1.1. Background of the study 9
1.2. Objectives of the Study 9
1.3. Limitations of the Study 9
1.4. Significance of the Study 9
1.5. Organization of the study: 10
1.6 Methodology 10

CHAPTER 2
PRESENTATION AND ANALYSIS OF DATA
2.1. Descriptive Analysis and Graphical Presentation: 11

CHAPTER 3
SUMMARY, CONCLUSIONS AND RECOMMENDATION
3.1. Summary 22
3.2. Conclusions 22
3.3. Recommendations 23
BIBLIOGRAPHY
 LIST OF TABLES

Table No Title Page

Table No. 1 Share capital trend of NABIL 11
Table No. 2 Reserve & surplus trend of NABIL 12
Table No. 3 Net worth or shareholder's equity trend of NABIL 13
Table No. 4 Deposit trend of NABIL 14
Table No. 5 Correlation between net worth & Total Liabilities 15
Table No. 6 Correlation between share capital and total liabilities. 16
Table No. 7 Correlation between reserve and surplus and total liabilities. 17
Table No. 8 Correlation between Deposit and total liabilities. 18
Table No. 9 Correlation between current liabilities and total liabilities. 19
Table No. 10Earnings per share Trend of NABIL 20
Table No. 11Interest coverage ratio of NABIL 20
Table No. 12Return on shareholder's equity trend of NABIL . 21
 LIST OF FIGURES

Figures No Title Page No

Figure No. 1 Trend of paid up capital 11
Figure No. 2 Trend of reserve and surplus of NABIL 12
Figure No. 3 Trend of Net worth of NABIL 13
Figure No. 4 Trend of Deposit 14
Figure No. 5 EPS 20
 ABBREVIATIONS

A/c- - Accountant
B.S- - Bikram Sambat
BBS - Bachelor in Business Studies
CBA- - Commercial Bank Act
CRR - Cash Reserve Ratio
EPS - Earning Per Share
Etc - Extra
FY - Fiscal Years
Govt - Government
LTD - Limited
Mix - Mixed
NBL - Nepal Bank Limited
NRB - Nepal Rastra Bank
Rs - Rupees
S.D - Standard Deviation
SC - Share Capital
SWOT - Strength, Weakness, Opportunity, Threat
UN - United Nation
%- - Percentage
&- - And
 A PROJECT REPORT ON
Financial Performance of NABIL Bank Limited,
Kathmandu

Submitted By:

T.U. Registration No:

Class Roll No:

A PROJECT WORK REPORT

Submitted To:
Kathmandu Don Bosco College
Faculty of Management
Purbanchal University

In Partial Fulfillment of the Requirement for Degree of

BBA 5th Semester

Kathmandu Nepal
Jun, 2011
 ACKNOWLEDGEMENTS

It is indeed great opportunity provided by Tribhuvan University to the students of

BBA 4th Semester to conduct fieldwork research on certain topic in the partial
fulfillment of the requirement for the degree of Bachelor of Business Studies. It is
very encouraging that it had given us the opportunity to develop the vision and
critically on certain topic.

Within this, we could learn and practically apply the steps of the research including
how to prioritize and select problem, selecting the variables and in the indicators
providing the research methodology, presenting the findings and providing the
recommendation to the concerned bodies. Applying these steps, we now understand
more about the dynamic process of the research and how they can generate
outstanding results. Yet, we still need to know a lot more about it and apply it in
practical situation

All the findings of study are summarized comprehensively in this report. This report
contains three parts; Introduction, Presentation and Analysis of data and summary,
conclusion and recommendations.

This field, being the first attempt of conducting individual research, May contains
some errors of mistakes. There may even be some technical errors and language
problems, which I hope will be considered. I will highly appreciate and be obliged to
you for your valuable comments and the suggestion for the future.

Rajan Pokharel
 Faculty of Management
TRIBHUVAN UNIVERSITY

RECOMMENDATION

This is to certify that the fieldwork assignment report:

Submitted By:
Rajan Pokharel

Entitled:
A PROJECT REPORT ON
Financial Position of NABIL
Bank Limited

Has been prepared as approved by this Department.

This fieldwork assignment report is forwarded for examination.
Date: ……………… …………………………..
Head of the Department
Nepal Commerce Campus