A STUDY ON LOAN MANAGEMENT OF NEPAL BANK

LIMITED

A Project Work Report

Submitted By:

SWOSTIKA DHAKAL

Herald International College

TU Registration Number: 7-2-723-162-2019

Symbol Number: 707230082

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, Nepal

July, 2024
 DECLARATION

I hereby declare that the project work entitled “ A STUDY ON LOAN MANAGEMENT
OF NEPAL BANK LIMITED” submitted to Faculty of Management, Tribhuvan
University, is an original piece of work under the supervision of Mr. Binod Thapa,
faculty member, Herald International College and is submitted in the partial
fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS).
This Project work has not been submitted to any other university or institution for the
award of any degree or diploma.

…………………

Swostika Dhakal

Date :

ii
 SUPERVISOR’S RECOMMENDATION

The project report entitled “A STUDY ON LOAN MANAGEMENT OF NEPAL

BANK LIMITED” submitted by Swostika Dhakal of Herald International College,
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 of Business
Studies (BBS). I therefore recommend the project work report for the evaluation.

……………

Binod Thapa

Supervisor

Date :

iii
 ENDORSEMENT

We hereby endorse the project work entitled “A STUDY ON LOAN

MANAGEMENT OF NEPAL BANK LIMITED” submitted by Swostika Dhakal of
Herald International College, Kathmandu, in partial fulfillment of the requirements
for award of the Bachelor of Business Studies (BBS) for external evaluation.

……………………… ………………..

(Prem Kumar Bisowkarma) (Binod Regmi)

Chair of Management Research Committee Campus Chief

Herald International College Herald International College

Date: Date:

iv
 ACKNOWLEDGEMENTS

This project work report entitled “A STUDY ON LOAN MANAGEMENT OF

NEPAL BANK LIMITED” has been prepared in partial fulfillment for the degree of
Bachelor of Business Studies (BBS) under the course designed by the Faculty of
Management, T.U. This study is based on the prescribed research format involving the
use of financial ratios in the banking sector. At the time of preparing this study, I
consulted with various personalities. So, I would like to extend my sincere thanks to
all whose works and ideas helped me in conducting the study. Sincerely, I would like
to pay my sincere gratitud to my project work report supervisor Mr. Binod Thapa of
Herald International College who guided me through research work with supplying
valuable suggestions, supports and supervision. Finally, I would like to offer my
profound gratitude to my family members, my friends, colleagues, and well-wishers
for their encouragement and support during the entire period of my study.

Swostika Dhakal

Date:

v
 TABLE OF CONTENTS

Title page…….……………………………………………………..……….... i
Declaration…………………………………………..………....…………….. ii
Supervisor’s Recommendation…………………..…………..………........... iii
Endorsement…………………………………………..….…….…..…...…… iv
Acknowledgement………………………………….………….….…..….......v
Table of contents………………………………….………………...………... vi
List of Tables ………………………………….……………….....………….. vii
List of Figures ………………………………..…………...….……………….viii
Abbreviations………………………………..………...…….…...…………...ix

CHAPTER I: INTRODUCTION 1 - 14
1.1 Background of the Study……………….…………….……...………….. 1
1.2 Profile of Nepal Bank Limited…………………………...……….…...... 3
1.3 Objective of the Study ………………………………...…………........... 3
1.4 Rationale of the Study…………………………………….………......… 4
1.5 Review of Literature ………………………………………..........…....... 4
1.6 Research Methodology ………………………………………................. 8
1.7 Limitations of Study..………..……………………...…..……................ 14

CHAPTER II: RESULTS AND ANALYSIS 15 - 29

2.1 Data Presentation and Analysis…………...…………………….……….. 15

2.2 Major Findings ……………….………………………….………............ 27

CHAPTER III : SUMMARY AND CONCLUSION 30 -32

3.1 Summary ……………………………………………………...………… 30

3.2 Conclusion…………………………………………………..…................ 31

BIBLIOGRAPHY………………………………………………….…………. 33

vi
 LIST OF TABLES

Table no: Title Page no:

1: Current Ratio of NBL.………………………………………………15

2: Cash and Bank Balance to Total Deposit Ratio...…………………...17

3: Loan and Advance to Total Deposit Ratio…………………….…….18

4: Loan and Advances to Total Assets Ratio…………….…………….19

5: Loan and Advances to Shareholder’s Equity Ratio…………………20

6: Return on Assets (ROA)…………………....………....…………… 21

7: Return on Equity (ROE)………………….........................................22

8: Net Profit to Total Deposit Ratio…………………….………………23

9: Correlation between Deposit and Loan and Advances of NBL….......24

10: Correlation between Total Income and Total Loan and Advances of NBL …………25

11: Correlation between Investment and Loan an Advances of NBL…..26

vii
 LIST OF FIGURES

Figure no: Title Page no :

1: Current Ratio of NBL,……………………………………………...16

2: Cash and Bank Balance to Total Deposit Ratio...…………………. 17

3: Loan and Advance to Total Deposit Ratio…………………….……18

4: Loan and Advances to Total Assets Ratio……………….………… 19

5: Loan and Advances to Shareholder’s Equity Ratio.…..……………20

6: Return on Assets (ROA)…….……………………........………….. 21

7: Return on Equity (ROE)……………………....................................22

8: Net Profit to Total Deposit Ratio…………………….……………..23

viii
 ABBREVIATIONS

AD : Anno Domini

ATM : Automated Tailor Machine

BS : Bikram Sambat

FI : Financial Institution

FY : Fiscal Year

i.e. : That is

LTD : Limited

NBL : Nepal Bank Limited

No. : Number

NPL : Non- Performing Loan

NRB : Nepal Rastra Bank

R : Correlation Coefficient

ROA : Return on Assets

ROE : Return on Equity

ix
 1

CHAPTER I

INTRODUCTION

1.1 Background of the Study

A bank is a formal institution of a financial intermediary that accepts deposits and
channels those deposits into lending activities, either directly or through capital
markets. A bank may be defined as an institution that accepts deposits, makes loans,
pays checks, and provide financial services.
A bank is a financial intermediary for safeguarding, transferring, exchanging, or
lending money. A bank’s primary role is connecting funds such as investors or
depositors to those seeking funds, such as individuals or businesses needing loans. A
bank connects consumers that have capital deficits and customers with capital
surpluses. The basic function of a bank is collecting and depositing loans.
“Lending is a core function of a bank that contributes significantly to its profit. Bank’s
lending activities are generally governed by certain principles. Since the lending
activities involve the depositor’s money which is repayable on demand. Bank adheres
to the principle of safety and security, risk diversification, liquidity, profitability, and
loan purpose” 19 (IIBF, 2005). Loan management is simply the management of loans
and advances. The success of the banking business depends on the efficient and
effective management of loans. Poor loan management has proved to be one of the
major causes of bank failure throughout the world. Thus, loan management is always
a challenging task in banking since it involves risk linked with credit operations. Loan
management deals with minimizing those risks which are directly or indirectly
involved in the lending process.
Lending is the principal business activity for most commercial banks as it provides
the highest return by means of interest on loans and advances and fees on non-fund-
based credit activities. Banks also invest a certain part of their loan in social
development in the form of deprived sector lending. Effective management of loan
portfolio and credit function is fundamental to a bank’s safety and soundness. Loan
management is the process by which risk that is inherent in the lending process is
managed and controlled. In other words, loan management is concerned with
 2

