CHAPTER I

INTRODUCTION

1.1 Background of the Study

With the financial liberalization, the number and types of financial institution in
developing countries have surged within recent years. The financial system has
become more complex day-by-day comprising of government as well as private
sectors financial institutions including bank, insurance companies, mutual fund,
finance companies and investment banks. Financial institutions have great influence
in the country’s economy as they assist in economic development of the country. The
role of banks in a financial market is that of a financial intermediary, which makes use
of loan and deposit services to effectively channel the idle funds of the public into
valuable production and other investment projects helping people to reach their goals.
It enables people to save for the future, invest in profitable business opportunities and
to protect themselves against unpredictable shocks. Banking system is the backbone
of financial intermediation through the mobilization and channeling of financial
resources. The recent developments in banking technology have transformed banking
from the traditional brick-and-mortar infrastructure of staffed branches to a system
supplemented by other channels like Automated Teller Machines (ATM), credit/debit
cards, internet banking, online money transfers, etc. (Bello, 2005). Banks in
performing their pivotal role in the economy, facilitate financial settlement through
the payment system, influence money market rates and provide a means for
international payment. The sector mobilizes funds from the surplus-spending units
into the economy and by on lending such funds to the deficit spending units for
investment, banks in the process increase the quantum of national savings and
investment (Mordi, 2004) Individual and entities need money to pursue their daily
business, so they place their money at money market to earn interest is termed as
deposit. It is a liability owed by bank and other financial institution to the depositor.
Deposits of commercial banks are the money deposited by the individuals and the
corporation in different form of accounts with the expectation of earning certain stable
return, safety, easy transaction and so on.
The background of the study on deposit mobilization typically focuses on
understanding the factors that influence individuals and businesses to deposit their
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savings or funds into financial institutions such as banks. This area of study is crucial
for banks and policymakers as it directly impacts a country's financial stability and
economic growth. Overall, the background of the study on deposit mobilization aims
to provide a comprehensive understanding of the drivers and barriers to deposit
growth, thereby informing strategies for banks, policymakers, and regulators to
enhance financial inclusion, stability, and economic development.

1.2 Profile of Himalayan Bank Limited

Himalayan Bank Limited, established in 1993 as a Joint Venture of Habib

Bank Limited of Pakistan has been successfully reigning the banking industry since
its inception. The bank holds the legacy of introducing various banking services for
the first time in Nepal from the very beginning. Products such as Premium Savings
Account, HBL Proprietary Card and Millionaire Deposit Scheme besides services
such as ATMs and Tele-banking were first introduced by HBL which was able to win
customers’ hearts during that time. Since its establishment, the bank has been highly
focused on innovative approaches and customer satisfaction. The bank started its
journey from Employees Provident Fund Building, popularly known as Sanchayakosh
Building at Thamel, Kathmandu. HBL has also been serving Nepali citizens living in
the country and abroad through remittance service. Presently, HBL is the biggest
inward remittance handling bank in Nepal. With its exclusive and proprietary online
money transfer software – Himal Remit, HBL is among the top remittance service
providers in Nepal having ties with financial institutions based in the Middle East,
Gulf region, UK, Australia, USA, Japan, Israel, South Korea, Malaysia, Singapore,
Portugal, Spain and Hong Kong. With respect to the Merger and Acquisition Policy
introduced by Nepal Rastra Bank, Himalayan Bank Limited acquired Civil Bank
Limited at 100:80.28 swap ratio (A shareholders holding 100 scrips of CBL will get
80.28 scrips of HBL) and commenced the joint operation as “Himalayan Bank
Limited” from February 24, 2023. Currently, the Banks has been happily serving its
customers from total of 176 Branch Offices and 20 Extension Counters spread all over
Nepal. Corporate Social Responsibility (CSR) holds one of the very important aspects
of HBL. Being one of the corporate citizens of the country, HBL has always promoted
social activities. Many activities that do a common good to the society have been
undertaken by HBL in the past and this happens as HBL on an ongoing basis.
Significant portion of the
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sponsorship budget of the Bank is committed towards activities that assist the society
as large.

1.3 Objectives of the Study

The major objective of this study is to determine the effects of deposits mobilization
on the financial performance of Himalayan Bank Ltd. This research work is to
examine the efficiency of Himalayan Bank by making a study of deposits
mobilization. It studies how they utilize deposits to fulfill the financial needs of the
different sector of economy. The specific subjective of the study are given as below:

 To find out deposit trend of Himalayan bank.

 To study the total deposit mobilization in Himalayan bank
 To assess the impact of deposit mobilization strategies on the bank's profitability
and market position.
 To analyze cost of deposit.

1.4 Rational of the Study

Deposit is one of the basic sources of the bank to mobilize the fund, without deposit
bank cannot operate its activities. Therefore, bank has to focus on in collecting scared
small deposit and transfer this deposit into productive sector for the economic
development of nation. Hence, the study is to examine the performance of Himalayan
bank in deposit mobilization. Analyzing growth of deposit, loan and advances,
investment, and interlink of financial performance and deposit mobilization, give the
ideas of the banks functioning, strength and weakness of the bank’s strategies.
Therefore, the policies and programs can be made to improve the performance of the
bank. This study is significance to know the challenges in deposit mobilization for
Himalayan bank.

The study deals with profitability in subject to total deposit, loan and advances,
investment, Net Profit, as an aid to economic development of the country by making
research of deposit mobilization of Himalayan bank and their utilization to fulfill the
need of the different sector of the economy. It is helpful to investor, customers and
management team to know how BFIs are utilizing deposit gather from general people
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and mobilizing into lending activities either by loan or capital market in order to
generate profit.

