CREDIT ANALYSIS OF EVEREST BANK LIMITED,

KIRTIPUR KATHMANDU

A Project Work Report

By

Arun Khanal
TU Reg No.7-2-39-917-2017
Shankar Dev Campus
Campus Roll No. 1356/074
T.U. Regd. No. 7-2-39-917-2017
Mobile No. 9867788083
Proposal No. 879
Group Finance

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu
February 2022
 ii

DECLARATION

I hereby declare that the project work entitled CREDIT ANALYSIS OF SYSTEM
OF EVEREST BANK LIMITED submitted to the Faculty of Management,
Tribhuvan University, Kathmandu is an original piece of work under the supervision
of Satya Narayan Kalika, faculty member, Shankar Dev Campus, Putalisadak,
Kathmandu, and is submitted in partial fulfillment of the requirements for the degree
of Bachelor 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 

...........................
Arun Khnal
Date: ....................
 iii

SUPERVISOR'S RECOMMENDATION

The project work report entitled CREDIT ANALYSIS OF SYSTEM OF

EVEREST BANK LIMITED submitted by Arun Khanal of Shankar Dev
Campus, Putalisadak, 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 degree of Bachelor of
Business Studies (BBS). I, therefore, recommend the project work report for
evaluation. 

............................
Satya Narayan Kalika
Supervisor
Date:
 iv

ENDORSEMENT

We hereby endorse the project work report entitled CREDIT ANALYSIS OF

SYSTEM OF EVEREST BANK LIMITED submitted by Arun Khanal of Shankar
Dev Campus, Putalisadak, Kathmandu, in partial fulfillment of the requirements for
the degree of the Bachelor of Business Studies (BBS) for external evaluation. 

............................................. .............................................
Satya Narayan Kalika Dr. Keshav Raj Joshi
Head, Management Research Committee  Campus Chief 
Shankar Dev Campus  Shankar Dev Campus 
Date:  Date: 
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ACKNOWLEDGEMENT

This project work report entitled "credit Appraisal System of Everest Bank
Limited" Basically prepared to meet the partial fulfillment of requirement for the
degree of Bachelor of Business Studies (BBS).This help to get the practical
knowledge about management sector. While preparing this report many people have
assisted me in different application.

So, I would like to extend to my gratitude to all those who helped me to

prepared this report .I am thankful to my supervision Mr. Satya Narayan Kalika who
gave me most valuable time ,advice and guideline for preparing this report. I would
also heartly thankful to the campus chief Dr. Keshav Raj Joshi.

I would like to thank librarian and all respected lectures of Shankar Dev
Campus.

I am thankful to all respondents who gave information about their smoke habit
my friends and family members also who helped me during the course of report
preparation in different ways.

At least I would like to thanks to Ashika Khanal for his professional input to
arranging this report in prescribed format

Arun Khanal
BBS 4th year
Shankhar Dev College
 vi

TABLE OF CONTENTS

Page No

Title Page i
Declaration ii
Supervisor's Recommendation iii
Endorsement iv
Acknowledgements v
Table of Contents vi
List of Figures viii
Abbreviations ix

CHAPTER 1: INTRODUCTIONS 1-4

1.1 General Background 1
1.2 Profile of Everest Bank Limited
1.3 Objective of the Study 2
1.4 Rationale of the Study
1.5 Review 2
1.6 Methods 3
1.7 Limitations of the Study 4

CHAPTER 2: DATA PRESENTATIONS AND ANALYSIS 5-17

2.1 Data presentations and Analysis 5
2.2 Major Findings of the study 16

CHAPTER 3: SUMMARY AND CONCLUSION 18

3.1 Summary 18
3.2 Conclusion 18

BIBLIOGRAPHY 20
 vii

LIST OF FIGURES

Page no.

