CHAPTER – 1

INTRODUCTION

1.1 Background

This study is focused to analyze the financial performance of Rastryia banijya Bank LTD

basing on its activity for past four years. RBB is fully government owned, and the largest

commercial bank in Nepal.  RBB was established on January 23, 1966 (2022 Magh 10

BS) under the RBB Act. RBB provides various banking services to a wide range of

customers including banks, insurance companies, industrial trading houses, airlines,

hotels, and many other sectors. RBB has Nepal's most extensive banking network with

161 branches.

RBB is one of the pioneer banks in the country, with a history of nearly a half

century. Earlier constituted under RBB Act 2021 with the full ownership of the

government of Nepal, the bank has been running under Bank and Financial Institute Act

(BAFIA) and Company Act (CA) 2063. The bank, licensed by NRB as an 'A' class

commercial bank of the country, has grown up as an indispensable component of the

Nepalese economy. It was the highest profit earning bank for fiscal year 2014/15. The

bank has the second highest paid up capital until the end of FY 2015/16 after agriculture

development bank. In terms of deposit, the bank has collected Rs more than Rs 130

billion (FY 2015/16), which is the highest deposit of any commercial bank in Nepal.

1.2 Profile of RBBL

RBB is one of the pioneering banks in the Nepalese market that has carried out Note

Kosh Fund, Bharu Kosh Fund, NRB's draft transaction, government transaction, and

1
pension fund of the Nepal government. Besides more than two dozen banks' branches are

running in losses, they provides continue services to the general public because it is the

government bank. Profit is not the only motive of the bank. RBB provides services in

remote and undeveloped areas of Nepal.

RBBL has a history of contributing for the monetization of the economy,

eliminating dual currency in the market, initiating preliminary financial literacy, and

helping industrial, commercial and financial sector of the country to flourish. It is a

modern and strong financial institute of the country. With 2600 hands, it has expanded its

wings in the most part of the country through multiple distribution outlets of 161

branches, 17 counters, 28 branchless banking (BLB) and 72 ATMs. It has high public

confidence, reflected in the highest deposit base and growing demand for branch

establishment in the various parts. The bank with as many as 1.7 million satisfied direct

customers ranging from poor to elite ones and millions of indirect ones has drawn

important imprint in the picture of the country's economy through its significant

involvement in the best use of its resources to enhance the production, income and

employment opportunities.

Services currently offered by RBB:

 Credit

→ Business loan

→ Housing loan

→ Vehicle loan

→ Hire purchase loan

2
 → Educational loan

→ Apartment loan

→ Loan against gold

→ Loan against fixed deposit receipt

→ Loan against the government bond

→ Loan against shares

→ Loan against the first class bank guarantee

→ Rastra Sewak loan

→ Teachers' loan

→ Personal loan

→ Agricultural loan

 Deposits

→ Current account

→ Savings account

→ Fixed deposit

→ Karmayogi Bachat Khata

→ Mahalaxmi Bachat Khata

→ Chhunamuna Bachat Khata

→ Sikshak Bachat Khata

→ Remittance

→ Branchless banking

→ ATM/CDM

→ E-banking

3
 → Mobile pay

→ SMS banking

→ Card services (debit/credit card)

http://www.rbb.com.np/intro.php

Therefore from the above presentation, we can say that the RBBL Inaruwa

Branch is an important bank for the people and organization of Inaruwa and it has led

great importance in the speedy growth and development of Inaruwa.

1.3 Objectives

General objectives of the study will be to analyze the existing data of the bank and assess

its financial performance through the help of ratio analysis. After completion of this

report a concrete conclusion will be derived and thereby it will be able to portray a real

picture of the organization's profitability aspect and its status. The other objectives are

listed as below.

• To analyze the profitability position of the RBBL

• To fulfill the requirement of Bachelor Degree.

• To find out the comparative pictures of profit and loss account and balances sheet.

1.4 Rational of the Study

4
Today financial management covers the management of all aspects of the balance sheet,

including the management of short and long term assets, short and long term liabilities

and equity.

The importance of finance in the small industry is to maximize the stockholders

wealth but stockholders are not the only party to benefit from business operation. These

are other function also (The firms, the investors and the consumers) who expects a fair

share of benefits. Besides this following are the signification of the study.

• It may help the RBBL to formulate policies.

• It may help to the third parties who are interested in it.

• It may help the future generation for their references.

1.5 Literature Review

Financial analysis is the process of identifying the financial strength and weakness of the

firm by properly establishing relationship between the items of balance sheet and profit

and loss a/c. Financial analysis can be undertaken by management of the firm or by

parties outside the firm viz. owners, creditors, investor and other

Review of literature is an essential part of all studies. It is ways to discover that

other research in area of our problems has uncovered. A literature review is the process of

looking, obtaining, Reading and evaluating the area of the researcher's interest. A critical

review of the literature helps to researcher to develop through understanding and insight

into previous research work that related to the present study. (Dongol RM, 2064)

Finance is the process of collection of funds from various sources necessary for

the smooth operation of business and its proper utilization and allocation in the

5
productive sector. Finance is the application of skill or cares to the manipulation the use

and the control of the money. Finance can be collected from the commercial banks and

private banks in from of loan; overdraft etc. an industrialist can operate his business with

his own capital also. If there is great flow of finance in small business then production

increases, with production increase sale increase industry can compete in the market. The

very term in real world about the "finance" has been interpreted differently by different

scholars.(Pandey, 1999)

Finance is the necessity of every business. Finance is very important in each

small-scale industry whether it is banks or any other small-scale industries. Financial

statement analysis generally begins with the calculation of a set of financial ratios

designed to reveal the relative strength and weaknesses of a company as compared to

other companies in the same industry, and to show whether the firm's position have been

improving or deteriorating over time.

