A CASE STUDY ON

          FINANCIAL ANALYSIS OF KUMARI BANK LIMITED

A Project Work 

Submitted By:

Gyanendra Dulal

TU Regd. No: -

Symbol No:-

Submitted to:

The Faculty of Management

Tribhuvan University
 In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

NEPAL COMMERCE CAMPUS

Kathmandu, Nepal

May 2018

Declaration

I hereby declare that the project work entitled “A Case study on Financial Analysis of Kumari

Bank Limited” submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an

original piece of work under the supervision of Mr. Chudamani Pandey, faculty member, Nepal

Commerce Campus, Minbhawan Kathmandu, and is submitted in partial fulfillment of the

requirements for the award of the degree of Bachelor’s of Business Studies (BBS). This project

work report has not been submitted to any other university or institution for the award of any

Degree or Diploma.   
………………………..

Gyenendra Dulal

Date:  May, 2018 

Supervisor’s Recommendation

The project work report entitled “A Case study on Financial Analysis of Kumari Bank Limited”

of Nepal Commerce Campus, Minbhawan Kathmandu, is prepared under my supervision as per

the procedure and format requirements laid by the Faculty of Management, Tribhuvan

University, as partial fulfillment of the requirements for the award of the degree of Bachelor’s of

Business Studies (BBS). I, therefore, recommend the project work report for evaluation.
……………………..

Chudamani Pandey

Nepal Commerce Campus

Date: May, 2018

Endorsement
We hereby endorse the project work report entitled “A Case study on Financial Analysis of

Kumari Bank Limited” by Gynendra Dulal of Nepal Commerce Campus, Minbhawan, submitted

in partial fulfillment of the requirements for award of the Bachelor of Business Studies (BBS) for

external evaluation.  

……………….…………………..                                         ………..………………………

Asso. Prof.Dr.Jitendra Prasad Upadhayay                             Prof.Dr. Jeewan Kumar Bhattarai

Research Committee                                                               Campus Chief

Nepal Commerce Campus                                                      Nepal Commerce Campus

Date: May, 2018                                                                     Date: May, 2018

ACKNOWLEDGEMENT
In the partial fulfillment of Bachelor of Business Studies as per the requirement of faculty of

management of the Tribhuvan University have prepare this fieldwork report on the “A Case

Study on Financial Analysis of Kumari Bank Limited”

First and foremost, a lot of individual owe my sincere thanks that have helped me directly and

indirectly. I wish to express my sincere gratitude and heartily thank to teacher of “Fundamental

of Inventment”. I am also very much thankful for the team of “Kumari Bank Limited” for their

various support, valuable suggestion and active co-operation to complete this report.

It is my pleasure to present this field work and is attempting to familiarize oneself with the

financial analysis of Kumari Bank Limited. To present this true picture, statistical tools and

diagram have been massively used, based on its significance and just to meet for the purpose. All

three parts of the study have been arranged in a sequence as require. I wish to my sincere

appreciation and profound gratitude to all who is one or another assisted me in the successful

pursuit of the study.

I would like to express my sincere gratitude to Mr.Chudamani Pandey for their guidance,

cooperation and contribution of their valuable time in order to complete this report. Similarly, I

would like to extend my sincere thanks to our college Campus Chief Prof.Dr. Jeewan Kumar

Bhattarai for his continuous encouragement in our study.

Lastly, I wish to acknowledge my regard to my family and my friends for their cooperation in

writing this report.

Thank You,

Gynendra Dulal
May, 2018

TABLE OF CONTENTS
Contents
Declaration
Supervisor’s Recommendation
Endorsement
ACKNOWLEDGEMENT
List of Tables and Figures
List of Abbreviations & Acronyms
CHAPTER I
INTRODUCTION
1.1         Background of the study
1.2         Objectives of Study
1.3 Rational of the Study
1.4  Review of
literature………………………………………………………………………………………
…………………………….3
1.5 Research
Method……………………………………………………………………………………………
………………………..6
1.6 Limitation of
study………………………………………………………………………………………………
……………………7
1.7 Data
collection………………………………………………………………………………………
………………………………..8
1.8 Data Processing and
analysis……………………………………………………………………………………………
……8
l1.9 Report
Structure…………………………………………………………………………………………
………………….
Chapter-2
Result and Analysis
2.1 Introduction
2.2 Analysis of financials tools
2.3 Loan & Advance & Total
deposit……………………………………………………………………………………………
….14
2.4 Net profit after tax and total
assets………………………………………………………………………………………….15
2.5 Net Profit after tax and Total
Assets…………………………………………………………………………………
2.6 Net Profit after tax and Net
Worth……………………………………………………………………………………..
2.7 Interst Expenses on Total Deposit and Borrowing
2.8 Major finding of the study

