A STUDY ON FINANCIAL PERFORMANCE OF NEPAL SBI BANK

LIMITED AND HIMALAYAN BANK LIMITED

A Project Report Proposal

Submitted By
Elina Duwal
Shwoyambhu International College
T.U. Reg No. 7-2-927-140-2018

Submitted to
Research Management Committee
Shwoyambhu International College
Kathmandu

In partial fulfillment of the Requirements for the Degree of

BACHELORS OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal
November,2022
1. Background of the study
Bank is the monetary institution which accepts deposits and provides loan facilities. Bank is an
organization where primary function is concentrated loan to individual, trades, industries,
business sectors etc. Banking sector plays an important role in the economic development of the
country. Commercial Banks are one of the vital aspects of this sector, which deals in the process
of mobilizing the available resources in the needed sector. It is the intermediary between the
deficit and surplus of financial institutions and non-depository financial institutions. Commercial
Banks a Finance Companies (in Nepalese context) are the examples of depository financial
institutions whereas Employment Provident Fund, Development Banks, Insurance Companies
etc. are the examples of non- depository financial institutions.
All the economic activities are directly or indirectly channeled through these banks. People keep
their surplus money as deposits in the banks and hence banks can provide such funds to finance
the industrial activities in the form of loans and advances. To overcome this economic situation,
government has to formulate and implement strategies focusing overall industrialization of the
nation and development of a sound banking system is necessary for the rapid industrial
development.
“A bank is a business organization that receives and holds deposits from others, lend loans or
extend credit and transform funds by written orders of depositors”- (encyclopedia, the world
book America,1984).
1.1 Introduction of Commercial bank
A commercial bank is one which exchanges money, deposits money, accepts deposits, grants
loans and performs commercial banking functions. Commercial bank is a dealer in money and
substitutes for money, such as cheque or bill of exchange. It also provides a variety financial
service. At present there are 28 Commercial Bank in Nepal.
1.1.2 Introduction of Selected Banks
A. Nepal SBI Bank Limited
Nepal SBI Bank ltd. is the first indo- Nepal joint venture in the financial sector sponsored by
three institutional promoters’ namely State Bank of India, employees Provident Fund and
Agricultural Development Bank Nepal through a memorandum of understanding signed on 17 th
July 1992 NSBL was incorporated as a public Ltd Company at the office of the company resister
at April 28, 1993 under the registration No. 7-049/50 with authorized Capital of Rs. 12 corers
and was licensed by NRB, of July 6, 1993. NSBL commenced operation with effect from July7,
1993 with one full fledge of office at Durbarmarga, Kathmandu with 18 staff members. The staff
strengthen has increased to 351. Under the Bank and financial institution act 2063 NRB Granted
fresh license to NSBL classifying it as “A” class license institution on April 26, 2006. The
management team and the managing director, who is also the CEO of the Bank, are deputed by
SBI. SBI also provides management support as per the technical services agreement.

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B. Himalayan Bank Limited
Himalayan Bank Limited was established in 1993 in joint venture with Habib Bank Limited of
Pakistan. Despite the tough competition in the Nepalese Banking Sector, Himalayan Bank has
been able to maintain a lead in the primary banking activities- loans and deposits. Himalayan
Bank Limited holds a vision to become a leading bank of the country by providing premium
services to the customers. The bank’s mission is to become preferred provider of quality
financial services in the country. There are two components in the mission of the bank: Preferred
Provider and Quality Financial Services. Therefore, Himalayan Bank Limited believes that the
mission will be accomplished only by satisfying these two components with the customer at
focus.

2. Statement of the Problem

After the identification of liberal and market – oriented economic policy by Nepal Government,
the joint venture bank has been gradually established, although they are facing a great deal of
competition among themselves. While assessing the financial health of the company answers to
the questions relating to the company’s profitability, assets utilization, liquidity financing
capabilities may be sought. A number of questions go beyond the scope of ratio analysis. They
however need to be answered while assessing the financial health of the company. Therefore, it’s
very necessary to compare the profitability ratio and other financial aspects of Nepal SBI as
compared to Himalayan Bank Limited.
The profitability rate, operating expenses and dividend distribution rate among the shareholders
has been found different in the financial performance of the two joint venture banks in different
periods of time in the context of Nepalese banking industries. These questions arise in banking
sector. Among the many other joint venture banks the study here mainly emphasizes on Nepal
SBI and Himalayan Bank Limited and trying to solve following questions:
 Are they maintaining sufficient Liquidity?
 How and why do cash and bank balances change each other?
 Is performance better? Can they meet the obligations?
 Do these banks managements utilize this resources satisfactorily?
 What are their sources and applications of income?
 Do they maintain sufficient refund in its capital employments?

The study tries to solve this question and the issues.

Therefore, this study attempts to evaluate the various measures of financial performance such as,
profitability, turnover, efficiency in operation sources and application of funds as well as other
related dimensions and they determine the overall financial strength or weakness of these two
joint venture banks.