formulating and implementing lending policies. O.P. Agrawal in his book “Principal
of Banking”, (Macmillan) has written that credit management is the management of
credit portfolios of bankers and financial institutions. Loan management affects a
company’s profitability and liquidity. The banks take care in analyzing the
creditworthiness of borrowing customers to ensure that the interest and principal
amount on the loan is timely recovered without any problem or liquidity.
Basically, banks in Nepal have been facing the problems in credit and investment
sector and the present possibility for banks to diversify into a wide range of services
and products provides a good opportunity for banking entrepreneurs and managers.
But the body’s diversification advantage is a once-in-a-lifetime opportunity that
should be utilized with some caution and sound management. As this involves plenty
of freaks, there is one saying that the higher you go the colder life becomes. The
banking industry is a high-risk business, but it is not necessary to be a high-profit
industry. It is quite difficult to manage risks and returns in the banking industry. In a
pool. Most commercial banks are focusing on consumer loans, vehicle loans, real
estate loans etcetera. However, on the other part. The growth of industrial loans has
not been encouraged in recent years. Lack of sound knowledge and various risks
associated with loan leads to. Industrial and commercial sectors. So, most of the banks
are giving loans to profitable and unproductive sectors, more flow of loans. Towards
unproductive sectors have become a serious concern for the country. Lending policies
are not systematic and so clear-cut visa not policy is available on the lending aspect.
In Nepal, it has been found that approval and lending decisions are made in favor of
those persons who have personal networks. So, GNU customer finds the loan-
providing process very complicated. And sometimes the documents submitted for the
loan sanctioning are fraudulent and for formal purposes only.
In short, loan mobilization and recovery are a too important aspect of loan
management, but it also includes all the activities related to loans such as loan
processing, marketing, monitoring, concentrating risk, hedging risk, and credit
reporting. Generally, lenders or banks use 7C’s to perform credit analysis of the loan.
The main parameters based on the credit analysis are Collateral, Character,
Conditions, Credit, Capacity, Currency, and Country.
 3

1.2 Profile of Nepal Bank Limited

No bank was operated in the country before 1994 B.S. No provision was made in the
old commercial bank act. which facilitates private and joint venture banks. The new
commercial bank act 1974 has however made provisions to permit foreign banks to
operate in the country after the approval of the Nepal Rastra Bank. Govt. of Nepal
brought about reform in the financial sector. Hence a number of joint venture banks
come into existence. Nepal Bank Ltd (NBL) is the first commercial bank, which was
established in 1994 B.S. It is a mixed economy bank in its ownership. Nepal Bank
Limited (NBL), the first bank of Nepal proudly holds the glory of marking the formal
beginning of the banking system in Nepal. Nepal Bank Limited was established as
FIRST Bank of Nepal on Kartik 30, 1994 (November 15, 1937, A.D.) under Nepal
Bank Act 1937. The bank was established with an authorized capital of Rs.10 million,
issued capital of Rs.2.5 million, and paid-up capital of Rs.0.842 million.
Shareholdings are distributed as 40.49% is owned by the government and 59.51% by
the public. It has expanded its branches throughout the Kingdom, including far remote
areas with poor profitability and some of the parts having insufficient income to meet
break even. The bank has given more priority to the service of common and poor class
people rather than the profit, and it has achieved some objectives set at the time of its
inception.
Accordingly, Nepal Bank Limited was established to provide the services: to accept
deposits, to extend credit facilities for the promotion of trade cottage industries,
agriculture to render customer relayed services, i.e., issue of the bill of exchange, etc.
to invest in government bond and securities to carry out agency functions and to act
banker to the government.

1.3 Objectives of the Study

The main objective of the study is to evaluate the loan management of commercial
banks in Nepal. The following are the basic objectives of the study:
 To analyze the impact of loans and deposits on the profit of NBL.
 To analyze the relationship of loans and advances with total income, investments,
and deposits.
 To analyze the situation of loans and advances and the lending capacity of NBL.
 4

1.4 Rationale of the Study

Loan management is a core process for every commercial bank and therefore the
ability to manage its process is essential for the success of bank credit. Management
goes beyond the ordinary management of loan management. It involves the
anticipation of problem loans, and a sound loan policy is very important for the
survival and growth of the bank. It helps to solve credit-related problems. Thus, the
study will certainly help the management of Nepal Bank Limited to improve their
performance and would help the management of NBL to improve their performance
and would help them to take corrective actions. The rationale of this story is as
follows:
 To help to identify the sufficient sufficiency of collateral of the bank against the
loans.
 The study will certainly help the bank with the current business scenario and the
overall credit environment.
 The study will help to identify the character of its borrowers.
 This study will help the management of the bank to identify the creditworthiness
of its borrowers.
 The study is important to identify the cash flow position or capacity to pay the
interest and principal of its borrowers.

1.5 Review of Literature

1.5.1 Conceptual review
Doing a resource needs our deep study of past information, relevant facts, and
different of past researchers about the topic of the research. This shows the research
we have done and what has to be done on the particular topic for this purpose. An
attempt has been made to look into bank publications, periodicals, and the central
bank’s Rules and regulations. In addition, informal reviews with bank personnel and a
few customers or borrowers have been aimed to receive. Further interaction programs
related to the financial issues transmitted by
various. Television channels will be taken as a supportive concept.
1.5.2. Review of previous thesis
 5