SUMMARY AND CONCLUSION

3.1
Summary....................................................................
...............................................................................
.....................
3.2         Conclusion
APPENDIX
Balance sheet
REFERENCE
 List of Tables and Figures
 

4.1  CurrentRatio…………………………………………………………..22

4.2  Cash and Bank Balance to Total Deposit Ratio……………………….23

4.3  Loan and Advances to Total Deposit Ratio……………………………24

4.4  Return on Total Assets Ratio…………………………………………..25

4.5  Earnings Per Share……………………………………………………..26

4.6  Return on Equity Ratio ………………………………………………..27

4.7  Interest expenses on total deposit and borrowing……………………..28

                                                                                                  
                                                         
 

List of Abbreviations & Acronyms

             %                                 Percentage

            &                                  And

            AGM                           Annual General Meeting

            ALC                            Asset liability Management

            BS                               Bikramsambat

            CD                              Credit Deposit

            e.g                               Example

            etc                               Etcetera

            Govt                            Government

            i.e                                That is  

            NRB                            NepalRastra Bank

            NRBL                         Nepal Rastra Bank Limited

            Rs.                               Rupees

            TU                               TribhuvanUniversity

                 
 

CHAPTER -1
INTRODUCTION
1.1            Background of the study
A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide
financial services, such as wealth management, currency exchange and safe deposit boxes. There are
two types of banks: commercial/retail banks and investment banks. In most countries, banks are
regulated by the national government or central bank.

Financial analysis is the process of evaluating businesses, projects, budgets and other finance-related

entities to determine their performance and suitability. Typically, financial analysis is used to analyze
whether an entity is stable, solvent, liquid or profitable enough to warrant a monetary investment.
When looking at a specific company, a financial analyst conducts analysis by focusing on the income
statement, balance sheet and cash flow statement. Financial analysis also helps to evaluate and
decision making for business operation. In financial analysis process ratio analysis is the most dominant
and logical structure to help business related stakeholder. Under the financial ratio analysis process
there are few categories to identical area of financial institution. So business stakeholders try to
concentrate to get overall business overview from profitability, liquidity, assets management and
solvency ratio analysis. These ratios not only help to decision making process also emphasized on risk
avoiding and profit raising  related factors. To calculate this ratio need to take quantitative data from
bank trading activity and other sources.

Introduction of Kumari Bank Limited

Kumari Bank Limited, came into existence as the fifteenth commercial bank of Nepal by starting its
banking operations from Chaitra 21, 2057 B.S (April 03, 2001) with an objective of providing
competitive and modern banking services in the Nepalese financial market. The bank has paid up
capital of Rs. 2,699,166,532 of which 51percent is contributed.

Kumari Bank Limited has been providing wide - range of modern banking services through 38 points of
representations located in various urban and semi urban part of the country, 36 branches outside and
inside the valley; and 2 extension counters. The bank is pioneer in providing some of the latest /
lucrative banking services like E-Banking and SMS Banking services in Nepal. The bank always focus on
building sound technology driven internal system to cater the changing needs of the customers that
enhance high comfort and value. The adoption of modern Globus Software, developed by Temenos NV,
Switzerland and arrangement of centralized data base system enables customer to make highly secured
 transactions in any branch regardless of having account with particular branch. Similarly the bank has
been providing 365 days banking facilities, extended banking hours till 7 PM in the evening.

Visa Electron Debit Card, which is accessible in entire VISA linked ATMs (including 46 own ATMs) and
POS (Point of Sale) terminals both in Nepal and India, has also added convenience to the customers.
The bank has been able to get recognition as an innovative and fast growing institution striving to
enhance customer value and satisfaction by backing transparent business practice, professional
management and corporate governance.

The key focus of the bank is always center on serving unfulfilled needs of all classes customers located
in various parts of the country by offering modern and competitive banking products and services in
their door step. The bank always prioritizes the priorities of the valued customers.

