INVESTMENT POLICY OF COMMERCIAL BANKS IN

NEPAL
(With Reference to Kumari Bank Ltd., Bank of Kathmandu Ltd. and
Nepal Investment Bank Ltd.)

A Thesis

Submitted BY:
SANITA MUNIKAR
Shanker Dev Campus
Roll No. 2623/064
T.U. Regd. No: 7-1-274-405-2001
Exam Roll No: 392819

To:
Office of the Dean
Faculty of Management
Tribhuvan University

In the partial fulfillment of the requirements for the Degree of

Master of Business Studies (M.B.S.)

March, 2015
 RECOMMENDATION
This is to certify that the Thesis

Submitted by:
Sanita Munikar

Entitled:

INVESTMENT POLICY OF COMMERCIAL BANKS IN

NEPAL
(With Reference to Kumari Bank Ltd., Bank of Kathmandu Ltd. and
Nepal Investment Bank Ltd.)

Has been prepared as approved by this Department in the prescribed format of the
Faculty of Management. This Thesis is forwarded for examination.

………………………… …………………………… …………………………

Asso. Prof. Prakash Singh Pradhan Prof. Dr. Kamal Deep Dhakal Asso. Prof. Prakash Singh Pradhan
(Thesis Supervisor) (Head, Research Department) (Campus Chief)

…………………….
Mr. Kiran Thapa
(Thesis Supervisor)

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 VIVA- VOCE SHEET

We have conducted the viva- voce examination of the thesis

By:
SANITA MUNIKAR
Entitled:
INVESTMENT POLICY OF COMMERCIAL BANKS IN
NEPAL
(With Reference to Kumari Bank Ltd., Bank of Kathmandu Ltd. and
Nepal Investment Bank Ltd.)

And found the thesis to be the original work of the student and written according to
the prescribed format. We recommend the thesis to be accepted as partial fulfillment
of the requirement for Master Degree of Business Studies (M.B.S.)

Viva-Voce Committee

Head, Research Department ------------------------------------------

Member (Thesis Supervisor) -------------------------------------------

Member (Thesis Supervisor) -------------------------------------------

Member (External Expert) -------------------------------------------

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 DECLARATION

I hereby declare that the work reported in this thesis entitled “INVESTMENT
POLICY OF COMMERCIAL BANKS IN NEPAL (With Reference to Kumari
Bank Ltd., Bank of Kathmandu Ltd. and Nepal Investment Bank Ltd.)”. Submitted
to Office of the Dean, Faculty of Management, Tribhuvan University, is my original
work done in the form of partial fulfillment of the requirement for the Master’s
Degree in Business Study (M.B.S.) under the supervision of Asso. Prof. Prakash
Singh Pradhan and Mr. Kiran Thapa of Shanker Dev Campus.

SANITA MUNIKAR
Shanker Dev Campus
Roll No. 2623/064
T.U. Regd. No: 7-1-274-405-2001
Exam Roll No: 392819

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 ACKNOWLEDGEMENT

I would like to express my deep and profound gratitude to my supervisor Asso.

Prof. Prakash Singh Pradhan and Mr. Kiran Thapa for their expert, scholarly and
timely guidance. I am always grateful for their valuable suggestions, advices and
constant supervisions, advices and affectionate behave during the research period. I
am glad by getting them as a supervisor. Also, I express my indebtedness to all the
lecturers of Shanker Dev Campus, Tribhuvan University for their academic support.

I would like to extend my gratitude to the respectable teachers for their valuable
suggestions, guidance and support. I would never forget my friends who always
encouraged me and helped me by providing support for the preparation of this
thesis.

This thesis entitled INVESTMENT POLICY OF COMMERCIAL BANKS IN NEPAL

(With Reference to Kumari Bank Ltd., Bank of Kathmandu Ltd. and Nepal
Investment Bank Ltd.) is a Masters Degree thesis prepared as practical fulfilled of
MBS course under Tribhuvan University of Nepal.

I am also grateful to all the Liberian of Shanker Dev campus I would like to express
my respect and, indebtedness to my parents for their continuous support to complete
my study.

I would like to extend thanks to the respondent banks for providing the necessary
data and valuable suggestions on my subjects on my subject matter. I hope this work
could be useful for future research in this field.

Finally, effort has been made to avoid all type of error and mistake, though mistake
can be made by everyone, so I’m sorry for the unknown mistake that I made in this
work.