This part includes a review of studies conducted by other previous research,

objectives, and findings on the related topic.
Thapa (2011), in his thesis entitled “Loan Management Commercial Banks”
Objectives:
To access the loan management process, system, and finding.
 To evaluate the capability of loan management to reduce the impact of non-
performing loans.
 To explore the relationship between loans, deposits, investment, income, and
borrowing & their impact on the profit and performance of the bank.
 To analyze different benefits that loan management might bring.
Major findings are: This study shows that there is a significant relationship between
bank performance & loan management.
 The availability of cash and ban loanable funds are important to the successful
operations of commercial banks. However, if there is excess cash it could lead to
loans waste of resources unless commercial is properly channeled to loans.
 Commercial bank has to hold a certain amount of cash that will meet depositors’
withdrawal requirements & other liquidity needs of Commercial banks.
Shrestha (2005), in her thesis entitled ‘Credit Management with special references to
Nepal SBI Bank.”
Objectives of the study:
 To analyze the effectiveness of credit policy
 To measure the credit performance
 To measure the liquidity position
Major findings are:
 The increasing growth ratio of deposits, loans, and advances and investment
shows good performance, and the major portion of the not interested bearing
deposit consists of current deposits, and this deposit is particularly maintained by
business enterprises. Increasing loan and advances and investment to total deposit
ratio shows there is no maximum utilization of the fund.
 Due to the increasing volume of loans and advances, the provision for doubtful
debts is also increasing during the study period.
 The study shows the low contribution made by lending and investment and high
contribution by other fee-based activities in total income and the significant
 6

relationship between deposit and loan shows that the bank is successfully
mobilizing deposits as loans.
 NBL is decreasing trend and bank has given priority to industrial and commercial
sector lending has a good lending procedure.
Kafle (2009), in his results entitled “Non-Performing Loans of Nepalese Commercial
Banks.” Objectives are:
 To know the problems of the nonperforming loan (NPL) and its effects on the
ROA and ROE of commercial banks.
 To find out whether the Nepalese commercial banks are following the NRV
directives regarding loan loss, and provision for nonperforming loans or not.
 To make necessary suggestions and recommendations.
He found no banks have followed NRB directives regarding loan loss provisions. He
also concludes that the return on assets (ROA) and return on equity (ROE) of the bank
depends on NPL and ROA and the NPL and ROE clearly indicate that there is an
inverse relation between them.

Review of Articles
Godwin Norwnse and Osarumwense Asemota (2009), have clearly mentioned
about loan management model in the article “Approximate Maximum Likelihood
Commercial Bank Loan Management Model” that the socio-economic conditions
surrounding the operations of our commercial bank are dynamic. This will affect the
amount of loans commercial banks can offer and also the amount of cash balance at
their disposal. Banks’ market shares determine to a large extent their ability to
diversify their portfolio. This is due to the fact that public confidence has to be
maintained. Loss of public confidence will arise if the bank is unable to honor
depositors withdrawals. To a certain degree, the market years determine portfolio
diversification, which the Central Bank consequences of reserve requirement will
allow the bank that demands loans are always on the increase as the economy
expands. Thus, any attempt to develop a model for. Credit lending must include a
certainty factor to account for loan management dynamics; for others the availability
of gas and loan evil forms are important to the successful operations of a commercial
bank. However, if there is excess gas, it could lead to a waste of resources unless
properly channeled into loans as a result. A commercial bank has to hold a certain
 7

amount of gas that will meet depositors, withdrawal requirements, and other liquidity
needs of the commercial bank.
Dahal (2009), in his article “Experience of the Nepalese Commercial Banks and
Challenges Ahead” figured out the following:
“It is sad to note that collateral-based lending instead of cash flow-based lending is
still prevalent. This speaks to the star need for a comprehensive risk management
system in a bank. All the banks need to work in this direction to assure the public that
they have adopted all the possible measures to keep their money safe. Moreover,
regulating authorities should create an environment whereby the banks can make
lending decisions based on the financial statement of the borrowers.”
Heinola (2005) has expressed his view in the resource report “Credit Management of
Bank” in this way, “Usually, it is thought that credit management’s main objective is
to avoid any bad debts, but this is not true, especially when a company’s goal is to
maximize profitability and sales the company might incur. Some bad tips about the
additional cells would make it worthwhile to the point where the profits from the
additional cells cover the bad debts incurred.”
Eduard, 2004, in his article, “Credit management needs to weigh the benefits of
giving credit to the risks associated with it.” Money cost money, so there have to be
benefits involved in giving credit to a customer in order to be able to manage the cost
that generates. (Edward 2004, 19) Edward says, “The best thing would be for
everyone to be able to accept the definition of credit as being something (money)
which is bought from a supplier at a price in just the same way as any other goods or
services are bought.
Shrestha (2004) in his article “A study in deposit and credit of commercial banks in
Nepal” concluded that the credit deposit ratio of would be 51.30% if other things
remained the same in 2004 A.D. which was the lowest under the period of review. So,
he suggests that commercial banks should See the state commercial banks should try
to give more credit to ring new fields as far as possible.
Poudyal (2003) in his article, “Bank Credit and Data Recovery” states that "Banks
create credit, mainly out of the deposit, shareholder’s capital, own borrowing and
begin with the client prepare credit proposal and submit it to the board, subsequently
bank complete appraisal of the proposal, approved credit limit and disburse
installment. Bank credits should be recovered from the client in time and fetch return
in the form of interest.” Loan management includes the credit policy of respective
 8

financial institutions, its loan approval process, documentation, a stipulation of the

disbursement procedure, project appraisal system, additional collateral, loan
monitoring and follow-up legal consideration, etc. Bank and financial associations
generally based their loan approval on the basis of the credit appraisal report.

1.5.3 Research Gap

Research is an ongoing process. There is no end to any topic. New things are
identified, studied, and analyzed through the help of previous research. Similarly, this
research focused on giving something new to the topic. Banks survive through a
collection of deposits and make lending to borrowers. Today non-performing loans
are becoming a great problem for Commercial Banks. All commercial banks lend
their deposits to different sectors of the economy. But all the sectors are not worsening
in today’s scenario. Even some sectors are flourishing today. The market is never the
same. The demand keeps on changing with modernization and globalization. Even
when some sectors are going bad some have high demand and the market. Banks can
still lend without increasing their non-performing assets if they focus on identifying a
new market for lending and commercial banks is limited. This project mostly focuses
on identifying the proper to lend to commercial banks. The loan performance of
different sectors will be analyzed and studied in this project.

1.6 Research Methodology

The topic of the problem has been selected as “Credit Management of Commercial
Bank of Nepal.” The sole objective of this study is to make a comparative analysis of
credit in different sectors and to determine the outcome from them. In order to reach
and accomplish the objectives of the study, different activities are carried out and
different stages are crossed during the study period. Commercial banks are the
principal agents of the money market which, in turn, is the major instrument of the
financial system. Thus, commercial banks and their lending and borrowing
transactions obviously affect the national economy. Moreover, lending and borrowing
transactions that take place through commercial banks influence the daily living of
each nation. And at the same time from the government side, a great concern should
 9

be taken as misleading by the commercial banks can violate the total economic
system commercial bank’s financial management system can contribute the economic
growth too because these banks are the major variables of the financial market. In this
way, the credit management of commercial banks in different sectors and their
outcomes might be considered a keen subject to study.