Figure 2.1 Flow and use of the credit formation 6

Figure 2.2 Data Flow Diagram of prior of Loan section process 8

Figure 2.3 Data Flow diagram of Approval of credit facilities 10

Figure 2.4 Flow chart of loan process 11

Figure 2.5 Data flow diagram of renewal of loan 12

Figure 2.6 Flow chart of Interest recovery 14

Figure 2.7 Data flow of Loan recovery 15

 viii

LIST OF ABBREVATIONS

B.S Bikram Sambat

BBS Bachelor of Business Studies
EBL Everest Bank Limited
etc. Etcetera
F/Y Fiscal Year
i.e That is
No. Number
NRB Nepal Rastra Bank
Reg. No. Registration Number
Rs Rupees
 1

CHAPTER I
INTRODUCTION

1.1 General Background

Credit analysis is associated to grant credit to a customer. It is also part of a

bank's lending procedures for making loan and monitoring the borrower's credit
worthiness. I believe that financial analysis has a border focus than credit analysis.
Financial would also include calculations such as return on equity, return on assets,
price earning ratios, dividend yield, comparisons often be associated with investors,
management and creditors.

Financial institutions play a major role in the pioneer functioning of economy.

These institutions accept deposit and in turn lend it to people who are in need of
financial resources. These institutions make flow investment easier .So we cannot
deny the role a bank plays developing on economy. It pools the fund scattered in the
economy and mobile. Bed them to productive sectors.

Bank and financial institutions are one of the vital aspects in the economic
development of the country, which deals in the process of analyzing the available
resources in the needed sectors. People keep their surplus money as deposit in the banks
and hence bank can provide such funds to finance the industrial activities in the form of
comas and advances.

Everest Bank Limited was established on 1994 AD with objective of extending

professional banking services. Everest Bank Limited is one of the private sector Banks in
Nepal having 110 branches in Nepal. The authorized capital of Everest Bank Limited is
Rs. 10 arba, issued capital is Rs.8.893 arba and subscribed and paid up capital 8.893 arba
to the general public in near foyer.

1.2 Profile of Everest Bank Limited

Catering to more than 10 lacs customers, Everest Bank Limited (EBL) is a name
you can depend on for professionalized and efficient banking services founded in 1994,
the bank has been one of the leading banks of the country and has been catering its
 2

services to various segments of the society. With clients from all walks of life, the Bank
has helped the nation to develop corporately, agriculturally and industrially.

Punjab National Bank (PNB), our joint venture partner (holding 20% equity) is one
of the largest nationalized bank in India having presence virtually in all important centers.
owing to its performance during the year 2012-13, the bank earned laure's and accolades in
recognition to its service and overall performance. Recently, PNB was awarded with
IDRBT (Ranking Technology Excellence Award) under customer management and
intelligence initiatives. The bank also bagged "Golden Peacock Business Excellence
Aweard 2013" by institute of directors. Similarly, the Bank was recognized as best public
sector bank by CNBC TV 18. The bank has now more than 7000 branches and 8,500
ATMs spread all across India. As a joint-venture partner, PNB has been providing top
management support to EBL under technical service agreement.

Everest Bank Limited (EBL) provides customer-friendly services through its wide
network connected through ABS system, which enables customers for operational
transactions from any branches. The bank has 110 branches, 143 ATM counters, 31
revenue collection counters and 3 extension counters across the country making it a very
efficient and accessible bank for its customers, anytime anywhere.

1.3 Objective of the Study

The main objective of the study is to examine the existing policies and practices of
credit appraisal system of Everest Bank Limited .More Specific objective will be as
follows:

1. To Examine the credit analysis system of Everest Bank Limited

2. To evaluate credit approval process.
3. To examine the credit structure of Everest Limited

1.4 Review of Literature

As a corporation tries to expand, they look for ways to raise capital. This is
achieved by issuing bonds, stocks, or taking out loans when investing or lending money
deciding whether the investment will pay off often depends on the credit of the company.
For example, in the cased of bankruptcy, lenders a need to assess whether they will be paid
back.
 3

Similarly, bond holders who lend a company money are else assessing the chances
they will get their loan back. Lastly, stockholder 5 who have the lowest claim priority
access the capital structure of a company to determine their chance of being paid of
course, credit analysis is also used on individuals looking to take out loan or mortgage.