The other significance of this study is, to support further investigation on the area.
Since, there are no sufficient studies conducted on this area of deposit mobilization in
Nepal, it will also help other researchers through revealing issues for further research.

1.5 Review of Literature

A literature review is scholarly paper, which includes the current knowledge including
substantive finding, as well as the theoretical and methodological contribution to a
particular topic. Literature reviews are the secondary source, and do not report new or
original experimental work. Effective research is based upon the past knowledge and
a survey of past literature. A review of previous related research includes review of
various research/scholar journals and articles and dissertation and other related
studies. It can be illustrated in the following manner (Larabee, 2007). A review of the
literature on deposit mobilization reveals a rich field of research that spans economics,
finance, and banking. Overall, the review of literature on deposit mobilization
underscores its critical importance for financial stability, economic growth, and
inclusive development. By understanding the complex interplay of factors influencing
deposit behaviour, researchers and policymakers can formulate effective strategies to
promote savings mobilization and enhance the resilience of financial systems.

1.5.1 Conceptual review

Commercial Bank Act 2031 B.S. of Nepal has defined that “A commercial bank is
one which exchange money, deposits money, accepts deposits, grants loan and
performs commercial banking function and which is not a bank meant for co-
operative, agriculture, industries or for such specific purpose.” The main objective of
the commercial banks is to collect the deposit. Commercial banks accept the deposit
from the public who has surplus funds under three main headings namely current,
savings and fixed deposits. According to Mishkin and Eakins in their book "Financial
Markets and Institutions," 8th edition: “A deposit is a sum of money placed by a
customer in a bank or other financial institution, with the expectation that it will be
held on demand or for a specified period, and will earn some amount of interest." All
the deposits help
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to increase the income of bank. Deposit analysis of the bank help to mobilize the
deposit of bank effectively. There are different types of deposit. They are given
below:

Fixed deposit
Fixed deposit is a type of savings or investment account that promises the investor a
fixed rate of interest. In return the investor agrees not to withdraw or access their
funds for a fixed period of time which could range from 3 months and above. Interest
rate varies according to different time period of deposit.

Saving deposit
A saving deposit is a type of bank deposit that an individual can start to save money
and earn interest for future earn. A saving account is one of the primary services
offered by the banks. Saving account also helps to perform various other financial
activities like paying bills, making online purchases and investing in equity. Interest
rate varies according to different types of saving deposit according to the rules of
bank.

Current deposit
Current deposit is a type of savings deposit with no deposit term specified. Current
deposit means a form of non-interest bearing demand deposit where withdrawals are
allowed, any number of times, depending upon the balance in the account or up to a
particular agreed amount. It is also known as demand deposit.

Call deposit
A call deposit account is a bank account for investment funds that offers the
advantages of both a savings and a current account. Like a current account, a call
deposit account has no fixed deposit period, provides instant access to funds and
allows unlimited withdrawals and deposits. The call deposit also provides the benefits
of a savings account through the accrual of interest.

Collecting small scattered amount of capital through different media and investing the
deposited fund in productive sector with a view to increase the income of the
depositors is meant deposit mobilization. In other words, investing the collecting fund
in the productive sectors and increasing the income of the depositors, also supports
increase in the saving through the investment of increased extra amount. When we
discuss about deposit mobilization, we are concerned with increasing the income of
the low income group of people and to make them able to save more and invest the
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collected amount in the development activities. Fiscal policy of the government and
monetary policy of the
 7

central bank for economic development of a country can be supported by deposit

mobilization. Deposit mobilization helps to convert idle money in productive sector.
Again, it helps in money supply, which saves the country from deflation and helps
central banks objective in monetary policy.

The depositors must be made to understand that the bank is fully solvent. The
depositor’s confidence could be secured only have the bank is able to meet the
demand for cash promptly and fully. The banker has to keep adequate cash for this
purpose. Cash is an idle asset and the bankers can’t afford to keep a large possession
of his assets in the form of cash. Cash brings in no income to the bank. Therefore, the
bankers have to distribute his assets in such a way that he can have adequate profits
without sacrificing liquidity.

1.5.2 Review of journals and articles

There is rich theoretical and empirical literature exploring the factors influencing
bank’s financial performance.

Bajracharya, Bodhi B. (2019), in this article, “Monetary Policy and Deposit

Mobilization in Nepal” has concluded that the mobilization of domestic saving is one
of the monetary policies in Nepal. For this purpose, commercial banks stood as the
vital and active financial intermediary for generating resources in the form of deposit
of the private sector so for providing credit to the investor’s in different aspects of the
economy.

Shrestha, R.L. (2018), in his article, “A study on deposit and credit of commercial
banks in Nepal”, Conclude that the credit deposit ratio would be 51.30, other things
remaining the same. In Nepal, which was the lowest under the period of review.
Therefore, he had strongly recommended that the joint venture banks should try to
give more credit entering new field as far as possible, otherwise they might not be
able to absorb even the total expenses.

Pradhan, S.B. (2016), in his article “Deposit Mobilization, Its Problem and
Prospects” has present that deposit is the life-blood of very financial institution like
commercial bank, finance company, co-operative or non-government organization.
He further adds consider the most of banks and finance companies that the latest
figure does produce a strong feeling that serious review must be made on problems
and prospects of deposit
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sector. Leaving few joint venture banks, other organizations rely heavily on the
business deposit and credit disbursement.

