A Study

On

Performance evaluation of Nepal investment bank

limited

A Project Proposal

Submitted By:

T.U. Reg. No.:

Submitted To:
Faculty of Management
, Tribhuvan University
Aloknagar, Kathmandu

In partial fulfillment of the requirements for the Degree of

Bachelor of Business Studies (BBS)

Table of Contents

CHAPTER 1.............................................................................................1
INTRODUCTION.....................................................................................1
1.1 Background of the Study............................................................2
1.2 Statement of the Problem............................................................3
1.3 Purpose of the Study.................................................................4
1.4 Significance of the Study............................................................4
1.5 Limitation of the Study...............................................................4
1.6 Literature Review.......................................................................4

CHAPTER 2............................................................................................6

RESEARCH METHODOLOGY...............................................................6
2.1 Research Plan and Design...........................................................6
2.2 Description of Population and Sample.........................................6
2.3 Data Collection Procedure..........................................................7
2.4 Analysis Plan.............................................................................7

References................................................................................................8

CHAPTER 1
INTRODUCTION
1.1 Background Of Study:

A Bank is an organization whose primary functions are concentrated with accumulation

of idle money from General public and advancing loan to individuals, traders industries and
business houses for expenditure. Generally the bank collects money from those who have spare
of it from their income on which it pays interest regularly. The money thus accumulated can be
invested different sectors such as business, foreign trades, agriculture’s industry and social works
for which it charges certain percentages of interest which is higher than interest paid by the bank
to accumulated fund. Such charges on advancing loan is the major revenue sources of the bank
by which it can bear administration expenses incurring in the process of operating its activities.
Thus the bank is a good mediator between depositors and loan takers.
To know the precise and clear meaning of bank, some expert’s definition can be given.
Chamber’s twentieth century dictionary defines a bank as an “Institutions for keeping, lending
and exchanging etc of money.”

According to Crowther “A banker is a dealer in debts. The bankers business is then to

take the debts of other to people, to offer his own in exchange and thereby to create money.”
According to World Bank, “Banks are the financial institutions that accept funds in the
form of deposit repayable on demand or short notice.”

Therefore a bank is a financial institution, which collects deposits and in turn provides
loans by creating credit. Today banking is such a vague tern, it does a lot more then deposits and
credit like remitting money, issue of money guarantee, letter of credit, controlling, payment,
other agency functions, monetary activity of country etc. are also the major function of bank.
This multiplicity of bank service and function has led to a bank being labeled “financial
supermarket.

There is no unanimity among the economists about the origin of the world banking the
term bank derives from the Italian World Bank which refers to the bench on which the banker
would keep its money for lending and exchanging. Some person tract its origin from the Latin
word Bancus which refers to the bench on which the banker would keep its money and his record
it is believed that the ancestors of modern banking system were merchants goldsmiths and
money lenders. Modern banking showed its seed in the medieval Italy despite strong Christian
prohibitions against charging interest.

The first banks called the banks of Venice were established in Venice Italy in 1157A.D to
finance bank of Genoa was establish in 1401and 1408 respectively. After that bank of
Amsterdam was established in 1609A D when the bank of England was established in 1940 it
played the vital role for the development of modern banking system. After it’s establishment
banks spread all over the world.

In the context of Nepal like as in other country the goldsmiths and landlord was the
ancient banker. The Nepalese people were highly exploited by Shahu Mahajan by charging
higher interest rate compound interest rate and even by manipulating the principal amount .if we
try to see the history of banking transaction in depth evidence of money lending function are
found in practice before 8th century. In 780 B.S. Gunakamadev the ruler of Kathmandu
reconstructed Kathmandu valley by borrowing debt from the people .14 th century Tanka dhari
system had been running .in the period of Ranodip Singh in Kathmandu established an office
called Tejarath Adda from this office the government distributed salary to their employees and
provided loans to government employment @ 5% of interest against the security of gold sliver
etc.
Because of the development of economic activities in Nepal the above institution could not
be fulfilled the need of people so in Kartik 30, 1994, BS Nepal bank limited was established as
one of the semi government commercial bank which had 10 million authorized capitals. It has
done the pioneering function in spreading the banking habits among the people. Having felt a
need of central bank to control and direct the commercial bank and help the government for
making monetary policies Nepal Rastra Bank was set up in 14 Baisakh 2013 B.S.
To fulfill the growing credit requirement of the country the commercial bank Rastriya
Banijya Bank was establish in 10th Bhadra 2022B.S Rastriya Banijya Bank is also to provide
facilities for the economic welfare of the general public. Nepal is an agriculture country to
develop agriculture system and industry agriculture Development Bank and Nepal Industrial
Development Corporation was established in 2024BS and 2016 BS respectively.