The loan approval process topics of definition by so many national & International
Banking are as follows:

Bank look at various criteria to decide if a bank business loan is approval first they
consider character credit and collateral. The character traits under consideration are living
in the community a long time, being home owner and family trying the borrower the area.

i) Good credit History

The having criminal record won't get approval for a bank business loan. The bank
likes to see that the borrower is stable and not likely skip town good credit history is very
important. They review how the mortgage payments are made whether on time or not.

ii) Collateral

Solid collateral definitely excites a banker and weight heavily in favor of getting a
bank business loan. car, trucks, land, education & building's are the type of collateral that
bankers really appreciate. The secondary collateral they like is inventory, goods and the
raw materials for production. Thought they perfect focused as sirs items have worth that
bankers care about even if the secondary collateral depreciates.

1.5 Methods

Research Methodology may be define as the systematic process that is adopted by

researcher in study problem with certain objective. In view research methodology is a tool
or technique while necessary for actual and attractive research in order to prepare this
report the main method that have been used will be as follow.

i) Research Variables

Research variables will including

• Interest rate.
• Credit Deposit
• Credit scheme.
 4

ii) Research Design

Research design is frame work of the study in this study research design will be
used top repair report.

iii) Population and sample

We follow the table and figure analysis in this study research design will be used to
research study. Here, 110 branches of Everest bank are opened.

iv) Nature and source of Data

Researcher will be used quantities nature in secondary firms.

v) Data collection Technique

Secondary data will be collected through previous report, internal record provided
by the bank and internet browser.

vi) Data presentation And Analysis Tools

The data will be presented by using the following.

• Table
• Figure flow chart
• Mean Percentage

1.6 Limitation of the study

Every researcher has more or less limitation in case of preparing this report,
the study will be based on following limitation.
• The result of the field work may not be appropriate
• Data will be based on secondary sources.
• The analysis will only limited 2 fiscal year.
• The study will only consider data flow diagram
 5

CHAPTER - II
DATÀ ANALYSIS AND MAJOR FINDING

2.1 Data Presentation and Analysis 

In this chapter an attempt has been made to present the findings of the study
on management information system and it's peripheral. The main objective of the
study is to examine the existing policies and prices and practices of credit
management of Everest Bank Limited. 

2.1.1 Credit Management of EBL

In the order to enhance and strengthen the credit management of the Bank,
Everest Bank Limited has implemented various credit policies and practices with
consent to NRB rules and regulation before the credit proposal or appraisal is being
made and after the credit exposure has been sanctioned to the borrower. 

2.1.2 Prior to approval of Credit Facilities 

A. Obtaining Particular of the Borrowers/ Customer 

The following particular of the customer is obtained by the bank prior to

providing/ approving loan facilities. 

 In case of individuals copy of citizenship certificate, permanent and temporary

addresses particulars of three generations and details of individual family
members. 

 In case of proprietorship particulars of the proprietors as mentioned in a above

and name, surname and address of the individual authorized to carry out on
business on behalf of the firm, and PAN number. 

 In case of private company, particulars as mentioned in 'a' above of directors

and shareholders holding 30% or more shares of the individual authorized to
carry on business on behalf of the firm and resolution to that effect registration
of the company and PAN number. 
 6

 In case of public company, particulars as mentioned in 'a' above of directors

and shareholders holding 30% or more shares and name, surname and address
of the individual authorized to carry on business o behalf of the firm and
resolution to that effect, registration of the company and PAN number, 

 Name, surname and address of collateral valuator. 

 In cases of guarantors, particular as mentioned in 'a' above. 

B. Obtaining Credit Information of the Customers 

The bank obtains the credit information of the customer of the customer prior
to extension or renewal, restructuring or rescheduling of loans of Rs. 1 million or
more. Such types of information are provided the credit information Lazimpat,
Kathmandu. For information below rupees 1 million the bank obtains the credit
information from local agencies as specified or instructed by the head office. 

Sources  collection & process Users 

Banks Banks 1
Bank 1 Credit
Provides Available with
Data/information Other bank
 Of the
Customers

Loan
Banks 2 Provides Banks 1
Classification 
Data/information СІВ
Of the customer 
Debit Balance

Bank 3
Provides
Shareholder
Data/information
Holding
Of the customer Banks 1
Patterns

Figure 2.1: Flow & use of Credit information

(Source: Credit information Bureau, Thapathali Kathmandu)
 7

C.  Loan Application Form 

a. Applicant's detai's. 
b. Brief details. 
c. Details regarding performance of the firm (of at least 2 years) 
d. Loan required with justification. 
e. Details of assets to be hypothecared (stocks and receivables) 
f. Security arrangement 

D.  Conducting an Interview 

At the time of interview the loan officer should attempt to gain as much
information from the customer, the officer should determine the purpose of the loan
amount required or demanded, repayment sources, background of the business and
banking relationship of the customer. 