The writer has highlighted following problems of Deposit Mobilization in Nepalese

Context:

 Most of the Nepalese do not go for saving in institutional manner, because of lack
of good knowledge. However, they are very much used of saving in the form of
cash or ornaments. Their reluctance to deal with institutional system is governed
by the lower level of understanding about financial organization process,
withdrawn system, and availability of deposing facilities and so on.
 There is unavailability of the institution services in rural areas.
 Due to lesser office hours of banking system people prefer holding cash in the
personal possession.
 There this no more mobilization and improvement of the employment of deposits
and loan sectors.

The writer has also recommended the following points for the prosperity of deposit
mobilization which are as follows:

 By providing sufficient institutional services in the rural areas. By adding service

hour’s system to bank.
 Nepal Rastra Bank should organize training program, to develop skilled
manpower.
 By spreading co-operative to the rural areas development mini branch services.

Williamson (2011), conducted research in the topic of “Personal Saving in

Developing Nations” found that saving and investment decisions are highly
interdependent in Asia sectors interest rate. Mostly household people try to save
money for short period. Its influence is less in the long run saving decisions.

1.5.3Review of previous thesis

Maharjan, N. (2017), in his thesis entitled, “Deposit Mobilization of RBB, Kirtipur
Branch” with the following objectives:
 To examine relationship between the amount of total deposit and amount of total
credit granted by the RBB Kirtipur branch.
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 To see the impact of interest rates of loan on the credit extended by RBB with
special case study of Kirtipur branch.
 To study the increasing or decreasing trend of deposit mobilization of RBB,
Kirtipur branch.
The researcher found that the commercial banks in Nepal are doing well but they are
not giving satisfactory results due to some internal and external factors. He also found
that RBB, Kirtipur Branch is successful to collect deposit but it is facing the problem
of utilization of its found. Bank has good deposit collection but it has maintained low
investment policy on loan and advances. So, there is very much wider gap between
total deposit and total credit. The researcher further fund that the bank has not tried to
find out the new sectors of investment and he also found that the control office has not
also given authority to the branch manage to invest in government securities.

Panday, Pramita (2016), Conducted research on the topic of “A Study on the

Liquidity Mobilization of Joint Venture of NABIL, SCBNL, and HBL” has tried to
examine the liquidity positions of all the banks, which were strong, and enough to
meet this immediate needs of cash and short-term obligations. Data is used for five
years from the year 2010 to 2015. Only secondary data are used. Coefficient of
correlation has been applied in order to calculate the Loans and advance and deposits.

In this thesis, the researcher has fund the ways of utilizing the surplus deposit and the
right reinvestment for the economic development of a country. The specific objectives
of the study are as follows:
 To analyze the deposit position of the banks under study.
 To analyze the reinvestment position of the banks.
 To analyze the gap between deposits and loan and advances.
 To provide suggestions for the improvement on the basis of findings.

Manandhar, Shaseela (2016), conducted research on the topic of “A Study on the

Deposit Mobilization of RBB” has tried to examine the role of RBL in the deposits
accumulation and to see how far the blank is able to utilize the collected deposits.
This study covers 10 year’s data from 2005 to 2015 and based on secondary data.
Correlation, percentage and ration analytical tools of statistics are used for the
analysis an interpretation of data.
 1
0
This study tries to analyze relationship between the amount of the total deposit and
amount of total credit granted by RBB.
The specific objectives of the study are as follows:
 To examine and analyze the various deposit services offered by RBB.
 To evaluate the effectiveness of current RBB deposit Policy.
 To study the strength and flows for the existing deposit policy and relationship of
deposit and loans and advances of RBB.
 Identification of RBB interest rates of deposits has positive relationship with the
deposit collection of RBB.
 To analyze and examine the deposited fund position of RBB.
The Researcher found that the deposit credit ratio is only 76.55% on average, which is
satisfactory. The position of deposit collection is increasing. But the utilization of
these deposits is not in favorable condition. This average credit deposit ratio shows
that the RBB has to be improve to mobilize its collected fund better and better in
future. It is also observed the total credit including Loan and advances and bill
discount.

Karmacharya, M.N. (2014), conducted research on the topic of “A Study on the

Deposit Mobilization of NBL” has tried to examine the role of NBL in the deposits
accumulation and to see how far the bank is able to utilize the collected deposits. This
study covers 8 year’s data from the year 2002 to 2010 and based on secondary data.
Correlation, percentage and ratio analytical tools of statistics are used for the analysis
and interpretation of data.

The writer found that the deposit credit ratio is only 52% on average, which shows
unutilized resources are increasing. The security-marketing corporation, which is
recent established, can play an active role for utilization of unutilized resources. The
writer further found that NBL should not only concentrate in the extension of short-
term credit only. Bank should increase the level on priority sector and extent its
branches to meet growing needs of the country.