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3. Objectives of Research
Every research begins with the objectives. Objectives are the end result to be achieved. The main
objectives of this research are as follows:
 To evaluate the financial performance through the use of appropriate financial tools.
 To examine various aspects relating to financial performance of Nepal SBI Bank Ltd and
Himalayan Bank Limited for the period of 5 years.
 To evaluate the cause of changes in cash position of the two banks and their cause and
effect to the financial market and their assets, dividend position and market price per
share.
 To suggest and recommend both the banks to improve their financial performance.
 To explore the practical knowledge of thesis writing about financial performance of
commercial banks.

4. Limitation of study
Since the above-mentioned studies offer limited findings more extensive and adjustment of
necessary variable are needed to be more conclusive about study of the above-mentioned banks.
This study is simply conducted for the partial fulfillment of the requirement for the degree of the
bachelor in business studies (BBS). And only the secondary data is used and analyzed which
could not disclose the actual result.
The other limitations of the study have been listed below:
 The study here focuses only on the financial performance of these two banks.
 The study covers only the financial performance of the 5- year, which is very short
period to analyze the financial performance.
 This study deals with certain tools such as Ratio Analysis, EPS, DPS analysis.
 The study mainly concentrates on the financial performance of Nepal Bangladesh and
Nepal SBI Bank Ltd.
 For the forecast of the liquidity requirement, daily and monthly data is needed. But due to
time and cost constraints, only the annual data is used for analysis.

5. Significant of study

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This study attempts to focus on the financial performance of Nepal SBI Bank Limited and
Himalayan Bank Limited. The significances of the study are:
 Gives general information regarding Banking,
 Provides the information regarding deposits and prospects of deposit and its mobilization
in the country.

6. Organization of study
A project work report shall have the following chapters:
Chapter-I: Introduction
It is initial phase of the thesis that includes general introduction, a brief review of Himalayan
Bank Limited and Nepal SBI Bank Limited, focus of the study, statement of the problem,
significance, objectives and limitations of the study.
Chapter-II: Results and Findings
It deals with the position of related bank along with calculation of various types of ratios in order
to evaluate the financial position of Nepal SBI Bank Limited and Himalayan Bank Limited.
Chapter-III: Summary and Conclusion
This chapter will state a brief summary of the report and the conclusion based on the findings of
the report.

7. Literature Review
With increasing developments in the country, the establishment and expansion of number
of banks and financial institution has created keen competition among themselves.
Literature reviews are a basis for research in nearly every academic field. The main focus
of the study is how to find out the work, which have to done in the area of the research
problem and what has not been done in the field if research study is undertaken. Review of
literature provides the foundation of developing a comprehensive theoretical framework
for which hypothesis can be developed for testing. The literature survey also minimizes the
risk of pursing the dead ends in research.
The writers on the banking are divided regarding the origin of the word "Bank". Some authors
feel that the word bank is derived from the words "Banco". "Bancus" or "Banque" which all
mean a bench.
A bank is a business organization that receives and holds deposits of funds from others, makes
loans or extends credit and transfer funds by written order of depositors (The Encyclopedia
America; 1984:234 Vol. 3).

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According to concise oxford dictionary,” A Bank is an establishment of custody of money which
it pays out on customer demand”.
Some other well know definition given by different writers regarding “Bank”
“A Bank is an institution where debts (Bank Deposits) are widely accepted in settlement of other
people’s debt by each other” Sir – R.S. Sayers.
At least, we can say that it’s basically a financial intermediary action between transactions, the
confidence of which is ultimately the success of the bank, this calls for the prompt, convenient
and quality service to its customer but also establish good rapport with them,
“The American institute of banking has laid down four functions of the commercial bank i.e.
receiving and handling deposits, handling payments for its clients, granting loans and investing
and creating money by extension of credit”
Any bank must maintain adequate cash and bank balances to meet its day- to –day management
of cash resources for remote contingencies.
According to the Nepalese Commercial act, 2031 B.S.
“A commercial bank is one which exchanges money, deposit money, accepts deposits, grants
loans, and performs commercial banking function.

8. Research Methodology
8.1 Research Design
This study is based upon secondary data on the basis of which evaluation, calculation and
verification has been done for drawing final conclusion. Data for five years of both the
bank has been collected and those data are compared to reach the conclusion. Different
financial tools have been used for the study. Financial tools are those which are used for
analysis and interpretation of financial data. These tools can be used to get the precise
knowledge of a business, winch in turn, are fruitful in exploring the strengths and
weaknesses of the financial policies and strategies.
Various financial parameters and effective research techniques are employed to identify
the condition of loan disbursement and recovery of the bank. Quantitative data have been
used to get full information about loan disbursement and collection position of bank for
fulfilling the objectives of study. It is difficult to study the principle causes arising from
borrower side and quantify them in relation to repayment performance of the bank’s loan
investment. This study emphasizes on descriptive and analytical study of collected data
over a period of time and it gives suggestion on the improvement. So, the study is based on
descriptive and analytical research design.
8.2 Population and sample