 Importance of Financial Analysis

Today financial management covers the management of all aspects of the balance sheet,

including the management of short and long term assets, short and long term liabilities

and equity.

The importance of finance in the small industry is to maximize the stockholders

wealth but stockholders are not the only party to benefit from business operation. These

are other function also (The firms, the investors and the consumers) who expects a fair

share of benefits.

 Tools of Financial Analysis

6
The history of analysis of financial statement begins with present century. The analysis of

these facts and related data was considered to be important and a number of techniques

were developed and used for this purpose. At present, the most important techniques of

analysis are:

I) Ratio Analysis

II) Percentage Method

I) Ratio Analysis

It helps for the judgment of financial position of the bank. A ratio is the mathematical

relationship between two figures. Ratio analysis means comparing the data in standard

measures. It implies the process of computing, determining and presenting the

relationship of items or group of items of financial statement. In financial management,

ratio is the relationship between two accounting figures. 'Ratio' analysis is a statistical

yardstick that provides a measure of the relationship between two variables or figures.

Different types of ratio such as current ratio, quick ratio, debtor turnover ratio, inventory

turnover ratio, gross profit, net profit total assets turnover ratio has been calculated.

II) Percentage Method

The percentage method is that method where items of one year are taken as base and

other year items are compared with that base period items in percentage. Different

statements such as trading account, profit and loss account, and balance sheet are used to

analyze under this method.

7
 Among various commercial banks operating in Nepal including government

owned, private and joint venture we have selected only one bank for our study.

1.6 Methods

1.6.1 Population and Sampling

The method of conducting this study is primarily based on direct contact and

interviews. The data and information collected from direct contact and interviews

are carefully analyzed and necessary conclusions have been derived thereof.

Similarly, direct observation and a small survey were conducted to collect various

information for collecting information about satisfaction of customers towards

RBBL I met several customers within the premises and at the gate of RBBL. This

survey helped me a lot to gather true data about RBBL. The methodology of this

report includes the study participations, data collection tools, and data

presentation and analysis techniques.

This study is basically the qualitative approach since it is based on

qualitative data. All the information collected is based on the primary sources

such as direct contacts, interview, and observation. This study discusses all the

services provided by the bank and to check the relevance of the information about

these services a survey was also conducted within the premises of the bank.

Therefore, this study is based on the behavioral approach which includes only

qualitative data and quantitative data.

8
1.6.1.1 Population of the study: To conduct the survey, the employees of

bank, front desk and production departments are taken as a population.

The survey was conducted in order to collect the information about the

services provided by these departments. Similarly, customers of the RBBL

are also taken as a population for a survey in order to analyze the

effectiveness of the services provided.

1.6.1.2 Sample of the study: A sample of 10 employees were selected for

a survey through which information are collected about the services

provided by the bank and a sample of 10 customers were selected in order

to analyze the effectiveness of the services provided by the bank.

1.6.1.3 Sources of Data:

i. Primary data:

The data which are collected and used for first time is know as primary

data. Here for the preparation of this report, direct personal interviews,

indirect oral interview, information from correspondents are taken.

ii. Secondary data:

The data which are already existed and which are not originally collected

but obtained from any published or unpublished sources are called

secondary data. This data are used for the second or more times or we can

say that it is not used for the first time. So, secondary data also had played

a great role for the preparation of report.

9
1.6.2 Instrumentation

This field work is based on secondary published by RBBL the annual report is the

main source of data. The data from 2072/2073 to 2074/075 are use for preparing

this report.

1.6.3 Analysis Plan

The estimated time of this project work is 15 days. The title is selected in the first

step as "A Study of financial Analysis of RBBL". The secondary data is collected

from the annual report of the bank. The collected data are tabulated and analyzed

using financial tools. Finally, the report is prepared and submitted to the

department of college for examination.

1.6.4 Validity and Reliability

Researcher has used the accurate data by the source of field work. Likewise, the

researcher has convinced the respondent that the purpose of the research is just to

fulfill the academic degree and nothing else.

It is assumed that the facts and figures provided by proprietor of RBBL

are assumed to be correct. The data collected through direct personal interview

may be valid and reliable but the data collected through workers and labor may

not. The field work report is based

10
 Completely on personal interview and hence the data provided are

assumed to be correct and the report was confident as confidential policy of

company may not have given complete disclosure to the field work report.

1.7 Limitation

The limitations of the study are:

• Ratio analysis has no common standard.

• It may lacks reliability and validity due to the constraints of data resources and time.

• This study is carried out only for the performance analysis of the company.

• It contains only quantitative information.

11
 BIBLIOGRAPHY

Agrawal, G.R. (2005), "Marketing management in Nepal." Kathmandu: M.K. publishers,

Votahiti, Kathmandu, Nepal.

Annual Report ( 2072/073-2074/075), RBBL.

Dangol, R.M. (2064), "Accounting for Financial Analysis and Planning,. Asmita

Publication, Votahiti, Kathmandu.

Pandey, I.M. (1999), "Financial Management of Bank." New Delhi: Vikash publishing

house Pvt.Ltd, India.

Robbins, R.I. (1955), "The Management of Bank." New York: Kiras Mc Grow Hill

book, USA.

Sharma, Narendra (2005, "A Textbook of Accounting and Auditing." Kathmandu: Ratna

pustak Bhandar, Ram Saha Path, Kathmandu.

Shrestha, MK (2008), "Fundamentals of Financial Management", Kathmandu: Srijana

Books, Votahiti, Kathmandu.

Thapa, Kiran and Koirala, Naryan(2007), "Financial Institution and Market.

"Kathmandu: Januka publication, Anamnagar, Kathamandu.

• Websites:

www.google.com

http://www.rbb.com.np/intro.php

12