1.5.3 Research Gap

All the above research reviewed studies focused on some common major points. The
research has studied about Deposit mobilization and its reinvestment position. All of
the previous researchers have pointed out, no proper planning system and they have
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recommended for the effective implementation of proper deposit mobilization system

in their respected productive sector.
Most of them pointed these common points like: only Bank has good deposit
collection but it has maintained low investment policy on loan and advances. So, there
is very much wider gap between total deposit and total credit and further fund that
the bank has not tried to find out the new sectors of investment and also found that the
control office has not also given authority to the branch manager to invest in
government securities and other investment sector.
Due to urbanization many banks have been established under urban area but in rural
areas there are only few banks established. Only two or three types of banks named
with Gramin Bikash Bank, Rastrya Banijya Bank and Nepal Bank Ltd. have been
established with a view to provide service to the public people in rural areas which do
not show proper functioning of Banks in our country. Since, there is large number of
people in villages. If the banks had utilized the deposit in villages and made people
easier in rural areas, it would have become easier for banks to develop as well as for
country in economic development. This research is focusing only on Deposit
mobilization. It emphasizes on a study of Deposit mobilization of "Himalayan Bank
Limited” and its contribution to the developing country like Nepal.

1.6 Research Methodology

This chapter contains the tools and techniques these are applied on the study. The
financial and statistical tools which are used for the analysis and presentation of data
are described in this chapter. This chapter includes research design, justification for
the selection of study unit, nature and sources of data, methods of data collection, and
data analysis tools.

1.6.1 Research Design

The study depends on the secondary data containing various financial parameters an
effective research techniques are applied to evaluate the deposit mobilization of the
bank. The main objective of this study is to analyze deposit mobilization of
Himalayan Banks. The deposit mobilization of the banks was analyzed by using data
obtained from the five-year end and internally generated accounting records
maintained by the sample banks.
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1.6.2 Population and Sample

The population refers to the entire group of interest from which data is collected and
analyzed to draw conclusions. Here in the context of commercial bank, the total
population is 20. We cannot collect and study all the data of every banks of Nepal so
we are taking Himalayan bank limited as a sample. Himalayan bank limited will
represent all the commercial banks of Nepal.

1.6.3 Nature and Source of Data

The study is based on the secondary data of HBL. All the necessary data has been
collected from HBL such as annual reports and prospectus of HBL. For the purpose
of the study, various information ware collected from number of institutions like
Nepal Rastra Bank, Ministry of Finance, National Planning Commission, Banking and
Financial Statistics Economic Reports, Annual Reports of Himalayan Bank Limited
etc. along with Economic survey and various related books, booklets, magazine,
journals, newspaper and related thesis. Besides necessary suggestions were taken from
various experts both inside and outside the bank whenever required.

1.6.4 Instrument and Techniques of Analysis

Various financial and statistical tools were used to achieve the objective of the study.
The analysis of data was done according to the pattern of data available. Various tools
applied in this study were presented in the form of graph, percentage, Karl Person’s
coefficient of correlation. The method of least square was adopted in this study.
Similarly, some strong accounting tools such as ratio analysis were for analysis:

Financial Tools
Deposit mobilization is analyze through the use of two important tools. The basic tool
is deposit analysis. Besides it, total investment and total income analysis were used.

Deposit analysis
Deposit analysis refers to the process of examining and evaluating the deposits made
by individuals, businesses, or organizations into a financial institution such as a bank.
It involves analyzing various aspects of the deposits to gain insights into the deposit
patterns, trends, and characteristics of customers or account holders. Deposit analysis
can provide valuable information to financial institutions, helping them make
informed decisions regarding risk management, marketing strategies, product
development, and customer service. By understanding deposit behaviors and
preferences, banks can tailor
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their offerings to meet the needs of different customer segments effectively. There are
different types of deposit such as fixed deposit, saving deposit, current deposit, call
deposit, etc. Deposit analysis can be done through the study of various types of
deposit and their ratios.

Fixed deposit to Total deposit ratio

Fixed deposit to total deposit ratio is the financial ratio that measures the proportion
of a bank’s fixed deposit to its total deposit.It is calculated by dividing the fixed
deposits by the total deposit.
𝐹𝑖𝑥𝑒𝑑 𝑑𝑒𝑜𝑠𝑖𝑡
Fixed deposit to total deposit ratio =
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑝𝑜𝑠𝑖𝑡

Saving deposit to total deposit ratio

Saving deposit is a type of deposit that helps people to save their money. Saving
deposit to total deposit ratio tells about the ratio between saving deposit and total
deposit. It is calculated by using the following formula:
Saving deposit to total deposit ratio = 𝑆𝑎𝑣𝑖𝑛𝑔 𝑑𝑒𝑝𝑜𝑠𝑖𝑡
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑝𝑜𝑠𝑖𝑡

Current deposit to total deposit ratio

Current deposit refers to a deposit to a bank account or financial institution without a
specified maturity date. Current deposit to total deposit ratio help to measure the
proportion between current deposit of a bank and its total deposit. It is calculated by
using the formula given below:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑑𝑒𝑝𝑜𝑠𝑖𝑡
Current deposit to total deposit ratio =
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑝𝑜𝑠𝑖𝑡

Call deposit to total deposit ratio

Call deposit to total deposit ratio is the ratio that measures the proportion of a bank’s
call deposit to its total deposit. It can be calculated by using the formula given
below:
𝐶𝑎𝑙𝑙 𝑑𝑒𝑝𝑜𝑠𝑖𝑡
Call deposit to total deposit ratio =
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑝𝑜𝑠𝑖𝑡

Statistical Tools
Some important tools are used to achieve the objectives of this study. In this study
statistical tools such as mean, standard deviation and co-efficient of variation have
been used.
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Arithmetic mean
Arithmetic mean of a given set off observation is their sum divided by the number of
observation. In general, x1, x2…............x3 are the given number of observation, their
arithmetic mean can be derived in this way;