Sanita Munikar

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 TABLE OF CONTENTS

Recommendation
Viva-Voce Sheet
Declaration
Acknowledgement
Table of Contents
List of Tables
List of Figures
Abbreviations

CHAPTER – I INTRODUCTION .......................................................................13-11

1.1 Background ..................................................................................................... 13
1.2 Background of the Study ................................................................................ 14
1.3 Focus of the Study .......................................................................................... 16
1.3.1 Profiles of Selected Companies: .............................................................. 17
1.4 Statement of the Problem ................................................................................ 20
1.5 Objective of the Study .................................................................................... 21
1.6 Significance of the Study ................................................................................ 22
1.7 Limitations of the Study.................................................................................. 23
1.8 Organization of the Study ............................................................................... 23

CHAPTER – II REVIEW OF LITERATURE ....................................................24-35

2.1 Conceptual Review ......................................................................................... 24
2.1.1 Origin and Historical Growth of Banking ............................................... 29
2.1.2 Evolution of Banking in Nepal ................................................................ 29
2.1.3 Importance of Commercial Bank ............................................................. 35
2.1.4 Features of a Sound Investment Policy.................................................... 35
2.1.5 Review of Articles ................................................................................... 37
2.1.6 Review of Previous Research Work ........................................................ 40
2.2 Research Gap .................................................................................................. 47

CHAPTER – III RESEARCH METHODOLOGY ........................................... 48--39

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3.1 Research Design.............................................................................................. 48
 3.2 Population and Sample ................................................................................... 48
3.3 Data Collection Procedures and Sources of Data ........................................... 49
3.4 Research Variables.......................................................................................... 49
3.5 Analysis of data............................................................................................... 49
3.6 Statistical tools ................................................................................................ 49
3.6.1 Arithmetic mean average ......................................................................... 49
3.6.2 Multiple Bar- diagrams and graphs.......................................................... 50
3.6.3 Percentage ................................................................................................ 50
3.6.4 Coefficient of correlation(R).................................................................... 50
3.6.5 Regression analysis .................................................................................. 51
3.6.6 Standard deviation (σ).............................................................................. 51
3.6.7 Coefficient of variation (C.V.) ................................................................. 51

CHAPTER – IV PRESENTATION AND ANALYSIS OF DATA ....................52-90

4.1 Financial Analysis of Commercial Bank ........................................................ 52
4.1.1 Cash and Bank Balance to Total Deposit Ratio ....................................... 54
4.1.2 Cash and Bank Balance to Current Assets Ratio ..................................... 55
4.1.3 Investment on Government Securities to Current Assets Ratio .............. 57
4.1.4 Loans and Advances to Current Assets Ratio .......................................... 58
4. 2 Asset Management Ratio ............................................................................... 60
4.2.1 Loans and Advances to Total Deposits Ratio .......................................... 60
4.2.2 Relationship between Deposit and Loan and Advances .......................... 61
4.2.3 Total Investment to Total Deposit Ratio .................................................. 63
4.2.4 Relationship between Deposit and Total Investment............................... 64
4.2.5 Loan and Advances to Total Working Fund Ratio .................................. 66
4.2.6 Investment on Government Securities to Total Working Funds Ratio. ... 68
4.2.7 Investment on Shares and Debentures to Total Working Fund Ratio ..... 69
4.2.8 Total off Balance Sheet Operation to Loan and Advances Ratio ............ 70
4.2.9 Loan Loss Relation .................................................................................. 72
4.3 Profitability Ratio............................................................................................ 73
4.3.1 Return on Loan and Advances Ratio ....................................................... 74
4.3.2 Return on Total Working Fund Ratio ...................................................... 75
4.3.3 Total Interest Earned to Total outside Assets Ratio................................. 76
4.3.4 TotalProperty of Shanker
Interest Earned Dev Working
to Total Campus Library 7 ................................ 78
Fund Ratio
 4.3.5 Total Interest Paid to Total Working Ratio.............................................. 79
4.4 Risk Ratio........................................................................................................ 81
4.4.1Credit Risk Ratio....................................................................................... 81
4.4.2 Liquidity Risk Ratio ................................................................................. 82
4.4.3 Capital Risk Ratio .................................................................................... 84
4.5 Growth Ratio ................................................................................................... 85
4.5.1 Growth ratio of total deposit .................................................................... 86
4.5.2 Growth ratio of loan and advances .......................................................... 87
4.5.3 Growth ratio of total Investment .............................................................. 88
4.5.4 Growth ratio of total net profit ................................................................. 88
4.6 Statistical Tools............................................................................................... 89
4.6.1 Coefficient of Correlation Analysis ......................................................... 89
4.6.2 Client of Correlation between outside Asset and Net Profit .................... 90
4.7 Regression Analysis ........................................................................................ 97
4.8 Major Findings of the Study ........................................................................... 99