The initiation of the financial sector liberalization policy by Nepal Rastra Bank a board of
joint venture banks entered with the view to accelerate the race of development of nation. At
present there are many joint venture banks, which are running successfully in a competitive
environment. His majesty government deliberates policy of allowing foreign joint venture banks
to operate in Nepal basically targeted to encourage local tradition commercial bank to enhance
their capacity through competitor’s efficiencies mechanization modernization and prompt
customer service. Nepal Arab Bank LTD was established in 2041as a first foreign joint venture
bank.
Now in our country there are 18 commercial bank 15 development bank 48 finance
companies 34 co-operative organizations and 13 non-bank institutions after mid july 2006.

According to Nepal company act 2031 BS A commercial bank refers to such type of bank which
deal in money exchange accepting deposit advance loan and commercial transaction expect
specific banking related to co- operative agriculture industry and other objective. Basic source of
funds of commercial bank are capital reserve Banks can create new money when they make a
loan. New loans throughout the banking system generate new deposits elsewhere in the system.
The money supply is usually increased by the act of lending, and reduced when loans are repaid
faster than new ones are generated. Bank plays an important role in the economic development
of a country. Banks are the most important financial institution for collecting and utilizing
resources for the economic development of the country. The economic conditions are based on
the financial institution and development of the country depends on the active participation of the
bank in different developmental activities in the country. If all the banks increase their lending
together, then they can expect new deposits to return to them and the amount of money in the
economy will increase. Excessive or risky lending can cause borrowers to default. The banks
should become more cautious while making investments so it can maximize its profit by
minimizing risks (Basnet, 2007).

1.2 Statement Of The Problem

There are many problems that are bugging the Nepalese banking Industry. Some of them are
identified below:
1. The existence of unorganized bankers, which included moneylenders, merchants,
goldsmiths who do the lending business on personal basis.
2. There is existence of traditional banking system in Nepal. Some banks namely Nepal
Bank Ltd and Rastra Banijya Bank still operate with old lenders and in many branches
computer system has not been introduced.
3. Many banks are still unable to maintain capital adequacy ratio in accordance with the
regulation of NRB and international standard.
4. In Nepal, the largest bank namely Nepal Bank Ltd and Rastra Banijya Bank is unable to
earn more profit as compared to joint venture bank. Therefore low profitability is another
problem in the banking system in Nepal.
5. In Nepal, corruption and nepotism occur mainly in public sector banks. In such banks
loans are granted only of some benefits to the concerned employees are granted.
6. Lack of banking habit of Nepalese people can be considered as an obstacle on banking in
Nepal.
7. Bank credit is security-oriented rather than project oriented. Banks hardly consider the
actual end use and objectives of the projects.
8. Banks are mostly in the hands of big business houses and a substantial part of the credit is
given to units under their control of preferential terms resulting in the concentration of
economic power.
9. The other problems of banking in Nepal include less investment in productive sectors,
nepotism and favoritism, overstaffing, concentration of banks in urban areas high
liquidity. Maoist situation, government instability, and cut throat competition.

1.3 Purpose Of Study

Nepal is a developing country. The economic condition of the country depends on the active
participation of banks and other financial institution in different development activities. The
development of banks depends on the banking habit of the people.
Therefore, the primary objectives of this report are to gain the practical knowledge of
banking sectors. The secondary objectives of this report are as follows:
1. To study the importance of Ratio’s in national economy.
2. To find the percentage change in different types of ratios of Nepal Investment Bank
3. To find out Standard Deviation and Mean of Cash Bank Balance and Total Deposit.
4. To find out the type of relationship between Cash Bank Balance and Total Deposit of
Nepal Investment Bank.
5. To provide a suggestion packages which will help to enhance the profitability of the bank
and give vision and determination to the bank.
 6. To give necessary suggestion to the bank so that it can provide better facility to the
customer.

1.4 Significance Of Study

It is concluded from the observed analysis of data that ratios control the major economic
activities of the nation. Therefore, it is very important for the policymaker to adopt appropriate
policy with calculation interest rate. Therefore, that large capital can be mustard at very low
capital cost. It will encourage the industrial & commercial activities eventually leading to better
economic condition growth, social economic development, and employment opportunities.

Descriptive and analytical research designs have been presented to analyze the financial position
of Nepal Investment Bank Limited. This study is based on secondary data obtain from various
sources such as annual general meeting of Nepal Investment Bank Ltd of year 2058/2059 to
2062/2063, brochure, booklets, books and publications etc. Beside this, relevant data are
interpreted through various financial and statistical tools such as financial ratio analysis, Karl
Pearson’s correlation coefficient.