̅X= ∑x
N

Where,
x̅ = Arithmetic mean
∑x = sum of observation
N = Number of pairs of observation

Standard Deviation
The standard deviation is the absolute measure of dispersion in which the draw back
present in other measure of dispersion as it satisfied most of the requisites of a good
measure of dispersion. Standard deviation is defined as the positive square root of the
mean as square of the deviation takes from the arithmetic mean. It indicates the ranges
and size of deviance from the middle or mean. It measures the absolute dispersion.
Higher the standard deviation Higher will be the variability and vice versa. Dispersion
measures the variation of the data from the central value. In other words, it helps to
analyze the quality of data regarding its variability. Standard deviation is determined
in the following way:

∑𝑋− 𝑋2̅
S.D =√
𝑛

Where,
N= number of observations
X = individual value
𝑋̅ = simple arithmetic mean

Coefficient of Variation
Coefficient of variation is the relative measure of dispersion based on the standard
deviation (Kothari, 1989). It is most commonly used to measure the variation of data
and more useful for the comparative study of variability in two or graphs or
distribution. The relative measure of dispersing based on the standard deviation is
known as the measurement of coefficient of standard deviation. The percentage of
measure of co- efficient of so is called co-efficient of variation. Less CV is the more
uniformity and consistency and vice versa. Symbolically, the coefficient of variation
 15

is defined as:
 16

S.D
CV = X̅

Where,
S.D. = standard deviation
̅X = mean
CV = Coefficient of variation

Bar diagram
A bar chart or bar graph is a chart of graph that presents categorical data with
rectangular bars with heights or lengths proportional to the values that they represent.
The bars can be plotted vertically or horizontally. Bar graphs with vertical bars are
sometimes called vertical bar graphs. A bar graph will have two axes. One axis will
describe the types of categories being compared, and the other will have numerical
values that represent the values of the data. It does not matter which axis is which, but
it will determine what bar graph is shown. If the descriptions are on the horizontal
axis, the bars will be oriented vertically, and if the values are along the horizontal
axis, the bars will be oriented horizontally.
A vertical bar chart is sometimes called a column chart. Bar graphs/charts provide a
visual presentation of categorical data. Categorical data is a grouping of data into
discrete groups, such as month of the year, age group, shoes sizes, and animals. These
categories are usually qualitative. In a column vertical bar chart, categories appear
along the horizontal axis and the height of the bar correspond to the value of each
category.
There are many different types of bar graphs. They are not always interchangeable.
Each type will work best with a different type of comparison. The comparison we
want to make will help determine which type of bar graph to use.

Line graph
A line graph is a type of chart used to show information that changes over tie. We plot
line graphs using several points connected by straight lines. We also call it line chart.
The line graph comprises of two axes known as ‘x’ and ‘y’ axis
 The horizontal axis is known as the x-axis.
 The vertical axis is known as the y-axis.
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1.7 Limitations of the Study

The study is based on different assumptions and suppositions. So, this study however
is not free from the restraints. The following are the limitations of the study:
 Primarily, the study is based on the secondary data.
 The study covers the different deposit position & its ratios of HBL based on the
reveals made by the financial position of the bank.
 The study covers the related data of the Bank from the F/Y 2075/76 to 2079/80
only.
 The accuracy of this study is based on the data available from the management of
Himalayan Bank and the various published documents of the Bank and the
response made by the respondents during the informal talk.
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CHAPTER-II

RESULTS AND ANALYSIS

This chapter deals with the results and analysis of data collected from the different
sources. The purpose of this chapter is to study evaluate and analyze the financial
performance of Himalayan Bank Ltd. in the framework of Deposit Mobilization.

2.1 Data Presentation and Analysis of Results

The data collected from different sources has been refined and document in Excel
tables, which are further processed to analyse and arrive at the findings on the
financial conditions of HBL in terms of Deposit Mobilization framework.

2.1.1 Deposit Position of HBL

Deposit is the main source of commercial banks. The existence of commercial
banks basically depends upon the mobilization of deposits. It is important that
commercial bank’s deposit policy is the essential policy for its existence. The
growth of bank depends primarily upon the growth of its deposit. The commercial
banks may function when they have adequate deposits. Higher the volume of
deposit, higher will be the volume of lending and investment, which again generate
higher volume of profit. Banks earn profit by charging high rate of interest on
investment in comparison to interest on deposits. The deposit of banks are invested.
There is a great need of such deposit in developing countries. Banks being the
intermediate accepts such sort of money and helps to canalize this in productive
sector. So the importance of banks and financial intermediaries is big. HBL bank
provides banking services to the people and contributes in the economic development
of the country. The bank major activities include collection of deposit. The deposit
position of HBL is as follows.
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Table 1
Deposit Position of HBL (in Million)

Fixed Current Saving Call Others Total Growth

Year
Deposit Deposit Deposit Deposit Deposit Deposit (%)

2075/76 2446 2704 4972 4945 439 15506 -

2076/77 2252 3034 5230 2541 390 13448 -13
2077/78 2310 2688 5994 2801 326 14119 5
2078/79 2079 2799 7026 2341 342 14587 3
2079/80 3449 2910 8771 3851 365 19347 33
(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to 2079/80)

25000

20000

15000

10000

5000

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

Figure 1: Deposit Position of HBL

In the table, the total deposit decreases at the second year of the study period FY
2076/77 by -13%. After the FY 2077/78 the total deposit starts increasing. The total
deposits rate is very high at the FY 2079/80 that is 33%. All the deposit including
fixed, current, saving and others are highly increased. Total deposit of HBL over the
five years of study period is in fluctuating trend.
 20