1.6.1 Research Design

The purpose of the study was carried out by collecting information regarding the
borrowers and the banks' policies through personal interviews and return sources.
Moreover, the study will be conducted in the light of central bank’s rules that abide by
commercial banks. The study will have adopted descriptive cum analytical research
designs.

1.6.2 Population Sample

The population refers to industries of the same nature and their services and products
in general. Thus, the total number of 20 Commercial Banks shall constitute the
population of the data and only one bank constitutes the sample under the study. So,
among all the commercial banks in the banking industry, only a sample of the
commercial bank named SBI Bank Ltd. and its branches are comprised for the study.
However, the performance of all other banks and financial institutions is not
considered for the study.

1.6.3 Data Analysis

Financial as well as statistical tools have been used to analyze the data and
information.
Financial Tools
Ratio Analysis
Ratio analysis is a quantitative method of gaining insight into a company's liquidity,
operational efficiency, and profitability by studying its financial statements such as
the balance sheet and income statement. Ratio analysis compares line-item data from
a company's financial statements to reveal insights regarding profitability, liquidity,
operational efficiency, and solvency. Ratio analysis can mark how a company is
 10

performing over time while comparing one company to another within the same
industry or sector.
While ratios offer useful insight into a company, they should be paired with other
metrics, to obtain a broader picture of a company's financial health. Examples of
ratio analysis include the current ratio, gross profit margin ratio, and inventory
turnover ratio. There are various rates in this study, only the ratios relived to the
study are calculated and analyzed.
1.Liquidity ratio
Liquidity refers to the efficiency or ease with which an asset or security can be
converted into ready cash without affecting its market price. The most liquid asset of
all is cash itself. The more liquid an asset is, the easier and more efficient it is to turn
it back into cash. Less liquid assets take more time and may have a higher cost.
Liquidity ratios are an important class of financial metrics used to determine a
debtor's ability to pay off current debt obligations without raising external capital.
Liquidity ratios measure a company's ability to pay debt obligations and its margin of
safety through the calculation of metrics including the current ratio, quick ratio,
and operating cash flow ratio. The following liquidity ratios have been calculated in
order to exhibit the liquidity position of the NBL.
i. Current ratio
The current ratio is a liquidity ratio that is used to calculate a company's ability to
meet its short-term debt and obligations, or those due in a single year, using
assets available on its balance sheet. It is also known as the working capital ratio.
Current assets
Current Ratio =
Current liabities
 Current assets are assets that are expected to be converted into cash within a
period of one year. Assets that fall under current assets on a balance sheet are
cash, cash equivalents, inventory, accounts receivable, marketable securities,
prepaid expenses, and other liquid assets.
 Current liabilities are short-term financial obligations that are due either in one
year or within the company’s operating cycle. They are accounts payables,
accrued expenses, tax payable, short-term loans, bills payable, etc.

ii. Cash and Bank Balance to Total Deposit Ratio

 11

The ratio points to the bank’s capacity to cover their deposits like current, calls,
savings, and margin. A higher ratio is performed since the finance company is able to
cover deposits. It can be expressed as:
Cash∧bank balance
Cash and bank balance to Total Deposit Ratio =
Total deposit
In finance and banking, cash indicates the company's current assets or any assets that
can be turned into cash within one year.
A bank balance is the ending cash balance appearing on the bank statement for a bank
account and a deposit is money held in a bank account or with another financial
institution that requires a transfer from one party to another.
2. Assets Management Ratios
Asset management ratios are a group of metrics that show how a company has used or
managed its assets in generating revenues. Through these ratios, the company’s
stakeholders can determine the efficiency and effectiveness of the company’s asset
management. Due to this, they are also called turnover or efficiency ratios. Some of
the most commonly used asset management ratios are as below:
i. Loan and advance to Total Deposit Ratio
It means the bank’s success in utilizing the outsider’s funds for generating profit. It
explains how quickly total collected funds are converted into loans and advances. It
is shown as:
loan∧advance
Loan and advance to Total Deposit Ratio =
total deposit
A higher ratio is favorable since it flashes out of the efficiency of the bank in terms
of making effective loans and advances.
ii. Loan and Advance to Total Assets Ratio
It shows how much of a business is owned by creditors (people it has borrowed
money from) compared with how much of the company's assets are owned by
shareholders.
loan∧advances
Loan and advance to Total Assets Ratio =
total assets
It measures the ability in mobilizing total assets into loans and advances for getting
income. A higher ratio is considered an adequate symbol for the effective utilization
of the total assets of the bank to loans and advances which creates an opportunity to
earn more.
 12

iii. Loan and advance to Total Shareholder Equity Ratio

It measures a company's leverage by comparing its total liabilities to its shareholder
equity. It provides the measure regarding how far the shareholders’ equity has been
able to generate assets to multiply its wealth.
Loan∧advance
Loan and advance to Total Shareholder Equity Ratio =
Shareholders equity
A high debt-to-equity ratio may indicate that a company is having difficulty meeting
its short-term financial obligations. A low debt-to-equity ratio may indicate that a
company is not having difficulty meeting its short-term financial obligations.

3.Profitability Ratios
Profit describes the financial benefit realized when the revenue generated from a
business activity exceeds the expenses, costs, and taxes involved in sustaining the
activity in question. Profit describes the financial benefit realized when the
revenue generated from a business activity exceeds the expenses, costs, and taxes
involved in sustaining the activity in question. Profitability is the primary goal of all
business ventures. It is the value created when the use of resources is more than the
total of the input resources. Without profitability, the business will not survive in the
long run. So, measuring current and past profitability and projecting future
profitability is very important. Some of the important profitability ratios are:
i. Return on Assets
The return on total assets ratio compares a company’s total assets with its earnings
after tax and interest. It is a key ratio used to assess your company’s profitability. A
higher ratio is preferable since it has more operating efficiency of the firm and vice
versa. It is expressed as:
Net profit
ROA =
Total assets
ii. Return on Equity
Return on Equity (ROE) is the measure of a company’s annual return (net income)
and the value of its total shareholders’ equity, expressed as a percentage (e.g., 12%).
Alternatively, ROE can also be derived by dividing the firm’s dividend growth rate by
its earnings retention rate (1 – dividend payout ratio). It is found as:
 13

Net profit
ROE =
Total shareholder equity

iii. Net Profit to Total Deposit Ratio

Deposits are disbursed as loans and advances to the public in generating revenue. It
measures the internal rate of return from the utilization of total assets. A higher ratio
represents the effective utilization of total deposit by the bank. It is computed as:
Net profit after tax
Net profit to Total Deposit Ratio=
Total deposit