If the officer don't want to made loan, then it is better to make the lender and
applicant have invested extensive time & effort. 

E. Credit Analysis/ Appraisal 

The banks appraisal methodology is designed to keeps pace with ever

changing economic environment in order to minimize the risks in the
banking business. The end objectives of the appraisal system are to ensure that there is
no under financing or over financing. 

Following aspects are scrutinized and analyzed while appraising the credit
proposal of the borrower. 

a. Management and organization 

b. Technical aspect 
 Location and site 
 Raw material 
 Plants and machinery: plant capacity & manufacturing process. 

c. Financial aspect 
 Cost of project & means of financing. 
 8

 Profitability statement. 
 Financing rations 

d. Economic aspects 

F.  Preparing the Credit Report 

After obtaining the information of the borrower, filling up the application form
and making credit appraisal the loan officer has to prepare the credit report which has
to be forward to the higher authority for the approval of the loan. 

The credit report follows a structured format prescribed by the bank so that the
items of information are in the same order form one report to the next. This ends the
prior process of the loan lending facilities to the borrower. 

The prior lending prior lending process of the credit can be highlighted by the
help of data flow diagram also. 

Customer Store

Security of Making credit Credit Report

document appraisal
process I process 2 

Communication
process 3

CIB

Branch level
Head level/
Central level,

Figure 2.2: Data Flow Diagram of Prior Loan Sanction Process

(Source: Credit Information Bureau, Lazimpat)
 9

2.1.3 Approval/ Disbursement of Credit Facilities 

The higher authority scrutinizes the credit report forwarded for the approval of
the facilities to the borrower. After the verification of loan and inform to the loan
offer. Vow the loan officer has to perform the works related to the credit
documentation. Once the approval of credit facility is received the job of
loan documentation to be obtained and it is the responsibility of the loan officers to
get the documents executed in conformity with the approval. 

A. Registration of the Collateral 

After the loan sanctioned in the name of arrange the time to mortgage
the offered collaterals securities in the name of bank from the Malpot office. This is
done for the purpose to cover the credit risk exposure provided to the borrower.
The registration of the collaterals is not transferred to collaterals owner until and
unless the loan is adjusted. However, the bank may accept the exchange of collaterals
with prior to proper valuation of the new collateral and approval from the higher
authorities, 

In case of vehicle finance the vehicle id registered in the name of bank fro:n the
Nepal Government, Yatayat Office. 

2.1.4 Documentation 

Documentation are primary evidence if any lacuna is found is documentation,

this will jeopardize the interest of the bank and may even adversely bank to loser the
money. It is, therefore important to get the documents executed properly and correctly. 

 Promissory note. 
 Personal guarantee corporate guarantee. 
 Loan offer letter. 
 Loan agreement letter. 
 Hypothecation of stocks and books debts. 
 Other documents. 
 10

2.1.5 Opening of loan account 

After the loan documentation process is fully completed now it's time to
disburse the loan to the borrower. For this purpose the borrower has to maintain the
current saving account will the bank on the basis which the bank can create the loan
account. 

The approval of credit facilities to the borrower can be highlighted by the help
of data flow diagram. 

Branch level/
Head level
Central level

Scrutiny Forward Loan Credit Request of Nepal Govt.

of credit Approval Departmen registration Malpot/
proposal Letter t  Yatayat office
process 1 

Inform the
Customer Forward
Registration
Letter in the
Credit File
Customer name bank
 
 
Loan
Offer/Agree Documentation
process 2
  ment letter 

Account
  Loan a/c/ Database
 
 
Reporting

 
  CIB
NRB
 

Figure 2.3: Data Flow Diagram of Approval of Credit Facilities

 11

(Source: Central Information Bureau of Everest Bank Limited)

2.1.6 Reporting to CIB and NRB 

The bank has to make report to the CIB for updating the information of the
borrowers. Once the report is forwarded, the bank has to furnish the credit report of
the borrower on quarterly basis until there is no change found in the credit facilities.
Further, the bank has to report to the NRB on the basis of weekly, monthly, quarterly
and yearly report as prescribed by the NRB. 