CHAPTER – V SUMMARY, CONCLUSION AND RECOMMENDATIONS..103-

95
5.1 Summary ....................................................................................................... 103
5.2 Conclusion .................................................................................................... 104
5.3 Recommendations ......................................................................................... 105

BIBLIOGRAPHY
APPENDICES

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 LIST OF TABLES

Table 4.1 Current Ratio (Times) ............................................................................... 53

Table 4.2 Cash and Bank Balance to Total Deposit Ratio ........................................ 54
Table 4.3 Cash and Bank Balance to Current Assets Ratio ...................................... 56
Table 4.4 Investment on Government Securities to Current Assets Ratio ............... 57
Table 4.5 Loan and Advances to Current Assets Ratio ............................................ 59
Table 4.6 Loan and Advances to Total Deposit Ratio .............................................. 60
Table 4.7 Correlation between Deposit and Loan and Advances ............................. 62
Table 4.8 Total Investment and Total Deposit Ratio ................................................ 63
Table 4.9 Coefficient of Correlation Deposit and Total Investment ........................ 65
Table 4.10 Loan and Advances to Working Fund Ratio ......................................... 67
Table 4.11 Investment on Government Securities to Total Working Fund Ratio .... 68
Table 4.12 Investment on Shares and Debentures to Total Working Fund Ratio .... 69
Table 4.13 Total OBS Operation to Loan and Advances Ratio ................................ 71
Table 4.14 Loan Loss Ratio ...................................................................................... 72
Table 4.15 Return on Loan and Advances Ratio ...................................................... 74
Table 4.16 Return on Total Working Fund Ratio ..................................................... 75
Table 4.17 Total Interest Earned to Total outside Assets Ratio ............................... 77
Table 4.18 Total Interest Earned to Total Working Fund Ratio ............................... 78
Table 4.19 Total Interest Paid to Total Working Fund Ratio ................................... 80
Table 4.20 Credit Risk Ratio .................................................................................... 81
Table 4.21 Liquidity Risk Ratio................................................................................ 83
Table 4.22 Capital Risk Ratio ................................................................................... 84
Table 4.23 Growth Ratio of Total Deposit ............................................................... 86
Table 4.24 Growth Ratio of Loan and Advances ..................................................... 87
Table 4.25 Growth Ratio of Total Investment .......................................................... 88
Table 4.26 Growth Ratio of Total Net Profit ............................................................ 89
Table 4.27 Coefficient of Correlation between outside Asset and Net Profit .......... 90
Table 4.28 Coefficient of Correlation between Deposit and Net Profit ................... 92
Table 4.29 Coefficient of Correlation between Deposit and Interest Earned ........... 93
Table 4.30 Coefficient of Correlation between Loan and Advances and Interest Paid
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................................................................................................................................... 95
Table 4.31 Coefficient of Correlation between Total Working Fund and Net Profit
................................................................................................................................... 96
Table 4.32 Calculation of Regression Equation between Net Profits on Total
Working Fund ........................................................................................................... 97
Table 4.33 Calculation of Regression Equation between Net Profits on Total
Deposit ...................................................................................................................... 98

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 LIST OF FIGURES

Figure 4.1 Current Ratio (Times).............................................................................. 53