Vision

To establish ourselves as a leader in banking by providing a range of financial services suitable to the
needs of the market with high priority on customer care while simultaneously embracing the interests of
all stakeholders and value of a good corporate citizen.

 Mission

·         Leveraging and integrating the existing strengths of the institution.

·         Reaching out and serving wide range of customers within and outside the country.

·         Developing a culture of “Giving Extra Care to the Customers”.

·         Being innovative in designing and delivering services.

·         Adopting prudent investment practices for building up a sound assets base.

1.2             Objectives of Study

The main objective of this report is to measure the financial strength of Kumari Bank Limited other
specific objectives are as under.

·         To determine liquidity positions of Kumari Bank Limited.

·         To identify the efficiency of the bank.

·         To measure the profitability of the bank.

1.3 Rational of the Study

In this changing pace of the time, most of the commercial banks are gaining a wide popularity through
their efficient management and professional services and playing a great role in the economy. The main
 purpose of the commercial bank is to have effective financial management so that stakeholders get
satisfactory. This study adds new idea and findings about the concerned bank.

This study is helpful for all the concerned parties which add new idea and findings about  Kumari Bank
Limited.  The studies that will have importance to various groups but in particular is directed to a certain
groups of people/organizations are:

1.            To the investors

2.            To the creditors

3.            To management of the bank

4.            To the customers

5.            To the other parties

6.            And this study will be equally useful to the other readers, students of related subjects and other people
who are concern with banking field.

1.4 Review of Literature

Bhattarai (2009), in his article “something is rotten with the state of commercial banking in
Nepal” starts with words like NPA, conflict of interest, mercy offshore ownership, well connected
defaulter loan swapping and political obstruction to describe the commercial banks in Nepal. Bhattarai
quoted the words of the Governor to describe the state of banking sector as ‘terrible’. Also, he quotes
one of the donor representatives involved in financial reform as “Nepal has weakest central bank in
developing world”.  He quotes Mr. Investment SJBRana, the first governor of NRB,”only 3 out of 12
Governors actually completed their five years terms in its entire history because they were sacked for
undefined exigencies”. He also quotes Mr. Shovan Dev Pant, the then Executive Director of Nabil, “The
financial sector is in appalling state”.

According to his findings the directives if not properly addressed have potential to wreck the financial
system of the country. The directives in themselves are not that important unless properly
implemented. The implementation part depends upon the commercial banks. In case commercial banks
are making such huge profit with full compliance of NRB directives, then the commercial banks would
deserve votes of praise because they would then be instrumental in the economic development of the
country. All the change in NRB directives made impacts on the bank and the result are the followings:

1.      Increase in operational procedures of the bank, which increase the operational cost of the bank.

2.      A short term decreases in profitability, which result to fewer dividends to shareholders and less bonus to
the employees

3.      Reduction in the loan exposure of the bank, which decreases the interest income but increase the
protection of the depositor’s money.

4.      Increase protection to the money of the depositors through increased capital adequacy ratios and more
stringent loan related documents.
5.      Increase demand from shareholder’s contribution in the bank by foregoing dividends for loan loss
provisions and various reserves to increase core capital.

All the aforesaid result lead to one direction the bank will be financially healthy and stronger in the
future. Kumari bank limited will be able to withstand tougher economic situation in the future with
adequate capital and provision for losses. The quality of the asset of the banks will become better as
banks will be careful before creation credit. Ultimately, the changes in the directives will bring prosperity
not only to the shareholders but also to the depositors and the employees and the economy of the
country as a whole.
A study done by Mahendra (2012), entitle on “Comparative Financial Performance of MBL, KBL, LBL &
SBL”with the main purpose of analyzing financial performance trough Camel analysis of four same
generation commercial banks namely Kumari bank limited,  and Sidhhartha bank limited.
To evaluate liquidity, activity & profitability ratio of Kumari bank limited in comparison with different
banks & industry average.

To examine the loan loss provision of different banks & Kumari bank limited.

To provide suggestion and recommendation on the basis of findings.

The findings of the researcher are as follows:

1.      Different banks have good deposit collection, enough loan and advances and small investment in
government securities.

2.      The assets management ratio of different banks is not better than that of Kumari bank limited.

3.      The profitability position of different banks is worse in comparison with Kumari bank limited due to low
return on working fund, loans and advances and outside assets.