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All the commercial banks operating in the country is the population of the country among them
two joint venture commercial banks Himalayan Bank Limited and NSBI Bank Limited are
selected for the study. The sampling technique used in this study is the judgmental.
8.3 Source of Data and Data Collection
For the purpose of study only the secondary data are used. The required data and information for
analysis are directly collected from the annual reports of the respective banks. The
supplementary data are collected from number of institution like Danfe college Library company
office etc. Similarly, related books magazine Journals articles reports bulletins and data from
Security board Nepal. Further the secondary data have been collected from reports and financial
statement of the company published and unpublished official record, books, articles magazines,
annual report etc.
Various data obtained through different sources can’t be used directly for the analysis in
their original form. So, they have been rechecked, re-evaluated, edited and tabulated to
bring them worthier getting them from authorized sources. Moreover, different graph
charts are presented according to necessity to interpret visually. The data are tabulated
according to subject matter and they are shown in table in sequential way. Similarly, the
deposits are also used for the analysis and interpretation of the deposit position of selected
sample.
8.4 Data analysis
Financial and statistical tools were used to analyze the data. Ratio analysis was used in the
study. Results are tabulated; listed under various headings. The results were compared with
the corresponding result of the past in order to interpret them in a meaningful way. A brief
description of the tools is given below.
A. Financial Tools/ Ratio Analysis
The following are the ratios that are going to be analyzed under the financial performance
of Himalayan Bank Limited and Nepal SBI Bank Ltd:
1. Liquidity Ratio:
Liquidity ratio consists following ratios:
a. Cash and Bank to Total Deposit Ratio
b. NRB Balance to Current and Saving Deposit Ratio
c. NRB Balance to Fixed Deposit Ratio
d. Fixed Deposit to Total Deposit Ratio

2. Capital Adequacy Ratio:

Capital adequacy ratio consists following ratios:
a. Net Worth to Total Assets Ratio

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 b. Net worth to Total Assets Ratio

3.Capital Structure Ratio:

Capital structure ratio consists following ratios:
a. Debt to Equity Ratio
b. Debt to Total Capital Ratio
c. Total Debt to Total Assets Ratio
d. Interest Coverage Ratio

4. Profitability Ratio:
Profitability ratio consists following ratios:
a. Return on Total Assets Ratio
b. Return on Net Worth Ratio
c. Return on Total Deposit Ratio
d. Staff Expenses to Total Ratio

B. Statistical tools
For supporting the study, statistical tool such as Mean, Standard deviation, Coefficient of
Variation, Correlation, Trend Analysis have been used under it.
a. Arithmetic Mean (Average)
b. Standard Deviation (S.D.)
c. Coefficient of Variation (CV)
d. Correlation Coefficient (r)
e. Coefficient of Determination (r2)
f. Probable Error of Correlation
g. Trend Analysis

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 BIBLIOGRAPHY

Bajrachrya, B.C. (2000). Business Statistics and Mathematics. Kathmandu: M. K. Book

Publishers.
Encyclopedia America (2002). Encyclopedia America.
Gitman, L. J. (1982). Principle of Managerial Finance. New York: Harper and Row.
Hampton, J. J. (1983). Financial Decision Making. New Delhi: McGraw Hill
Jain, S.P. & Narang, K. L. (1989). Advance Accountancy. New Delhi: Prentice Hall of India Pvt.
Ltd. Publishers and Distributors.
Monitor Nepal (1997). Money and Banking Kathmandu.
Monitor Nepal (2001). Banking and Insurance Management. Kathmandu: Taleju Prakashan.
Vaidya, S. (1997). Banking Management. Kathmandu:
Wolff, H.K. & Pant, P.R. (2000). A Hand Book for Social Science Research and report Writing .
Kathmandu: Buddha Academic Enterprises Pvt. Ltd.
Himalayan Bank Ltd. Annual Reports. Kathmandu.
NSBI Bank Ltd. Annual Reports. Kathmandu:
Nepal Rastra Bank.
Poudel, N.P. (1996). Financial Statement Analysis: An Approach to Evaluate Bank
Performance. Economic Review. Kathmandu: Nepal Rastra Bank.
Roy, K (2006). Micro Finance in Nepal. Business Age.
Shrestha, M.K. (1990). A Commercial Bank Comparative Performance Evaluation . Nepal Bank
Patrika, Kathmandu: Nepal Rastra Bank
Deoja, S. (2008). A Comparative Study of the Financial Performance Between Nepal NSBI Bank
Ltd and Himalayan Bank Ltd. Kathmandu: An Unpublished Bachelor’s Degree Report,
Submitted to Faculty of Management, T.U.

Websites

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www.hbl.com.np
www.nsbibank.com