Statistical Tools
1. Mean ( X )
“Average are statistical constants which enable us to comprehend in a single effort
the significance of the whole. (Bowley, and Gupta, 2000, p-35). Arithmetic mean
represents the entire data by a single value. It provides the gist and gives the bird’s
eye view of the huge mass of unwieldy numerical data. It is calculated as:
∑X
X=
N
where,
N = Number of observations
∑X = Sum of observation
( X ) = Mean value of arithmetic mean
2. Correlation Coefficient (C.V)
Correlation analysis is primarily concerned with measuring the direction and strength
of linear relation among the variables and this strength of relationship between
variables are carried out by simple correlation coefficient, denoted by (r).In this
study, Karl Pearson’s Correlation has been used to find out relationship between
variables and examine effects of one variable on other variables. The value of
correlation coefficient (r) can be calculated from n pairs of observation (x, y)
according to the following formula: -
n∑ XY −∑ X . ∑ Y
Correlation Coefficient(r) =
√[ n∑ X −(∑ X ) ][ n ∑ Y
2 2 2 2
−(∑ Y ) ]
Where,
r = Correlation coefficient
 14

n = Number of years
∑X = Sum of X series
∑Y = Sum of Y series
∑XY = Sum of X and Y series
∑ X 2 = Sum of squares of X series
∑Y 2 = Sum of square of Y series
X and Y are financial variables of selected bank.
It shows strengths positive or negative relationship between variables. The value of
correlation coefficient lies between +1 and -1. The magnitude of correlation
coefficient indicates the strength of linear relation while its sign indicates the
direction. A high numerical value of correlation coefficient that is the value close to
+1 or -1 represents a strong linear iii relation. A value of correlation coefficient close
to zero means that the linear association is very weak.
Condition Decision
When r =1 There is positive correlation.
When r = -1 There is negative correlation.
When r lies between “0.7 to 0.999” There is high degree of positive
correlation.
When r lies between “0.5 to 0.6999” There is moderate degree of correlation.
When r is less than 0.5 There is low degree of correlation.

Following relationship between variables is studied:

 Correlation between loan and advances and deposit.
 Correlation between loan and advances to total income.
 Correlation between loan and advance to investment.

1.7 Limitation of the study

Every study is restricted to certain limitations and the present study report is not
exceptional. So, it also has common limitations. The following are the major
limitations of the present study:
 The study only focuses on loan management practices.
 The study has been limited to only one bank.
 It does not give any idea about others banks.
 15

 The data collected are mainly from secondary sources and are interpreted as
accordingly.
 This study is only a case study; hence the conclusions drawn from the study do
not ensure wide applicability in all types of enterprise running in different
situations.
 The study covers the period of the last five years only.

CHAPTER II
RESULTS AND ANALYSIS

2.1 Data Presentation and Analysis

Data collected from secondary sources are in raw form. It is necessary to arrange
these data so that it can be interpreted and understood by the researcher and reader of
this thesis. For this data is scanned, cleaned and organized. Different types of data
need different methods of representation. There are a number of methods which can
be used to present and interpret the data. However, the simple and easy way is to
present data in the form of chart, graph and table. There is various types of financial
ratio to make comparative analysis of financial statement.

2.1.1 Liquidity Ratio

Liquidity is a very critical part of a business. Liquidity is required for a business to
meet its short-term obligations. Liquidity ratios are a measure of the ability of a
company to pay off its short-term liabilities. Liquidity ratios determine how quickly a
company can convert the assets and use them for meeting the dues that arise. The two
liquidity ratios are:
A. Current Ratio
B. Cash and Bank Balance to Total Deposit Ratio
A. Current Ratio
 16

Current ratio establishes the relationship between current assets and current
liquidities. It provokes about the short-term solvency of the firms. Nepal bank limited
five years current ratio is shown in the table below:
Table no. 1
(Rs. in million)
Year Current Assets Current Liabilities Current Ratio
2075/76 110109 100036 1.1006
2076/77 164803 124900 1.3194
2077/78 144757 150540 0.9615
2078/79 199876 178511 1.1196
2079/80 236994 210931 1.1235
Mean 1.1251

Source: (Annual report of NBL from year 2075 to 2080)

According to the above table a bar graph is plotted which shows current assets,
current liabilities and current ratio of NBL for five years.

Figure 1

Current Ratio
260000
Current Assets and Current Liabities

240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2075/76 2076/77 2077/78 2078/79 2079/80
Year

Current Assets Current Liabilities

Source: Table no. 1

The above table clearly shows that the current ratio of NBL is below the standard i.e.
2:1, but still above 1 in all years except in the year 76/77. Here current assets are less
 17

than two times the current liabilities. This indicates that bank assets are used to
optimum level and bank is unable to maintain standard level.

A. Cash and Bank Balance to Total Deposit Ratio:

This Ratio points to the Banks capacity to cover their deposits like current, calls,
saving and margin. Nepal bank limited five cash and bank balance to total deposit
ratio is shown in the table below:

Table No. 2
Year Cash and Bank Total Deposit Ratio
Balance
2075/76 4639 99831 0.0464
2076/77 4301 118,275 0.0363
2077/78 4943 142,989 0.0345
2078/79 6327 163,623 0.0386
2079/80 6390 197,167 0.0324
Mean 0.0376
(Rs. in million)
Source: (Annual report of NBL from year 2075 to 2080)
According to the above table a bar graph is plotted which shows cash and bank
balance and total deposit of NBL for five years of study period.

Figure 2
 18

Cash and Bank Balance to Total deposit Ratio

Cash Balance and total Deposit

220000
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2075/76 2076/77 2077/78 2078/79 2079/80

Year

Cash and bank Balance Total Deposit

Source: Table no. 2

The above table shows that the cash and bank balance to total deposit range is 3.24%
minimum to 4.64% maximum and average is 3.76% over the research period.

2.1.2 Assets Management Ratio

They are also called turnover or efficiency ratios.
A. Loan and Advance to Total Deposit Ratio:
Analysis of loan and advance to total deposit
Table no.3
Fiscal Year Loan and Advances Total Deposit Ratio (in%)
2075/76 78,296 99,831 0.7842
2076/77 95,725 118,275 0.8093
2077/78 106,825 142,989 0.7470
2078/79 141,959 163,623 0.8675
2079/80 177640 197,167 0.9009
Mean 0.8218
(Rs. in million)

Source: (Annual Report of NBL year 2075 to 2080)

According to the table above, a bar graph is plotted which shows the loan and
advance and the total deposit of NBL for the study period.
 19

Figure 3

220,000
Loan and Advance to Totlal Deposit Ratio
200,000
180,000
Loan and Advances and
160,000
Total Deposit
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2075/76 2076/77 2077/78 2078/79 2079/80

Year

Loan and advances Total deposit

Source: Table no. 3

This above table shows that the loan and advances to total deposit ratio of NBL has
the highest of 90.09% in 2079/80 and lowest of 74.70% in 2077/78. It shows that the
bank is utilizing its total deposit and loan as it is in an increasing trend. The bank is
able to provide loans and advances from its total deposit.