4.      To fund collection and mobilization position of different banks is satisfactory in comparison to Kumari
bank limited while considering growing rate.

5.      In relation to fund flow analysis, the different banks have poor loans and advances issued.

6.      Different banks has better positive relationship between net profit, return on loans and advances and
return on investment but different banks has worse performance in income as commission and discount
and exchange income.

7.      There is significant relationship between deposit and loan and advances but there is no significant
relation between deposit and investment of both banks different banks and Kumari bank limited. There
is no relationship between outside assets and net profit.

The findings of the study are as follows:

1.      The liquidity position of Kumari bank limited is good than of other bank. Highly fluctuating liquidity
position shows that the bank has not formulated any stable policy.

2.      It can be concluded that Kumari bank limited have good profitability position.
3.      Total loans and advances to total saving deposits ration of Kumari bank limited is much better than
other bank.

1.5 Research Methods

Research methods help to find out accuracy, validity and suitability. The justification on the present
study cannot be obtained without help of proper research methodology. For the purpose of achieving
the objectives of the study, the descriptive methodology are be used.
Types of Research
Research method section describes the rational for the application of specific procedures or techniques
used to identify, select and analyze information applied to understanding the research problem. It
allows the reader to critically evaluate a study’s overall validity and reliability. Financial ratios are
important tools of financial analysis. It’s based on Quantitative data and tools.

There are two types of research methods:

Quantitative research
Quantitative research is inquiry into an identified problem, based on testing a theory, measured with
numbers, and analyzed using statistical techniques. The goal of quantitative methods is to determine
whether the predictive generalizations of a theory hold true. We will explore some of the issues and
challenges associated with quantitative research in this section. Seek the advice of faculty members who
have conducted quantitative studies for advice, support and encouragement.

Qualitative research
A study based upon a qualitative process of inquiry has the goal of understanding a social or human
problem from multiple perspectives. Qualitative research is conducted in a natural setting and involves a
process of building a complex and holistic picture of the phenomenon of interest.  We will explore some
of the issues and challenges associated with qualitative research in this section. Look for colleagues who
engage in qualitative research to serve as a sounding board for procedures and processes you may use
as a new faculty member.
This research is based on Quantitative research methods.
Population and Sampling

A population is a complete enumeration of each and every unit of the universe as a whole. It is related
to the total study of material in detail. There are 28 A class licensed banks in Nepal but this study
considers only Kumari Bank Limited as a sample.

Sample is a small separated part showing the quality of the whole. In sample, only a part of the universe
is considered and conclusions about the entire universe are drawn on that basis. Here, for the proposed
study, I have taken Kumari Bank Limited as a sample.
Types of Data

The data used in this report are of secondary data.This research has been conducted in secondary data
basis, so the last five years data is collected from:
·         Website of Kumari Bank Limited.

·         Annual Report of Kumari Bank Limited

1.6 Limitations of the Study
Almost data are taken from the audited balance sheet from the head office of Kumari Bank Limited, in
order to draw a clear, true and suggestive financial analysis. However, limitations of the study are as
follows;

·         The study is mainly based on secondary data.

·         The study covers only five years period from F/Y 2069/70 to 2073/74.

·         The data used on calculation will be rounded up.

·         The data will be analyzed by comparing with the five years average data because of the unavailability of
the standard company average.

·         This study will be carried out based on the published financial statements namely balance sheets, profit
and loss accounts, related schedules and published annual report. These published documents have
their own limitations.

1.7Data Collection Procedure

Data is a collection of related raw materials on which decision is based. There are mainly two sources of
data-primary data and secondary data. This study will be conducted mainly based on secondary data.
The major sources of secondary data for this study are as follows:

·         Annual report of the bank

·         Previous studies and reports.

·         Unpublished official records.

·         Published and unpublished bulletins and reports of the bank.

·         Reports published by Nepal Stock Exchange.

·         Reports of Nepal Rastra Bank Samachar and Banking and Financial statistics published by Nepal Rastra
Bank.

·         Other materials published in daily, weekly, monthly newspapers and magazines.