Figure 4.2 Cash and Bank Balance to Total Deposit Ratio ...................................... 54
Figure 4.3 Cash and Bank Balance to Current Assets Ratio..................................... 56
Figure 4.4 Investments on Government Securities to Current Assets Ratio............. 58
Figure 4.5 Loan and Advances to Current Assets Ratio ........................................... 59
Figure 4.6 Loan and Advances to Total Deposit Ratio ............................................. 61
Figure 4.7 Correlation between Deposit and Loan and Advances............................ 62
Figure 4.8 Total Investment and Total Deposit Ratio............................................... 64
Figure 4.9 Coefficient of Correlation Deposit and Total Investment ....................... 65
Figure 4.10 Loan and Advances to Working Fund Ratio ......................................... 67
Figure 4.11 Investment on Government Securities to Total Working Fund Ratio ... 68
Figure 4.12 Investment on Shares and Debentures to Total Working Fund Ratio ... 70
Figure 4.13 Total OBS Operation to Loan and Advances Ratio .............................. 71
Figure 4.14 Loan Loss Ratio ..................................................................................... 73
Figure 4.15 Return on Loan and Advances Ratio ..................................................... 74
Figure 4.16 Return on Total Working Fund Ratio .................................................... 76
Figure 4.17 Total Interest Earned to Total outside Assets Ratio .............................. 77
Figure 4.18 Total Interest Earned to Total Working Fund Ratio .............................. 79
Figure 4.19 Total Interest Paid to Total Working Fund Ratio .................................. 80
Figure 4.20 Credit Risk Ratio ................................................................................... 82
Figure 4.21 Liquidity Risk Ratio .............................................................................. 83
Figure 4.22 Capital Risk Ratio.................................................................................. 85
Figure 4.23 Growth Ratio of Total Deposit .............................................................. 86
Figure 4.24 Growth Ratio of Loan and Advances .................................................... 87
Figure 4.25 Growth Ratio of Total Investment ......................................................... 88
Figure 4.26 Growth Ratio of Total Net Profit.......................................................... 89
Figure 4.27 Coefficient of Correlation between outside Asset and Net Profit ......... 90
Figure 4.28 Coefficient of Correlation between Deposit and Net Profit ................. 92

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 ABBREVIATIONS

A.D. Anno Domini

APEC: Asia Pacific Economic Cooperation
ATM Automatic Trailer Machine
B.S. Bikram Sambat (Abbreviation of Bikram Era)
CEO: Chief Executive Officer
CIB: Credit Information Bureau
DRT: Debt Recovery Tribunal
HBL Himalayan Bank Limited
IDA: international development agency
NABIL: Nabil Bank Limited
NPA: Non-Performing Assets
NRB: Nepal Rastra Bank
SBI: Nepal State Bank of India Limited
SCBNL: Standard Chartered Bank Nepal Limited
SD: Standard Deviation

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 CHAPTER – I
INTRODUCTION

1.1 Background
It is fact that the development of the country depends upon economic growth.
Among the various support of economic growth, the development of banking
method is one of the most important elements. In another words there is no
possibility of economic development without banking activities. That’s why it is the
most powerful weapon of the country. Bank is the resource for the economic
development, which maintains the self-confidence of various segments of society
and extends credit to the people. So, commercial banks are those financial
institutions mainly dealing with activities of the trade, commerce, industry and
agriculture that seek regular financial and other helps from them for growing and
flourishing. The objective of commercial banks is to mobilize idle resources into the
most profitable sector after collecting them from scattered sources.

The concept of the banking has been developed from the ancient history with the
effort of ancient goldsmiths who developed the practice of storing people’s gold and
valuables under such arrangement the depositors would leave their gold for
safekeeping and given a receipt by the goldsmith. Whenever, the receipt was
presented the depositors would get back their gold and valuables after paying a
small amount as fee for safekeeping and serving.

In Nepal, ‘The Tejarath Adda’ may be regarded as the father of modern banking
institution and for a quite a long time it tendered a good service to the government
as well as to the general public. However, the concept of modern banking institution
in Nepal was introduced as the first commercial bank Act 1993 B.S. Before that the
credit needs of the people for commercial and other purpose were met mostly by the
unorganized market of the private moneylenders. The commercial banks, in fact are
expected to run on the commercial principles. They are guided by the specific
motive. Earning of profit is therefore, the primary objectives of these banks. The
history of commercial banks in Nepal starts from the establishment of the Nepal
Property
Bank Ltd. on 1994 B.S.ofIt Shanker Devbank
is the first Campus Library
in Nepal and 13
prior to this, there was no
such organized banking system in the country. It was established under Special
Banking Act 1993 B.S. having elementary functions of a commercial bank. 51% of
the paid up capital of Nepal Bank Ltd. is owned by the government and 49% owned
by the public. Because of the non-existence of a central bank in the country, the
commercial bank had to act as its own central bank and keep enough resources in
had of meeting emergencies.