B. Loan and Advance to Total Assets Ratio

Table no. 4
(Rs. in million)
Fiscal Year Loan and Advances Total assets Ratio
2075/76 78,296 133,467 0.5866
2076/77 95,725 171,516 0.5581
2077/78 106,825 191,163 0.5588
2078/79 141,959 222,645 0.6376
2079/80 177,640 260,077 0.6830
Mean 0.6048
Source: (Annual Report of NBL year 2075 to 2080)
According to the above table a bar diagram is plotted below to show the loan and
advances and total assets along with their ratio.
Figure 4
 20

Loan and Advances and Total assets Ratio

Loan and advances and Total assets 280000
260000
240000
220000
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2075/76 2076/77 2077/78 2078/79 2079/80

Year

Loan and advances Total Assets

Source: Table no. 4

This above table shows the loan and advances to total assets ratio of NBL with the
maximum of 68.30% in year 2079/80 and minimum of 55.81 in 2076/77. The average
ratio is 60.48%.

C. Loan and Advances to Shareholder’s equity Ratio

Table no. 5
Year Loan and Shareholder’s Ratio
Advances Equity

2075/76 78,296 22,972 3.4083

2076/77 95,725 29,281 3.2691
2077/78 106,825 30,031 3.5571
2078/79 141,959 33,215 4.2739
2079/80 177,640 35,463 5.0091
Mean 3.9035
Source: (Annual Report of NBL from year 2075 to 2080)
According to the above table, a bar graph is plotted below which shows the loan and
advances and shareholder equity of NBL for the five years.
Figure 5
 21

Loan and Advances and Shareholder's Equity Ratio

200,000

Loan and Shareholder's equity

180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2075/76 2076/77 2077/78 2078/79 2079/80
Year

Loan and Advances Shareholder's Equity

Source: Table no. 5

The above graph shows that loans and advances are in increasing order and
shareholder’s equity are also in increasing order. The ratio is in increasing trend and
the highest ratio is 5.0091 in year 2079/80 and the lowest ratio is 3.2691 in year
2076/77.

2.1.3 Profitability Ratio

This ratio provides useful insights into the financial well-being and performance of
the business. The profitability ratio shows how successful a business is in earning
profits over a period in relation to operation costs, revenue, and shareholders’ equity.
A. Net profit to Total Assets Ratio (ROA)
Table no. 6
(Rs. in million)

Year Net Profit Total Assets Ratio

2075/76 3,216 133,467 0.0241

2076/77 2,597 171,516 0.0151

2077/78 2,333 191,163 0.0122

2078/79 2,961 222,645 0.0132

2079/80 2,923 260,077 0.0112
 22

Mean 0.0152
(Source: Annual Report of NBL from 2075 to 2080)
According to the above table a graph is plotted to show the ROA of NBL for the five
years.
Figure 6

R0A
300,000
Net Profit and Assets

250,000
200,000
150,000
100,000
50,000
0
2075/76 2076/77 2077/78 2078/79 2079/80
Axis Title

Net Profit Total Assets

Source: Table no. 6

This above table shows that the net profit to total assets ratio of NBL is maximum at
2.41% and minimum at 1.12% during the study period. The analysis indicates that the
bank has not been able to generate surplus by utilizing assets efficiently. ROA of
Nepal Bank Limited is in fluctuating trend and its management is not able to mobilize
the available sources and tools efficiently.

B. Return on Equity Ratio (ROE)

Table no. 7
(Rs. in million)
Year Net Income Shareholder’s Equity Ratio

2075/76 7,606 22,972 0.3311

2076/77 7,260 29,281 0.2479
2077/78 6,292 30,031 0.2095
2078/79 7,691 33,215 0.2315
2079/80 7,216 35,463 0.2034
Mean 0.2445
(Source: Annual Report of NBL from the year 2075 to 2080)
 23

According to the above table a graph is plotted to show the ROE of NBL for the five
years.
Figure 7

ROE
Net Income and Shareholder's

40,000
Equity

20,000

0
2075/76 2076/77 2077/78 2078/79 2079/80

Year

Net Income Shareholder's Equity

Source: Table no. 7

This above table shows that the net income to shareholder’s equity ratio of NBL is
maximum at 33.11% in the year 2075/76 and minimum at 20.34% in the year
2079/80. It shows that the net income is fluctuating, and shareholder’s equity is
increasing till 2078/79 but it decreases in 2079/80. Shareholder’s equity is maximum
in the year 2079/80 but net income is maximum in the year2078/79. The average of
the ROE is 24.45% which is generally considered good.

C. Net Profit to Total Deposit Ratio

Table no. 8
(Rs. in million)
Year Net Profit Total Deposit Ratio
2075/76 3,216 99,831 0.0322
2076/77 2,597 118,275 0.0219
2077/78 2,333 142,989 0.0163
2078/79 2,961 163,623 0.0181
2079/80 2,923 197,167 0.0148
Mean 0.0206
(Source: Annual Report of NBL from the year 2075 to 2080)
 24

According to the above table, a bar graph is plotted below which shows the net profit
and total deposit ratio of NBL for the five years.
Figure 8

Net Profit to Total Deposit Ratio

220,000
200,000
Net Profit and Deposit

180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2075/76 2076/77 2077/78 2078/79 2079/80

Year

Net Profit Total Deposit

Source: Table no. 8

This above table shows that the net profit to total deposit ratio of NBL is maximum at
3.22% in 2075/76 and minimum at 1.48% in 2079/80. The ratio is in fluctuating order
and the net profit is maximum in the year 2075/76 and deposit is maximum in the year
2079/80.

Statistical Analysis
1. Correlation Coefficient
Correlation coefficients are used to measure the strength of the linear relationship
between two variables. It is an indicator of the strength of the linear relationship

between two different variables X and Y.