Table 2
Current Deposit Position of HBL (Rs. In Million)
Year Current Deposit Growth (Rs.) Growth %
2075/76 2704 - -

2076/77 3034 330 12

2077/78 2688 -346 -11

2078/79 2799 111 4

2079/80 2911 112 4

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to 2079/80)

3500

3000

2500

2000

1500

1000

500

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

Figure 2: Current Deposit Position of HBL

In the table, the growth rate starts in FY 2076/77 it increases with 12% and again it
decreases with a huge rate of -11% in FY 2077/78. The growth rate remains constant
for the last two FY 2078/79 and 2079/80 i.e.4%. It shows that the growth of current
deposit of Himalayan bank limited is in fluctuating trend. The highest current deposit
of HBL is Rs. 3034 millions in FY 2076/77 and lowest current deposit of HBL is
Rs.2688 in Fy 2077/78 during the five years study period.
 21

Table 3
Saving Deposit Position of HBL (Rs. in million)
Year Saving Deposit Growth Rs. Growth %
2075/76 4972 - -
2076/77 5230 258 5
2077/78 5994 764 14
2078/79 7026 1032 17
2079/80 8771 1745 25
(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to 2079/80)

10500

9000

7500

6000

4500

3000

1500

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

Figure 3 Saving Deposit Position of HBL

The table and figure both show that the saving deposit is in increasing trend. The
saving deposit in FY 2075/76 is Rs.4972 million, FY2076/77 is Rs.5230 million, FY
2077/78 is Rs.5994 million, FY 2078/79 is Rs.7026 million, and FY 2079/80 is
Rs.8771 million. The lowest growth rate is in FY 2076/77 i.e.5% and the highest
growth rate in FY 2079/80 i.e. 25%. Overall, the saving deposit position of the bank is
in good condition.
 22

Table 4
Fixed Deposit Position of HBL (Rs. in million)
Year Fixed Deposit Growth (Rs.) Growth (%)
2075/76 2446 - -

2076/77 2252 -194 -8

2077/78 2310 58 3

2078/79 2079 -231 -10

2079/80 3449 1370 66

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to 2079/80)

4000
3500
3000
2500
2000
1500
1000
500
0
2075/76 2076/77 2077/78 2078/79 2079/80
Fixed Deposit

Figure 4: Fixed Deposit Position of HBL

The table shows that the growth rate of fixed deposit of the bank was not good for the
second year. The decreasing trend increases in the third year and it again decreases in
forth year and subsequently at last year the growth rate of fixed deposit of the bank is
increased abnormally. The FY 2075/76 2076/77 2077/78 2078/79 were the bad time
for the bank but last FY 2079/80 was favorable for the bank. The fixed deposit is in
fluctuating trend during the study period.
 23

Table 5
Interest Bearing Deposit Trend of HBL (Rs. in million)

Year Interest Bearing Deposit Growth (Rs.) Growth (%)

2075/76 12363 - -

2076/77 10022 -2341 -19

2077/78 11106 1084 11

2078/79 11446 340 3

2079/80 16071 4625 40

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to 2079/80)

17500

15000

12500

10000

7500

5000

2500

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

Figure 5: Interest Bearing Deposit Trend of HBL

From table and figure 5 Interest bearing deposit of HBL. In the year 2076/77 it
decreases by 19% to Rs. 10022 million. In the year 2077/78 it was increased by 11%
and reached to Rs. 11106 million. But there was increase in interest bearing deposit
by 3% in year 2078/79 and reached to Rs. 11,446 million. In the year 2079/80, it has
increased to 40% and has reached to Rs. 16,071 million.
 24

Table 6
Non-Interest-Bearing Deposit Trend of HBL (Rs. in million)

Non-Interest
Year Growth (Rs.) Growth (%)
bearing deposit

2075/76 3143 - -
2076/77 3424 281 9
2077/78 3012 -412 -12
2078/79 3140 128 4

2079/80 3276 136 4

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to2079/80)

4000

3500

3000

2500

2000

1500

1000

500

0
2075/76 2076/77 2077/78 2078/79 2079/80
Non-Interest bearing deposit

Figure 6: Non-Interest-Bearing Deposit Trend of HBL

In the table, during year 2076/77 the growth rate of non-interest bearing deposit
increased by 9% and reaches to Rs. 3,424 million. In the year 2077/78 the non-
interest bearing deposit decreased by 12% million which is corresponding to Rs.
3,012 million. And in the year 2078/79 the interest bearing deposit increased by 4%
and reached Rs. 3,140 million. Now, in the recent year 2079/80, the non-interest
bearing deposit has increased by 4% and reached to Rs. 3,276 million. Non-interest
bearing deposit of himalayan bank limited is in fluctuating trend during the five years
study period.
 25

2.1.2 Deposit Ratio of HBL

Deposit ratio is the ratio between different types of deposit and the total deposit of the
bank. It shows the deposit condition of the bank. It is the proportion of deposits of the
bank. Deposit ratio talks about the percentage of deposit like fixed deposit, saving
deposit, current deposit and call deposit of the total deposit of the bank.