Later, the Nepal Rastra Bank was established on 2013 B.S. with objectives of
supervising, protecting and directing the functions of commercial banking activities.
As the time passed, the Rastriya Banijya bank was established on 2022 B.S. in order
to play a major role not only in domestic banking services but also in the foreign
trade. After the establishment of this bank, there was progress in the banking
industry in Nepal.

Today, Nepal can take legitimate pride in the remarkable growth and progress in the
banking industry. Nepal has opened its door to foreign commercial banks to operate
in the kingdom almost a decade back. Consequently, Nepal Arab Bank was
established in 2041 B.S. under the commercial bank act of 2031. Similarly, the
Nepal Indosuez Bank was established as a joint venture between Nepal and France
on 2042 and a Nepal Grindlays Bank on 2043. As the country followed economic
liberalization, there was massive entrance of foreign banks in Nepal. The
establishments of Himalayan Bank as a joint venture with Pakistani bank; Nepal
SBI Bank as a joint venture with the reputed bank of India, State Bank of India;
Nepal Bangladesh Bank as a joint venture bank with Bangladeshi bank; Bank of
Kathmandu as a joint venture bank with Thailand bank; Everest bank as the venture
bank with Punjab National bank; Nepal Sri Lanka bank as a joint venture bank with
Sri Lanka bank are the examples of expansion of banking industry Nepal.

1.2 Background of the Study

Nepal is one of the least developed countries characterized by high population
growth rate, low per capita income and low rate of capital formation as well as
limited resources in the world. Therefore, Nepal like other developing countries has
been facing theProperty
problemof
ofShanker
accelerating
Dev the pace of
Campus economic
Library 14 development.
Capital formation and its proper utilization are two important aspect of economic
development of a country. “Economic development demands transformation of
saving into the actual investment. And, it is the financial institutions that transfer
funds from surplus spending units to deficit units” (Nepal Rastra Bank, 1996:43).
Economic development is supported by financial infrastructure of the country.

The evolution of the organized financial sector in Nepal has a short history
compared to that in other developing South Asian countries. The financial structure
which reflects the relative position of the financial system incomparision to the non-
financial system has a bearing not only on the propensity to save and inducement to
invest but also on the conduct of monetary policy for the financial institution and
instruments serve as the channel of the central bank is conducting monetary policy.

Nepalese financial system comprises of commercial banks, development banks,

finance companies, operative societies, non-government organization (permitted to
perform limited banking activities), insurance companies, Nepal stock exchange,
citizen investment trust, employee’s provident fund and postal saving service.
Financial system of a country has a great bearing of system of the country in this
regard. It collects scattered financial resources as capital funds, deposits, borrowings
from people and invests them among those who are engaged in commercial and
economic activities of the country. In other words, it can be said that financial
system transfers the economic resources from unproductive sectors to productive
sectors that help develop the economic condition of a country. All we accept that
without the assistance and support of commercial banks and financial institutions,
no economic activities of a country can be operated. Thus, commercial banks and
financial institutions have a catalytic role in the process of economic development.
Commercial banks are the major part of financial system in Nepal.

Banking sector plays an important role in the economic development of the country.
It provides an effective payment and credit system which facilitates the channeling
of funds from the surplus (savers) units to the deficit units (investors) in the
economy” (Garhwal, 1993:12).It is intermediary between the deficit and surplus of
financial resources. Financial institution like banks are a necessary to collect
Property of Shanker Dev Campus Library 15
scattered saving and put them into productive channels. The basic task of financial
institutions is to mobilize the saving of the community and ensure efficient
allocation of the savings to high yielding investment projects to offer attractive and
secured returns to different sectors of the economy according to planned priorities
of the country, on the other hand, this process of financial institutions give rise to
money and other financial assets which therefore have a central place in the
development process of the economy.

Loans are an essential aspect of commercial banking functions. “First, income from
loan contributes substantially to the revenues and profit of the bank. Second,
lending money to people in the community strengthens the community- bank
relationship. Third, lending money spurs business development and supports a
growing economy” (demister, 1980: 82). Credit being the most important function
of commercial banks, affects overall development of the country. So far as pace of
economic development is considered, it is directly related to the quality and quantity
of the credit, which is derived from various financial institutions especially
commercial banks in Nepal. Investment operation of commercial banks is very risky
one. For this, commercial banks have to pay due consideration while formulating
Investment Policy. A healthy development of any commercial band depends upon
its investment policy. A good investment policy attracts both borrowers and lenders,
which helps to increase the volume and quality deposits, and investment.