A. Correlation between Deposit and Loan and Advances

Bank mobilizes investment and lending. Deposits are considered as raw material in a
banking system. It measures how much change in one variable affects other variables.
It shows degree of relationship between loan and deposit. Here loan is dependent
variable and deposit is independent variable.
Table no. 9
(Rs. in billion)
Year X Y XY X^2 Y^2
 25

2075/76 100 78 7,800 10,000 6,084

2076/77 118 96 11,328 13,924 9,216
2047/78 143 107 15,301 20,449 11,449
2078/79 164 142 23,288 26,896 20,164
2079/80 197 178 35,066 38,809 31,684
∑X= 722 ∑Y= 601 ∑XY=927,83 ∑X^2= ∑Y^2=
Total 110,078 78,597
Here,
X= Deposit
Y= Loan and advances
Dependent variable: Loan an Advances
n∑ XY −∑ X . ∑ Y
Correlation coefficient (R) =
√[ n∑ X −(∑ X ) ][ n ∑ Y
2 2 2 2
−(∑ Y ) ]
5∗92783−722∗601
=
√[ 5∗110078−(722) ] [ 5∗78597−(601) ]
2 2

= 0.848
Coefficient of Determination ( R2 ¿=0.719
Interpretation:
From the above table, it is observed that the overall correlation coefficient of NBL is
0.848. Relatively correlation between deposit (independent variable) and loan
(dependent variable) is less than 1. Further (R) is between 0.7 to 0.99, so there is
high degree of positive correlation between loan and deposit. Coefficient of
determination ( R2 ¿ is 0.719 which indicates that deposit has only 71.9% role in loan
and rest is by another unforeseeable factor.

B. Correlation between Total Income and Loan and Advances

The correlation between total income and loan and advances measures the degree of
relationship between these two variables. Its shows percentage change in loan and its
effect on income. Here loan is a dependent variable and total income is an
independent variable.
Table no.10
(Rs. in billion)

Year X Y XY X^2 Y^2

 26

2075/76 7 78 546 49 6,084

2076/77 8 96 768 64 9,216

2077/78 7 107 749 49 11,449

2078/79 8 142 1,136 64 20,164

8 178 1,424 64 31,684

2079/80
∑X = 38 ∑Y= 601 ∑XY= ∑X^2= ∑Y^2=
Total 4,623 290 78,593
Here,
X = Total income
Y =Loan and advances
Dependent variable: Loan an Advances
n∑ XY −∑ X . ∑ Y
Correlation coefficient (R) =
√[ n∑ X −(∑ X ) ][ n ∑ Y
2 2 2 2
−(∑ Y ) ]
5∗4623−38∗601
=
√ [5∗290−38 ¿ ¿¿ 2 ] [ 5∗78593−(601) ] 2

= 0.634
Coefficient of Determination ( R2 ¿ = 0.401
Interpretation:
From the above table, it is observed that the overall correlation coefficient of NBL is
0.634. Relatively, the correlation between total income (independent variable) and
loan (dependent variable) is less than 1. Further (R) is between 0.5 to 0.699, so there
is moderate degree of positive correlation between loan and deposit. Coefficient of
determination ( R2 ¿ is 0.401, which indicates that total income has only 40.1% role in
loan and rest is by another unforeseeable factor.

C. Correlation between Investments and Loan and Advances

Most banks give first priority to loan and then only excess fund are used for
investment. Thus, availability of funds for investment depends on lending policy. So,
increase and decrease in loan directly reduces or increase the volume of investment.
This correlation measures the degree of relationship between investment and loan and
advances of NBL. Here investment is an independent variable and loan are dependent
variable.
 27

Table no. 11
(Rs. in billion)
Year X Y XY X^2 Y^2
2075/76 16 78 1,284 256 6,048
2076/77 16 96 1,536 256 9,216
2077/78 33 107 3,531 1,089 11,449
2078/79 30 142 4,260 900 20,164
2079/80 43 178 7,654 1,849 31,684
∑XY=
2 2
18,265 ∑X = ∑Y =
Total ∑X= 138 ∑Y= 601 4,350 78,561
Here,

n∑ XY −∑ X . ∑ Y
Correlation Coefficient (R) =
√[ n∑ X −(∑ X ) ][ n ∑ Y
2 2 2 2
−(∑ Y ) ]
5∗18,265−138∗601
=
√[¿5 × 4350−( 138 ) ][5× 78561−(601) ]¿
2 2

= 0.905
Coefficient of Determination ( R2 ¿=0.9052=0.819
Interpretation:
From the above table, it is observed that the overall correlation coefficient of NBL is
0.905. Relatively, the correlation between Investment (independent variable) and
loan (dependent variable) is less than 1. Further (R) is between 0.7 to 0.99, so there is
a high degree of positive correlation between loan and deposit. Coefficient of
determination ( R2 ¿ is 0.819 which indicates that investment what only 81.9% role in
loan and rest is by another unforeseeable factor.

2.2 Major Findings

Based on the major findings are summarized as follows:
 A higher current ratio indicates that a company is able to meet its short-term
obligations. NBL has its current ratios higher in all years except in the year
2077/78, still below from the standard value i.e. 2:1. Somehow, in all the five
years current assets are higher than current liabilities. The higher the ratio, the
 28

higher is the safety margin that the business possesses to meet its current
liabilities. Nepal Bank Limited has the highest ratio of 1.3194 in year 2076/77 and
lowest ratio of 0.9615 in year 2077/78.
 Cash and Bank balance to Total Deposit ratio range from 4.64% maximum in year
2075/76 to 3.24% minimum in year 2079/80. The average ratio is 3.76% for the
research period.
 The Loan and Advances to Total Deposit ratio of NBL has the highest of 90.09%
in 2079/80 and lowest of 74.70% in 2077/78. It shows that the bank has been
utilizing its total deposit and loan as it is in an increasing trend. The ratio
increased in the first two years and then decreased in the third year and again
starts to increase in the next two year of the research period. This analysis shows
that the bank is able to provide loans and advances from its total deposits utilizing
them efficiently for loan and advances.
 The Loan and Advances to Total Asset ratio of NBL kept increasing on first two
year then decreased in the third year and again started to increase in the last two
years of the study period. It varied from maximum 68.30% to minimum 55.81%
with an average of 60.48%. As CV is 96.8%, which means there is more
variability around the mean.
 The amount of loan and advances to Shareholder's equity ratio of NBL varied
from maximum 5.0091in year 2079/80 to minimum 3.2691 in year 2076/77 with
an average of 3.7035. Therefore, the ratio is in increasing trend except in the 2 nd
year of the study period.
 Net profit to Total Assets Ratio (ROA) of NBL is maximum at 2.41% and
minimum at 1.12% during the study period. The analysis indicates that the bank
has not been able to generate surplus by utilizing assets efficiently. The net profit
decreased from 2075/76 to 2077/78 and started to increase thereafter. ROA of
Nepal Bank Limited is in fluctuating trend and its management is not able to
mobilize the available sources and tools efficiently.
 The Net income to Shareholder’s equity ratio (ROE) of NBL is maximum at
33.11% in the year 2075/76 and minimum at 20.34% in the year 2079/80. It shows
that the net income is fluctuating, and shareholder’s equity is in increasing till
2078/79 but it decreases in 2079/80. Shareholder’s equity is maximum in the year
 29