1.8 Data Processing and Analysis

Presentation and analysis of collection data is the core part of the research work. The collected raw data
are first presented in systematic manner in tabular from and are then analyzed by applying different
financial and statistical tools to achieve the research objectives. To make the study more specific and
reliable, following tools are used for analysis:
·         Financial Tools

·         Statistical Tools

Financial Tools
For the sake of analysis, various financial tools are used. The basic tools used are ratio analysis. Ratio
analysis is used to compare firm’s financial performance and status to that of other firm’s overtime. The
financial tools used are listed below:

Ratio Analysis

Ratio Analysis is the calculation and interpretation of financial ration to assess the firm's performance
and status. It is the relationship between two accounting figures expressed mathematically.

1.9 Report Structure
The whole study is divided into three different chapters.

Chapter-I: Introduction

This chapter describes the background of the study. It has served orientation for readers to know about
the basic information of the research area, various problems of the study, objectives of study, scope of
the study, and limitation of the study and chapter plan of the study..

Chapter – II: Results and Analysis

This chapter analyzes the data related with study and presents the findings of the study and also
commend briefly on them. Data processing, data analysis and interpretation are given in this chapter
and there is use of techniques relating to analysis such as ratio, descriptive expression, diagrams and so
forth.

Chapter:III: Summary and Conclusion

On the basis of the result from data analysis, the researcher concludes about the performance of the
concerned organization in terms of liquidity management. This chapter is devoted to the summary of
the research, conclusion derived on the basis of data analyzed and the recommendations for
improvement to the concerned organization.
CHAPTER II
RESULT AND ANALYSIS
                                  
2.1 Introduction
This chapter deals with the presentation, analysis and implementation of relevant data of  Kumari Bank
Limited. I order to fulfill the objectives of this stud. Purpose of this chapter is to introduce the mechanics
of data analysis and interpretation .Calculated financial ratios are analyzed and evaluated after their
interpretation is made. The calculated secondary data have analyzed and presented in table form. For
this purpose, analysis and interpretation are categories into two headings. They are analyzing financial
and statistical tools.

2.2 Analysis of Financial Tools

Under this topic various financial ratios are calculated to evaluate and analyze the performance
ofKumari Bank Limited. Study of all type of ratios is not done. Only those ratios that are important from
the point of view of the fund mobilization and investment are calculated. The important ratios that are
studied for this purpose are given below.

2.2.1 Ratio Analysis

Ratio analysis is defined as the systematic use of ratio to interpret the financial statement so that
strength and weakness of a firm as well as its historical and current financial condition can be
determined. From an investor’s stand-point, predicting the future is what financial statement analysis is
useful both as a way to anticipate future conditions and more important as a starting point for planning
actions will influence the future course of events. Ratios are very useful and powerful tools to interpret
the financial performance of the firm .

A .Liquidity Ratios

This ratio indicated the case of turning assets into cash. Liquidity refers to the ability of a firm to meet its
short term or current obligation. So liquidity ratios are used to measure the ability of a firm to meet its
short term obligation. In the worst case, inadequate liquidity can lead to the liquidity insolvency of the
institution. To find out the ability of the bank, to meet their short term obligations which are likely to
mature in the short period, the following ratios are developed under the liquidity ratios to identify the
liquidity position.

2.1 Current ratio

Table 2.1

Current Assets and Current Liabilities

Fiscal Year Current Assets Current Liabilities Ratio

2069/70 859703810 251458357 3.42

 2070/71 868922458 235477249 3.69

2071/72 1066335927 241912804 4.41

2072/73 1641973571 263205548 6.24

2073/74 1406711099 402601384 3.49

  Sources: Annual Report of Kumari Bank Limited

Figure 2.1

Current Assets and Current Liabilities

The main question current ratio addresses is "Does your business have enough current assets to meet
the payment schedule of current debts with a margin of safety for possible losses in current assets, such
as inventory shrinkage or collectable accounts?"

Table and figure 4.1 shows that the exhibit the current ratio of Kumari Bank Limited for the study period
of 2068/69 to 2072/73. The ratio were 3.42, 3.69, 4.41, 6.24, and 3.49 respectively.The standard value
for the current ratio is 2 to 1 but in case of Kumari Bank, all ratios are more than the standard.