Table 7
Fixed deposit to total deposit ratio ( in Rs. Million)

Year Fixed Deposit Total Deposit Ratio (%)

2075/76 2446 15506 16
2076/77 2252 13448 17
2077/78 2310 14119 16
2078/79 2079 14587 14
2079/80 3449 19347 18
(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to2079/80)

20

16

12

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

Figure 7: Fixed deposit to total deposit ratio of HBL

From the above table and figure we can get the ratio of fixed deposit to total deposit
of Himalayan bank limited from the FY 2075/76 to FY 2079/80. The fixed deposit to
total deposit ratio of FY 2075/76 is 16%, FY 2076/77 is 17%, FY 2077/78 is 16%, FY
2078/79 is 14% and FY 2079/80 is 18%. The highest ratio is 18% in FY 2079/80 and
the lowest ratio is 14% in FY 2078/79 during the five year study period.
 26

Table 8
Saving deposit to total deposit ratio ( in Rs. Million )

Year Saving Deposit Total Deposit Ratio (%)

2075/76 4972 15506 32

2076/77 5230 13448 39
2077/78 5994 14119 42
2078/79 7026 14587 48

2079/80 8771 19347 45

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to2079/80)

60

50

40

30

20

10

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

Figure 8: Saving deposit to total deposit ratio of HBL

Table 8 and figure 8 shows saving deposit to total deposit ratio of Himalayan bank
limited. The ratio of FY 2075/76, FY 2076/77, FY 2077/78, FY 2078/79 and FY
2079/80 is 32%, 39%, 42%, 48% and 45% respectively. The highest saving deposit
ratio is 48% in FY 2078/79 and the lowest saving deposit ratio is 32% in FY 2075/76
during the five year study period. It has increasing trend except the last year of study
period.
 27

Table 9
Current deposit to total deposit ratio ( in Rs. Million )

Year Current Deposit Total Deposit Ratio (%)

2075/76 2704 15506 17

2076/77 3034 13448 22
2077/78 2688 14119 19
2078/79 2799 14587 19

2079/80 2910 19347 15

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to2079/80)

25

20

15

10

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

Figure 9: Current deposit to total deposit ratio of HBL

Table 9 and figure 9 show the current deposit to total deposit ratio of Himalayan bank
limited from FY 2075/76 to FY 2079/80. According to table and figure the current
deposit ratio are 17%, 22%, 19%, 19% & 15% in FY 2075/76, FY 2076/77, FY
2077/78, FY 2078/79 & 2079/80 respectively. It has fluctuating trend during the five
years of study period.The highest current deposit ratio is 22% in FY 2076/77 and the
lowest current deposit ratio is 15% in FY 2079/80 during the five year study period.
 28

Table 10

Call deposit to total deposit ratio ( in Rs. Million )

(Source: Himalayan Bank Ltd., Annual Financial Statement 2075/76 to2079/80)
Year Call Deposit Total Deposit Ratio (%)

2075/76 4945 15506 32

2076/77 2541 13448 19
2077/78 2801 14119 20
2078/79 2341 14587 16

2079/80 3851 19347 20

35

30

25

20

15

10

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

Figure 10: Call deposit to total deposit ratio of HBL

Table 10 and figure 10 show the call deposit to total deposit ratio of Himalayan bank
limited from FY 2075/76 to FY 2079/80. According to table and figure the call
deposit ratio are 32%, 19%, 20%, 16% & 20% in FY 2075/76, FY 2076/77, FY
2077/78, FY
2078/79 & 2079/80 respectively. It has fluctuating trend during the five years of study
period.The highest call deposit ratio is 32% in FY 2075/76 and the lowest call deposit
ratio is 16% in FY 2078/79 during the five year study period.
 29

2.2 Major Findings

 Over the five-year period, HBL's total deposits initially decreases by 13% in FY
2076/77 but begin to rise after FY 2077/78. The growth rate increases to 33% in
FY 2079/80, with significant increases across all deposit types. Overall, the
deposit trend is fluctuating.
 Himalayan Bank Limited's current deposit growth rate started at 12% in FY
2076/77, and decreases by -11% in FY 2077/78, and then remain constant at 4%
for FY 2078/79 and FY 2079/80. The highest current deposit is Rs. 3034 million
in FY 2076/77, and the lowest is Rs. 2688 million in FY 2077/78, indicating a
fluctuating deposit trend over the five-year period.
 The saving deposits at Himalayan Bank Limited shows a consistent increase over
the study period. Starting at Rs. 4972 million in FY 2075/76, it rise to Rs. 8771
million in FY 2079/80. The growth rate is lowest at 5% in FY 2076/77 and highest
at 25% in FY 2079/80. Overall, the saving deposit position is strong and
improving.
 Bank’s fixed deposit position is not that good. The decreasing trends keeps on
increasing for four years continuously but there is an abnormal increase in the
final year (FY 2079/80)..
 Himalayan Bank Limited's interest-bearing deposits decreases by 19% to Rs.
10,022 million in FY 2076/77. They then increases by 11% to Rs. 11,106 million
in FY 2077/78, and 3% rise to Rs. 11,446 million in FY 2078/79. In FY 2079/80,
the deposits increases by 40% to Rs. 16,071 million.
 Himalayan Bank Limited's non-interest bearing deposits has been fluctuating over
the five-year period. Customers are more likely to deposit money for transactional
purposes rather than for saving or earning interest.
 The ratio of fixed deposits to total deposits at Himalayan Bank Limited varies
over the five-year period: 16% in FY 2075/76, 17% in FY 2076/77, 16% in FY
2077/78, 14% in FY 2078/79, and 18% in FY 2079/80. The highest ratio is 18% in
FY 2079/80, and the lowest is 14% in FY 2078/79.
 The saving deposit to total deposit ratio at Himalayan Bank Limited is 32% in FY
2075/76, 39% in FY 2076/77, 42% in FY 2077/78, 48% in FY 2078/79, and 45%
in FY 2079/80. The ratio increased each year except for the last year, where it
slightly decreases from its peak of 48% in FY 2078/79.
 30