2079/80 but net income is maximum in the year2078/79. The average of the ROE
is 24.45%, which is generally considered good.
 The Net profit to Total Deposit ratio of NBL is maximum at 3.22% in 2075/76
and minimum at 1.48% in 2079/80. The ratio is in fluctuating order and the net
profit is maximum in the year 2075/76 and deposit is maximum in the year
2079/80. This suggest that the bank profitability has decreased over time.
 It is observed that the overall correlation coefficient of NBL is 0.848. Relatively
correlation between deposit (independent variable) and loan (dependent variable)
is less than 1. Further (R) is between 0.7 to 0.99, so there is a high degree of
positive correlation between loan and deposit. Coefficient of determination (
2
R ¿ is 0.719 which indicates that deposit has only 71.9% role in loan and rest is
by another unforeseeable factor.
 It is observed that the overall correlation coefficient of NBL is 0.634. Relatively,
the correlation between total income (independent variable) and loan (dependent
variable) is less than 1. Further (R) is between 0.5 to 0.699, so there is moderate
degree of positive correlation between loan and deposit. Coefficient of
determination ( R2 ¿ is 0.401, which indicates that total income has only 40.1%
role in loan and rest is by another unforeseeable factor.
 The overall correlation coefficient of NBL is 0.905. Relatively, the correlation
between Investment (independent variable) and loan (dependent variable) is less
than 1. Further (R) is between 0.7 to 0.99, so there is a high degree of positive
correlation between loan and deposit. Coefficient of determination ( R2 ¿ is 0.819
which indicates that investment is only 81.9% role in loan and rest is by another
unforeseeable factor.
 30

CHAPTER III
SUMMARY AND CONCLUSION

3.1 Summary
Commercial banks play an important role in the economic development of the country
as they provide capital for the development of industry, trade as well as agriculture by
disbursing the savings collected as deposits from the public. The primary objective of
such banks is to earn profit by granting loans and advances to people associated with
various fields like trade, agriculture, industry etc. How well a bank manages its
investment has a great deal to do with the economic health of the country because the
bank loans support the growth of new business and trade and empower the economics
activities of the country. Presently there are twenty commercial banks operating in
Nepal.
Loan management is the essence of commercial banking: consequently, the
formulation and implementation of lending policies are among the most important
responsibilities of directors and management. Well-conceived lending policies and
careful lending practices are essential if a bank is to perform its credit. Lean
management affects the company’s profitability and liquidity. So, it is one of the
crucial decisions for the commercial banks.
The need of financial resources in a developing country like Nepal is essential for the
economic development of country. All the sectors from industrial and commercial to
agriculture and infrastructure need finding. Although the growth of industrial loans
has not been encouraging in recent years, there is sizable growth in commercial and
other short-term credits. Commercial banks are focusing loans on consumer loans like
housing, vehicle, education loan etc. it is encouraging to explore to new sector for
loan management, but it should be considered that industrial loan should be given
prime importance as the economy largely depends on their sector. Lending policies
are not systematic, and no clear-cut vision of policy is available on the lending aspect.
In Nepal it has been found that on approval and lending decisions are made flexible to
favor the personal networks. A new customer finds that the loan providing process
being very complicated and sometimes the documents submitted for loan sanctioning
are fraudulent and for formality purposes only.
 31

To meet the objectives of the study, the sources of secondary data of commercial
banks are analyzed by using financial tools such as ratio analysis. Simple descriptive
analysis tools such as mean and standard deviation are used. The ratio analysis
involves comparison for a useful interpretation of financial statements. The quantities
judgment regarding loan management of a firm can be done with help of ratio
analysis. For the analysis of data, the financial and statistical tools relevant to the
topic are used. In this study, the financial tools ratio analysis, liquidity ratio, asset
management ratios and profitability ratios are calculated to find out the lending
strength of these commercial banks. The data used in the research mainly secondary
nature and extracted from the annual reports of the concerned banks The financial
statement of five years period (2075/76 to 2079/80) is selected for the study purpose.

3.2 Conclusion
It can be conducted from the observance and analysis of above data that lending loans
improves the business and other commercial sectors and develops the economic
activity of the nation. Therefore, it is very important for the policy makers to adopt
appropriate policies with an interest rate. It plays an indispensable role in the process
of development. They not only influence the structure of the economy but also its
development process. Commercial banks collect scattered saving from the people and
provide resources such as loans and advances to the people who need them. This
captivity builds an industrial environment in the country, creates employment and
investment opportunities for the people and consequently the economy of the country
secures proper growth. It is also important to better economic growth, socio economic
development and employment opportunities.

NBL has been able to maintain a good position in the banking industry of the country
and there has been an ongoing effort and commitment in enhancing its financial
position. The total deposit of Nepal Bank Limited has increased rapidly over the study
period. The highest total deposit of NBL is 197billion in 2079/80 and lowest is 99
billion in year 2075/76. Likewise, loan and advance of NBL has also increased over
the study period.
In liquidity current ratio, both current assets and liabilities are increased over the years
but NBL is not able to meet its standard ratio so it should increase its current assets.
 32

Its CV is low which means there is more stability between them. More steps should be
taken by organizations to keep in view of economic development of the country in
such a manner customer, nation and organization get the benefit.

NBL has efficiently utilized its deposit for loan. As coefficient of variation is also
lower in loan to total deposit ratio, the more precise is the estimate and more stable.
The bank is not able to mobilize the resource for earning profit with its assets. It
should utilize the resources in such a way they earn more profit for a successful
business.
NBL has a positive relationship between the two variables i.e.
 Deposit and loan and advances.
 Income and loan and advances.
 Investment and loan and advances.
 33

BIBLIOGRAPHY

Dahal (2009) “Experience of the Nepalese Commercial Bank and Challenges Ahead”
Heinola (2005), “Credit Management of Bank” Thesis submitted to Tribhuwan
University, Kathmandu.
Kafle (2009), “Non-Performing Loans of epalese commercial Banks”
Kafle (2009). “Non-performing loans of Nepalese commercial banks.”
Norwnse and Aesmota (2009), “Approximate Maximim Likelihood Commercial bank
Loan Management Model”
Poudyal (2003), “Bank credit and debt recovery” Kathmandu.
Shrestha (2004) “A study in deposit and credit of Commercial Banks in Nepal”
Shrestha (2005), Credit Management with special reference to Nepal SBI bank”
Shrestha, (2004), “A study in deposit and credit of commercial banks in Nepal”
Kathmandu.
Thapa (2011), “Loan Management Commercial Banks”Dahal, (2009), “Experience of
the Nepalese Commercial Banks and Challenges ahead”

Website
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http://www.nepalbank.com.np/
https://www.nrb.org.np/