2.2 Cash and Bank Balance and Total Deposit

Table 2.2

Cash & Bank Balance and Total Deposit

Sources: Annual report of Kumari Bank Limited

Table and Figure 2.2 shows that the cash and bank balance to total deposit ratio of Kumari Bank Limited
for the study period 2069/70 to 2073/74. Cash & Bank Balance to Total Deposit Ratio of this bank has
been observed as 0.039, 0.34, 0.039, 0.049 and 0.037 respectively throughout the study period. The
average ratio for the study period is 0.04. That means the bank has 0.04 off cash and bank balance of the
total deposit. Adequate cash and bank balance is necessary to maintain the liquidity position. Too much
of it can make the excess money useless and too less will reduce the capacity of a bank to pay its
customers principal and interest. In each year of the study period, the ratio of cash and bank balance is
will above the standard i.e. 5 to 10 percentage of liquidity. From this, it is obvious that the bank has
enough cash and bank balance to cover its deposit demand.
Figure 2.2

Cash & Bank Balance and Total Deposit

2.3Loan & Advances and Total Deposit

Table 2.3
Loan & Advances and Total Deposit

Fiscal Year Ratios (%)

2069/70 80

2070/71 77

2071/72 79

2072/73 79

2073/74 78

            Sources: Annual Report of Kumari Bank Limited

Figure 2.3

Loan & Advances and Total Deposit

Table and Figure 2.3 shows loan and advances to total deposit starting from 2069/70 to 2073/74, the
ratio goes from 80 %, 77%, 79%, 79% and 78% respectively. Total deposit is the main sources of bank to
provide loan and advances. Only small portion of deposit goes as loan and advances.

2.4 Net Profit after Tax and Total Assets

 Table 2.4
Net Profit after Tax and Total Assets Source: Annual report of Kumari Bank Limited

Kumari Bank has good performance in term of profitability viewing the return on total assets ratios for
the study period 2069/70 to 2073/74. During the study period, the bank is able to earn profit through
and so that the ratio is positive trend. The average ratio of return on total assets for the study period is
1.19% on average. This indicates that the bank is being able to manage the assets in efficient way.

Figure 2.4

Net Profit after Tax and Total Assets

2.5 Net Profit after Tax and Number Of Share

Table 2.5

Net Profit after Tax and Number Of Share

                                                               Sources: Annual report of Kumari Bank Limited

     Figure 2.5
Earning per share

Table and Figure 2.5 shows that the earning per share of Kumari Bank Limited for the study period is Rs
19.362. EPS in the last year of period is Rs 26.53. The ratio is higher than the average in fiscal year
2069/70, 2070/71, 2071/72, 2072/73 and 2073/74. This indicates that the bank has increases its
earnings per share in recent years. This indicates that bank is improving its performance.

2.6 Net Profit after Tax and Net Worth

Table: 2.6
Net Profit after Tax and Net Worth
 Fiscal year Net profit Net worth Ratio

2069/70 275500000 1603800000 0.17

2070/71 291450000 1828332000 0.16

2071/72 341650000 2,431,681,560 0.14

2072/73 394790000 2699166532 0.15

2073/74 716060000 3265991503 0.22

Average 0.17

                                                Sources: Annual report of Kumari Bank Limited

Figure: 2.6

Net Profit after Tax and Net worth (ROE)

Table and Figure 2.6 shows that the ratio of net profit after tax and net worth as return on equity of
Kumar Bank Limited, for the financial year 2069/70 to 2073/74 shows that the situation of return on
equity is well.

2.7Interest Expenses on Total Deposit and Borrowing

Table 2.7

Interest Expenses On Total Deposit and Borrowing

Fiscal Year Ratio

2069/70 7.38%

2070/71 5.38%

2071/72 5.67%

2072/73 4.47%

2073/74 4%

Average 5.48%

Sources:Annual report of Kumari Bank Limited

 Figure 2.7

Interest Exp. On Total Deposit and Borrowing

The average ratio of interest expenses on deposite and borrowing is 5.48%. Period. The year wise
interest expenses on deposit and borrowing for the study period of 2069/70 to 2073/74 is 7.38%, 5.87%,
5.67%, 4.47% and 4% respectively. Viewing above ratios, the interest expenses on deposite and
borrowing ratios is in fluctuating process in recent year of study.

2.8Major Findings of the Study

1.      At the time of financial reengineering process of Kumari Bank Limited, Loan investment policy has been
brought. New policy of lending focuses on cash flow lending by passing out collateral based lending.