1.3 Focus of the Study

In any firm, Investment policy is taken as major financial decision, which affects the
value of the firm. The performance of any business organization largely depends
upon its investment policy. Furthermore, investors invest their money analyzing the
investment policy of a business organization. That is why investment policy is
regarded as an important decision with respect to management and invertors.A bank
always puts in efforts to maximize its profitability. The Profit is excess of income
over expenses. To maximize profit, income should be reasonably excess over
expenses. The major source of income of a bank is interest income form loans and
investments and fee based income. As loan and advances dominate the asset side of
the balance sheet of any bank; similarly earnings form such loan and advances
occupy a major space ofinShanker
Property incomeDev
statement
Campusof the bank.
Library 16 However, it is very
important to be reminded that most of the bank failures in the world are due to the
shrinkage in the value of loans and advances. Hence loan is known as risky asset
and investment operation of commercial banks is very risky one. Risk of non-
performing loans erodes even existing capital. Considering the importance of
lending to the individual banks and also to the society it serves, it is imperative that
the bank meticulously plans its credit operations. Sound credit policy has the
following objectives:
• To have performing assets.
• To give guidance to lending officials
• To establish a standard for control, etc
• To contribute to economic development

Considering these facts, this study mainly focuses on the investment policy of joint
venture commercial banks in Nepal.

1.3.1 Profiles of Selected Companies:

Presently, there are altogether 31 commercial banks operating in the country. The
large numbers of commercial bank is leading them to huge competition. There are
various factors that can make a commercial bank leader in the market, but the
commercial bank having sound investment policy can lead the market. This study
focuses on the investment policies of the commercial banks. The limited resources
and time has lead to make this study between three leading commercial banks of
Nepal. This study focuses on the investment policy of Nepal Investment Bank
Limited, Bank of Kathmandu Limited and Kumari Bank Limited.

I. Nepal Investment Bank Limited

Nepal Investment Bank Ltd. (NIBL), previously Nepal Indosuez Bank Ltd., was
established in 1986 as a joint venture between Nepalese and French partners. The
French partner (holding 50% of the capital of NIBL) was Credit Agricole Indosuez,
a subsidiary of one the largest banking group in the world. With the decision of
Credit Agricole Indosuez to divest, a group of companies comprising of bankers,
professionals, industrialists and businessmen, has acquired on April 2002 the 50%
shareholding ofProperty
Credit Agricole Indosuez
of Shanker in Nepal
Dev Campus Indosuez
Library 17 Bank Ltd. The name of
the bank has been changed to Nepal Investment Bank Ltd. upon approval of bank’s
Annual General Meeting, Nepal Rastra Bank and Company Registrar’s office with
the following shareholding structure.

A group of companies holding 50% of the capital

Rastriya Banijya Bank holding 15% of the Capital.

Rastriya Beema Sansthan holding the same percentage.

The remaining 20% being held by the General Public (which means that NIBL
is a Company listed on the Nepal Stock Exchange).

The authorized capital of NIBL was Rs. 4,000,000,000 in FY 2011/12 and issued
and paid up capital was Rs. 3,012,924,200. NIBL has established a number of
branches to increase the volume of its transactions.

II. Bank of Kathmandu Limited

In the list of joint venture commercial banks in Nepal, Bank of Kathmandu Ltd. is
also one of such types of banks; however, now it isn’t joint venture bank. BOKL,
established in 2051 B.S. Falgun 28 (April 1995) under the Company Act 1964 is in
joint venture with internationally renowned “Siam Commercial Bank Public
Company Ltd. Thailand.” Siam Commercial Bank has several overseas branches &
correspondents throughout the world. It also has correspondent arrangements with
numerous internationally renowned banks; But after the desire of Siam Commercial
Bank to leave the BOKL in the hands of Nepalese shareholding. BOKL is 10th
Commercial Bank of Nepal. According to analysis of the world finance committee
BOKL could be ranked in number 2000.The bank’s authorized capital in 2011/12
was Rs. 2,000,000,000 and issued capital was Rs. 1,604,187,700. BOKL has
established a number of branches to increase the volume of its transactions.
Services provided by BOKL

Various deposit facilities for the public: saving, current, fixed, call etc.