 The current deposit to total deposit ratio at Himalayan Bank Limited fluctuates
over the five-year period: 17% in FY 2075/76, 22% in FY 2076/77, 19% in FY
2077/78, 19% in FY 2078/79, and 15% in FY 2079/80. The highest ratio is 22% in
FY 2076/77, and the lowest is 15% in FY 2079/80.
 The call deposit to total deposit ratio at Himalayan Bank Limited varies over the
five-year period: 32% in FY 2075/76, 19% in FY 2076/77, 20% in FY 2077/78,
16% in FY 2078/79, and 20% in FY 2079/80. The highest ratio is 32% in FY
2075/76, and the lowest is 16% in FY 2078/79, indicating a fluctuating trend
throughout the period.
 31

CHAPTER-III

SUMMARY AND CONCLUSIONS

3.1 Summary

A bank is an institution, which deals in money. A bank is like a reservoir. It draws

surplus money from the people who save and lend them to the people who want to use
it for productive purpose. In this process the bank earns commission. The rate of
interest paid to the depositors is generally lower than the rate charged to the
borrowers. The difference between these two rates of interest is the profit of the bank.
Deposit collection is the main function of commercial bank. The present study has
been undertaken to examine and evaluate the financial performance of HBL. The
financial statements of five years that is from 2075/76 to 2079/80 have been examined
for the purpose the study. The study has resorted mainly to secondary data that has
been first processed and analyzed comparatively. Individual interview with the
management personnel has been taken whenever necessary. This study is exploratory
as well as analytical sometimes. HBL was established in 1993, which was the first
joint venture bank in Nepal. Among many joint venture banks, it is a leading one,
which is always running in profit due to its proper management and good policies.
Data that I have presented is all from the secondary sources, which are in the annual
reports or other printed matters. A customer can be account holder when he opens
account. There are the numbers of rules and procedures regarding opening different
types of accounts.

According to the study, Himalayan Bank Limited (HBL) shows fluctuating deposit
trends and ratios over the five-year period. Total deposits initially decrease by 13% in
FY 2076/77 but rise significantly, reaching a 33% growth rate in FY 2079/80. Current
deposits peak at Rs. 3034 million in FY 2076/77, dropping to Rs. 2688 million in FY
2077/78. Saving deposits increase steadily from Rs. 4972 million in FY 2075/76 to
Rs. 8771 million in FY 2079/80. Fixed deposits decline overall, with an unusual spike
in the final year. Interest-bearing deposits grow substantially by 40% in FY 2079/80.
Non- interest bearing deposits fluctuate over the study period. The ratios of fixed
deposits, saving deposits, current deposits, and call deposits to total deposits show
variability: fixed deposits range from 14% to 18%, saving deposits increase from 32%
 32

to 48% but
 33

drop to 45%, current deposits fluctuate between 15% and 22%, and call deposits vary
from 16% to 32%.

3.2 Conclusion

The deposit of HBL is in increasing trend. The share of fixed deposit is more than that
of savings, current, margin and other deposits in the deposit mix of HBL. The trend of
interest bearing deposit has been gradually increasing but there has been more
fluctuation in non-interest bearing deposits, similarly, there is also more fluctuation in
interest expenses on total deposits. The trend analysis shows that the deposit of HBL
is in increasing trend. In addition to this, the bank is being able to satisfy its customers
and in providing higher quality and newer services to them. Interest rate on deposit
should be competitive with other commercial banks.
Customer services should be diversified and should further be accommodated. The
bank should aim towards increasing its customers but it must also provide the quality
services to the present customers. For this the bank must make plans and policies
keeping customers in mind. Bank should also pay attention towards the priority sector
and industrial sector for lending loans to develop the economic condition of the
country. Bank should provide more facilities to the staff, it has to provide job
satisfaction, training and should encourage its staff.
 34

REFERENCE

Khadka, Sherjung. (2011), “Banking and Insurance”. Kathmandu: Asia

Publication. Khan, M.Y. and Jain P.K., “Management Accounting”, New Delhi:
McGraw Hill Publishing Co. Ltd.
Khan, M. Y. and P.K., “Financial Management Policy”: New Delhi: McGraw Hill
Publishing Co. Ltd., 2008.
Pradhan, Radhe S (2009). “Financial Management” Kathmandu: Buddha Academic
Enterprises Pvt.Ltd: Nepal
Shrestha, M.K. and Bhandari, D.B (2010), “Financial Markets and Institution”.
Asmita Publication, Bhotahity, Kathmandu.
Joshi, P.R. (2012). Research Methodology. Kathmandu, Buddha Academic
Publishers and Distributors Pvt Ltd.
Bajracharya, B.B. (2075). Monetary Policy and Deposit Mobilization in Nepal. An
Unpublished Master’s Degree Thesis, Central Department of Management, Faculty of
Management, Tribhuvan University.
Gupta, B. (20013). Deposits and Reinvestment Problems of Nepalese Commercial
Banks. An Unpublished Master’s Degree Thesis, Central Department of
Management, Tribhuvan University.

Website:
www.google.com
www.himalayanbank.co
www.nepalrastrab.com.np