2.      Liquidity position of Kumari Bank Limited seems weak. It is obvious that in the present situation of the
country, investment potential favorable, so the liquidity is insufficient in the bank.

3.      Profitability Position of Kumari Bank Limited in term of  Return On Equity(ROE) is well as it is in

increasing trend from 2069/70 to 2073/74.

4.      Efficiency Ratio of Kumari Bank Limited is good as it is well concerned on providing loan with new rules
and regulation ,so it may be the reason behind decreasing the loan loss provision.

5.      Kumari Bank Limited Earning per share despite drawbacks, the positive earnings per share can be
regarded as an indication of good performance.

CHAPTER III

SUMMARY AND CONCLUSION

3.1SUMMARY
A Commercial Bank means the bank which deals with exchanging currency, accepting deposit, giving,
loans doing others various commercial transaction. Therefore, the major function of Commercial Bank is
to accept deposits and provide loans.

There is not so long history of commercial bank in Nepal . Kumari bank limited, came into existence
as the fifteenth commercial bank of Nepal by starting its banking operations from Chaitra 21, 2057 B.S
(April 03, 2001). But now there are twenty eight Commercial Banks all over the country and they have
been expanding their services by establishing branches in every corner of the country.
The assets of Commercial Bank indicate the manner in which the funds entrusted to the bank are
employed. The successful working of the bank depends on ability of the management to distribute the
fund among the various kinds of investment known as assets outstanding loan advance of the bank.
These assets constitute primary source of income to the bank. As being a business unit a bank aims at
making huge profit since loan and advances are more profitable than any other assets of the bank, it is
willing to lend as much as its fund as possible. But the bank has to be careful about the repayment of
loan and interest giving loan. If the bank is too timid, it may fail to obtain the adequate return on the
fund, which is confined to it for use. Similarly, if the bank is too liberal, it may easily impair its profits by
bad debts. Therefore, bank should not forget the reality that most of the bank failures in the world are
due to shrinkage in the loan and advance.

Despite of being loan and advance, more profitable than other assets, it creates risk of non repayment
for the bank. Such risk is known as credit risk or default risk. Therefore, like other assets, the loan and
advances are classified into performing and non performing assets are on the basis of overdue aging
schedule. If the dues in the firm of principal and the interest are not paid, by borrower within a maturity
period, that amount of principal and interest is called non performing loan or assets. Performing assets
have multiple benefits to the company as well as to the society while non performing assets erode even
existing capital of the bank. So, the proper management of credit in commercial bank has been keys for
the success.

Credit administration involves the creation and management of credit and advances. Portfolio
management helps to minimize or manage the credit risks by spreading over the risk to various
portfolios. Bank earns interest on credits and advances, which is one of the major sources of income for
bank.       

3.2CONCLUSION
Kumari Bank Limited has sufficient liquidity. It shows that bank has not got investment sector to utilize
their liquid money. Now, in Nepal, many banks and financial institution are functioning to collect
deposits and invest money somewhere in invest able sectors. Therefore, monetization have been
increased since liberalization policy taken by government. Heavy remittance has also help to increase
the amount of deposits in bank. On the other hand, due to political crisis, economic sectors have been
fully damaged. Most of the projects have been withdrawn due to security problem. Therefore, bank has
maximum liquidity due to lack of safety investment sectors.

Due to economic crisis in the country, credit takers are not getting good return from their investment
sectors. On that situation, credit customers do not return money of the bank in the stipulated time
period, therefore, the non-performing credit of the bank increase its provision for credit loss.

Credit related financial indicators demonstrate the quite poor situation in Kumari Bank Limited.
Therefore Financial sector reform program is below the level and still much needs to be done. It can also
be concluded that there has been almost similar procedures and policies while granting the loan, not
much change from its conventional methods.

Lack of proper financial analysis of the borrower by the banks, is one of the borrower by the banks, is
one of the major cause behind increasing NPA of Nepalese commercial banks. Therefore, proper
financial analysis should be performed before giving loan to the borrower.

Nepal Rastra Bank should regulate all the deposit accepting financial institution under the supervision
and regulatory activity so that general people can feel the security of their deposits.

Bank should regularly follow the credit customer to confirm that whether the customers have utilized
their credit for same purpose or not, committed at the time of taking credit from the bank.

APPENDIX
Balance sheet
As on ashard 2074

                                                                                                               

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