1.5 Limitation of the study

Numerous limitations have been faced while preparing this fieldwork report. Some of
them which can be pointed out as:
1. Lack of time
2. Focus on only ratio’s of Nepal Investment bank.
3. It cannot be compared with the ratios of other banks.
4. Only Nepal Investment bank is taken
5. Past 5 years trend is taken.
6. It is bound by the limitation of rules and regulation of Nepal Rastra bank

1.6 Literature Review

In recent years, banking business has grown dramatically. Now sharp competition in
banking sector has forced them to turn to the money and capital markets to raise funds by selling
stock, bonds etc. Competition for banks traditional loan and deposits customers has increased
dramatically. Credit union, money market, mutual funds, insurance companies, brokerage firms
and even chain stores are fighting for the slice of nearly every credit and deposit market
traditionally served by banks. In this way banks are forced to get entry into open market to raise
funds. It means that their financial statements are increasingly being examined by the investors
and by the public. All these trends have placed management under great pressure to perform to
meet the objectives of their stockholders, employees, depositors and borrowing customers. At the
same bank should also keep government regulators satisfied that the banks policies, loans and
investment are sound and effective.
 Various indicators of bank reports and statement show the quality of bank performance.
Bank performance can be evaluated on the basis of profitability and risk of the bank.

CHAPTER 2
RESEARCH METHODOLOGY

2.1 Research Plan and Design

Research design indicates a plan action to be carried out in connection with proposed research
work. The research design is less descriptive but more prescriptive in this study because the
historical secondary data have been mainly developed for analysis. For the analytical purpose,
some question have been asked to the concerned personnel’s who is considered as primary data
and secondary data includes the annual report published by the related bank, financial statements
of the bank by Nepal Rastra Bank, review materials etc. Such data’s, information have been
processed through various processes like editing, tabulating, calculating and result have been
interpreted in the form of ratios, percentages and figures for clear view.

2.2 Description of Population and Sample

Population refers to the industries of the same-nature of its service & product. It is the collection
or the aggregate of objects or the set of results of an operation. On the other hand sample means
the representative parts of population selected from it with the objectives of investigating its
properties. Thus, a sample is just a portion of the population selected with a view to draw
conclusions about the population under study.

Population of the study is thirty two commercial banks operating in the country. But, it is not
possible to study all data related with these thirty two commercial banks. Ten percent of the total
population comes to 3.2 banks. Hence four banks have been taken as sample from the whole
population of thirty two banks. This study is based on convenient sampling method. The sample
banks are Standard Chartered Bank Nepal Ltd., Nepal Investment Bank Ltd.,Himalayan Bank
Ltd and NABIL Bank Ltd. The Sample banks are choosen on the basis of their establishment
date. All the four sample banks were established during 1980 to 1993.

2.3 Data Collection Procedure

The study is mainly based in Secondary data. Secondary data are those data that are collected by
someone else or used already & made available to other in the form of published statistics such
as annual reports, periodicals, newspapers, magazines etc. Although the study mainly used
secondary data, high level of efforts and more time was paid to get data. The relevant secondary
data has been collected mainly through the annual report of selected commercial banks, from
data bases of Nepal Investment Bank (NIB), various reports and other studies like studies in
Tribhuvan University central Library, Pokhara University central Library, different journals,
magazines, reports, Masters degree thesis papers, Website articles, Books and articles have also
been referred to. The study is confined only to the specific areas such as deposits mobilized by
these banks, Loans and Advances, Investments, Liquidity , Assets management , profitability and
risk.ratios.The data related to the trend analysis of ratios of Nepal Investment Bank are obtained
with the help of Nepal Investment Bank balance sheets from 2067/68 to 2071/72.

2.4 Analysis Plan

To collect the information, secondary data source is used. Financial statements of the sample
banks for five fiscal years were obtained from official website and the publications. Various
financial and statistical tools have been used for the data analysis. Financial ratios have been
used for measuring investment policies of the bank and its effect on economic Development. For
the analysis, analytical statistical tools such as mean, coefficient of correlation between different
variables have been used.

REFERENCES
• http://www.nibl.com.np/images/AnnualReport/Final%20Financial%20Statements%2072-
73.pdf<br>

• http://www.nibl.com.np/images/annualreport/Annual_Report_2071-72_English.pdf<br>

• http://www.nibl.com.np/images/AnnualReport/Final%20Financial
%20Statements(COPY11)%2070-71-Final-WEB.pdf<br

• http://www.nibl.com.np/images/AnnualReport/Final_Financial_Statements_69-70.pdf

• http://projectreportforcollege.blogspot.com/2011/05/nepal-investment-bank.html