Dealing with transaction of foreign exchange.

Serving as agent of correspondent on behalf of client.

Issuing letter of credit, drafts, traveler’s cheque etc.

Remittance of funds.

Collection & payment of chouse, promissory notes, drafts.
Property of Shanker Dev Campus Library 18

Keeping valuables in safe custody called lockers etc.

Electronic banking services with others corresponding bank.

Besides these BOKL, used Radio Modem (RF Link) technology, which helps
centralized database and communication system to do better work by which
Anywhere Banking facility. Radio Modem VSAT with SCPC. Anywhere banking
facility provides deposit and withdrawal facility to the customers, order cheque
books from telephone. And Automatic Teller Machine (ATM) in the New Road
branch. ATM is a machine in which inserting a certain card, the customer is to get
certain amount of money. BOKL management team is also doing the homework to
introduce a credit card. And, BOKL has joined hands with Society for World-wide
Inter-bank Financial Telecommunication (SWIFT) to speed up the transfer of funds
in different countries all over the world. BOKL is also providing late night easy
service at some of its branches.

III. Kumari Bank Limited

Kumari Bank Limited (KBL) came into existence as part of the Nepal Rastra Bank’s
liberalization of the Nepalese Banking Industry by starting it’s banking operations
from Chaitra 21, 2057 B.S (April 03, 2001). is credited to be the first private sector
bank in Nepal with the largest capital investment of NPR. 500 millions. Kumari
Bank Limited is also the first National Level Bank managed by Nepali Management
with highest capital base. The authorized capital was 2,000,000,000 and issued
capital was NPR.1,6038,000,000 the FY of 2011/12. took the initiative of
establishing itself when the country was going through major economic and
financial crises. stands in the market with a vision to be a world class Nepalese
Bank and to be a leading financial institution of the country. Its goal is to create its
own niche in the market and get recognition as the most preferred organization
among its customers, shareholders, regulatory authorities and all its stakeholders. So
far, have been able to associate their customers with banking products like internet
banking, mobile banking and auto sweep facilities, which has helped them to meet
their objectives of adapting modem technologies and coming up with innovative
banking products. The sources of these achievements rely on their organizational
values of good teamwork and high professionalism. The bank has been established

Property of Shanker Dev Campus Library 19

with the objective of providing a complete one stop banking solution backed by
state-of-the –art infrastructure and creating value to valued customers.

1.4 Statement of the Problem

“The major problem in almost all underdeveloped countries and Nepal is no
exception, is that of capital formation and proper utilization. In such countries, the
commercial banks have to shoulder more responsibilities and act as development
banks, due to the lack of other specialized institutions”(Dali, 1974: 52).
Investment is the most important factor from the shareholders and a company’s
management point of view. Though several financial companies have been
established in the country with in short span of time, sufficient return could not been
achieved and strong, stable and appropriate investment policy has not been followed
by these institutions. Due to throat cut competition of the financial environment
these companies seem to be ready to grant much more loan, advances and other
facilities against their client’s insufficient deposit. Unsecured loan and investment
may cause the liquidation of those financial companies. If the funds are wrongly
invested without thinking any financial risk, business risk and other related factors,
the company cannot obtain profitable return as well as sometimes it may lose its
principle.

Project appraisal method followed by commercial banks is also not scientific one.
So a large volume of credit extended by commercial banks is drifting from basic
credit principle and found to have lower productivity. Loan supervision and follow
as regarding whether clients are properly utilizing the bank investment is found to
be poor in many of the commercial banks. Due to all these reasons, the proportion
of non-performing asset on total loan and advances has been increasing
significantly. It has become a major problem of two large commercial banks, NBL
and RBB, and now private sector joint venture banks are also suffering from the
NPA problem within the short time span of their operation.

Similarly, the investment portfolio position of the banks is not satisfactory. They are
not following a sound diversification principle. Portfolio theory gives the concept of
investment in Property
a very good way that
of Shanker Dev“does notLibrary
Campus put all 20
eggs in a single basket”.
Diversity of funds reduces the risk. One-time commercial banks had invested a large
proportion of their loan to Garment, Hotel and Carpet industries. But now these
sectors became sick and banks are in trouble of their loan repayment.