Further, the entire loan process is also highlighted with the help of flow chart. 

``
Start

Submit 

Documents 

Are the documents within Terminate Credit Facility 

the norms and standard
of the bank & NRB?

Forward for Store

  approval
 

Is the Terminate Credit Facility 

  loan/project
viable?

 
Documentation
 
 
Service End
End 

Figure 2.4: Flow chart of Loan process

(Source: Central Information Bureau of Everest Bank Limited)
12
 13

2.1.7 Post Sanctions follow up of Credit Facilities 

Post sanction follow up of the loan by the bank is made by

making communication with the borrow, physical inspection of the until, ensure
payment of interest on time, account turnover, submission of financial data, renewal
of the loan accounts on yearly basis in case of overdraft loan, reporting to the higher
authorized and external bodies regarding the financial strength and position of the
borrower and legal consideration regarding the recovery of the loan. 

Request to submit
Renewal papers
Bank  Customer 
Custo Submits the required
mer 

  Credit File 

  Scrutiny of
documents & Credit
credit appraisal report
 
Process I
 
Communication
Process 2
1`

Branch level/
  СІВ
Head level/
Central level
 
Figure 2.5: Data flow diagram of renewal of loan
Source: Central Information Bureau of Everest Bank Limited

2.1.8 Interest and Loan Recovery of the Bank 

 14

Interest earned on the loan and advances is main income sources of the bank.
The bank has given the up most priority in collecting the interest from the borrowers
on times so as to generate high income. Any interest found to be delay or failure then
it adversely affects the income and performance of the bank. The loan account where
then such loan account is treated as irregular. As per the loan classification
directives of NRB the bank has to put its efforts to keep the loan and advances within
the category of pass loan. If the loan accounts is not kept within the pass category and
is found to be substandard loss then in such cases the bank has the right to send the
call back notice to the borrower for the settlement of the loan. The bank has also the
right to call back the loan if the borrower fails to submit the renewal documentation
for the loan renewal and if the borrower doesn't pay the interest on time or after the
physical verification if the operation of the until business is found not satisfactory to
take the legal action for the recovery of the loan. 

The bank consults with its legal department in order to proceeds legal action to
the borrower. If the borrower shows positive response and gives the time period to
repay the loan then the bank may stop the legal proceeds considering of the time if the
loan is found due then bank initiate its legal action. The legal proceeding continues
until the loan is repaid. 

The bank has to register the non-performing loan in Debt Recovery Tribunal
within two years of which the loan recovery chance is very low. After the regular
effort of recovery if the loan is 101 recovered then the bank makes auction then
the bank easily recovers the loan but if the auction fails then easily recovers the loan
but if the auction fails the bank has to treat the securities as Non Baking Assets. As
per the NRB regulations the bank can hold the VRB for seven years. If again the time
exceeds then the bank has to convert the securities into the fixed Assets of the Bank. 
 15
Bank

Request to pay
the interest
 
 
Action or
Credit File 
process 

  Issues letter to
the borrower

is the letter
  issued to No. Legal Action
borrower
 
fruitful?

Yes

  Collect &
  settle the
interest 

Account
database 

Figure 2.6: Flow chart of Interest Recover

(Source: Central Information Bureau of Everest Bank Limited)
 16
Bank Inform & request  Legal dept.
For the legal
Gives legal order 

  Accepts Inform Legal File

The &
  Letter Issuance 
of legal
Scrutiny of
Borrower  After scrutiny of document
documents
Legal helps
process 
Report *DRT 
 

Report **CIB

Settlement
of loan Report NRB

Provides Request to Adjust the

  outstanding Account
Release letter release
loan & Databas
the
interest e
securities

 
Borrower
   
Figure 2.7: Data Flow of Loan Recovery
(Source: Annual Report, 2077/78)
 17

2.1.9 Structure of credit

Types of Loan 2076/77 2077/78 Regulatio
Amount % Amount % n Norms
A. Real Estate Loan 8,576,166,549 2.77% 9,109,993,995 1.865
%
B. Personal Home Loan of Rs. 1 21,450,313,664 16.60 22,584,889,128 19.96
crorer of less % %
C. Margin Type Loan 2,698,205,816 2.089 103,482,723 0.099
% %
D. Team Loan 28,558,254,647 29.10 27,108,550,513 23.96
% %
E. Overdraft Loan/TR Loan/WC 29,508,038,774 22.84 24,598,705,765 21.74
Loan % %
F. Trust receipt import loan 9,373,930,350 7.26% 5,690,960,974 5.029
%
G. Demand and other working 19,372,167,031 14.99 19,911,395,233 17.6%
capital loan %
H. Hire purchase loans 11,912,833,422 3.26% 6,025,767,608 5.33%

I. Deprived sector loan 601,796,997 0.47% 1,183,727,073 0.43%

J. Bills purchased - - - -

K. Staff loans 1,981,596,400 1.50% 1,368,664,266 1.20%

L. Other 7,888,898,763 6.10% 31,677,259,760 2.8%

(A+B+C+D+E+F+G+H+I+J+K+ 129,172,201,91 100% 113,153,810,53

L) 3 7
(Source: Annual Report of Everest Bank Ltd., Acquired evereset@com.np)

2.2 Major Findings of the Study 

Based on the entire study, some important findings have been outlined which
are as follows: 
 The bank has given more concentration in the found based lending. The
interest income earned by the bank from the loan and advance covers more
 18

than 70% of total income. This proves that the banks are giving more
emphasis on the credit lending rather than other income. 
 The bank has been able to gain control over the credit management by it's
through its various MIS report's. 
 The credit policy is in consistent with the bank's objectives. 
 The operation c the bank is fully computerized. Pumori plus software of the
bank takes care of generating various MIS reports and the flow or information
from the low level to higher level is also computerized. 
 The timely availability of information regarding any decision of the bank is
given top most priority. 
 19

CHAPTER-III
SUMMARY AND CONSLUSION

3.1 Summary 

Banking sector plays as important role in the economic development of the

country. Development banks are one of the vital aspects of this sector, which deals in
the process of analyzing the available resources in the needed sectors. li acts as the
intermediary between the deficit and surplus of financial resources. 

It helps to determine the ability of a company or individual to fulfill their

financial obligations. The process contains both qualitative and questionnaire factors
such as amounts owed, character, and city to make payments. Credit analysis is used
to determine whether a company or individual qualifiers for a loan or mortgages. It
also used to determine the quality of a bond.

3.2 Conclusion 

Credit activity is the integral part of banking business. Detailed information on

various aspects of credit activities and the system implemented by the bank has to be
included during the process of loan sanction in order to minimize risk inherent with it.
It is crucial for a banking institution to lay down clearly defined systems and
procedures for conducting its day to day operations. It is still more crucial that the laid
down system and procedures are meticulously compiled with by all concerned.

Based on the entire study and findings some conclusions have been made.
This study particularly deals with conclusion about credit management banking
system and information flows from the view point of MIS. 
 Everest Bank Limited is more focused on fund based income rather than non
fund based and others. The major portion of the bank's income is generated
through the interest earned form the loan and advances. 
 The loan proposal processed and the lending criterions of the bank is found as
per the rules and regulations prescribed by NRB. 
 The optimum uses of information generated by the help of MIS system of the
bank have helped to create efficient and effective management of the credit of
the bank. 
 20

Bibliography

Books by author Agrawal D.R. (1993). Organization & management in Nepal.

Kathmandu. M.K. Publisher & Distributor.
Chaudhary A.K. (1991). Business Statistic & Mathematic.
Kathmandu. Bhudi Puran Prakashan. 
Jawadker W.S., (1998). Management Information System. Tata
McGraw Hill Publishing co. Ltd. 
Joshi. P.M. (2007). Fundamentals of financial management.
Kathmandu. Asmita Publication 
Regmi, Y. (2005). Modern Banking of Nepal, Kathmandu,
Regmi Publication
Annual Report (2077/78). Everest Bank Limited. Central Office. Kathmandu. 
NRB Directives (2078). Nepal Rastra Bank. Kathmandu. 
Mannaul