The directions and guidance provided by Nepal Rastra Bank are the major policy
statements for Nepalese commercial banks. A long term and published policy about
their operation is not found even in the joint venture banks. Even if somehow they
have formulated some procedural guidelines they are failing in proper
implementation due to poor supervision.

Investment policy may differ from one company to another but there in not
optimum utilization of shareholders fund to have greater return in any financial
companies. Nepal Rastra Bank (NRB) has also played important role to make these
companies to invest their funds in a good sector. For this purpose NRB has imposed
many rules and regulations so that they can have sufficient liquidity and security.

Thus, in this scenario of Nepalese commercial banking sector, this study mainly
seeks the answers of the following specific problems related to investment policy of
Listed Banks.
1 What is the proportion of Non-Performing Asset on total loans and
advances of the bank?
2 What is the portfolio behavior of the bank?
3 Is the bank’s funds mobilization and investment policy effective and
efficient?
4 Do the earnings of the bank is affected by the investment policy?
5 Is there any stability in fund mobilization policy or not?
6 What is the relationship of investment and loans and advances with total
deposit and net profit?

1.5 Objectives of the Study

The main objective of the study is to evaluate the investment policy of Listed
Banks. However, the specific objectives of the study are:

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 • To examine the liquidity management, asset management efficiency,
profitability position & risk position.
• To evaluate the investment practices of sample banks.
• To analyze relationship between deposit and total investment of sample
banks.
• To examine the relationship between deposit and loans and advances.
• To analyze the relation between net profit and total investment.
• To suggest measures to improve the investment policing of the sample
banks.

1.6 Significance of the Study

Commercial banks in developing countries like Nepal have the greatest
responsibility towards the economic development of the country. “In the present day
world in the developed and developing money economics, the vital process of
production and consumption are significantly affected by the aggregate money
supply consisting of the currency, demand and time deposits with banks”(Vaish). In
modern times, since credit or bank money constitutes bulk is of the economy’s
aggregate money supply, it mostly changes the volume of bank money or credit
rather than changes in the total supply of the high- powered money issued by the
reserves held by the bank against their deposit liabilities that account for changes in
the aggregate money supply. Gone are the old days when commercial banks were
regarded as merely purveyors of money. They are today not merely purveyors of
money but are also the creditors or manufactures of money in the system. The main
goal of the bank as a commercial organization is to maximize the surplus by the
efficient use of its funds and resources. In spite of being a commercial institution, it
too have a responsibility ( obligation) to provide social service oriented contribution
for the social economic up-liftmen to the country by providing specially considered
loans and advancements towards less privileged sectors. Hence, the study is needed
to examine the overall performance of , BOKL and NIBL especially in collection of
deposits and its utilization. The study will have to know the overall performance of ,
BOKL and NIBL. So it will be useful for managers, shareholders, customers, public
and students who would conduct for the study on investment analysis.
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1.7 Limitations of the Study
This study has the following limitations:
This is a case study of listed banks and findings of the study cannot be generalized.
The study is limited to five years period from 2008/09 2012/013 to The study is
based on secondary data collected from the Bank, data available in published annual
report of the bank have been assumed to be fact. Among many factors affecting
investment decision, only certain factors i.e. liquidity, profitability, diversification,
growth etc. have been considered. Lack of sufficient time and information. The
sufficient information, report, reference and reading material were not available for
the study. Due to the lack of industry standard and accepted norms, it is not possible
to generalize whether a particular ratio is ‘good’ or ‘bad’.

1.8 Organization of the Study

The whole study has been divided into five chapters as:
Chapter I. Introduction:- This chapter deals with the background of the study, focus
of the study, statement of the problem, objective of the study, significant of the
study, limitation of the study and organization of the study
Chapter II. Review of Literature:- This chapter includes the conceptual review,
review of related study and justification of the study.
Chapter III. Research Methodology:- This chapter includes the research design,
population and sample, sources of data, data collection technique and data analysis
tools.
Chapter IV. Presentation and Analysis of Data:- This chapter includes the liquidity
ratios, assets management ratios, activity ratios, profitability ratios, correlation
coefficient analysis, trend analysis and projections and major findings of the study.
Chapter V. Summary, Conclusion and Recommendations:- This chapter includes
summary, conclusion and Recommendations.

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 CHAPTER-II
REVIEW OF LITERATURE

In this chapter, review of literature related to the investment policy of commercial

bank has been made. Review of literature is basically a stock taking of available
literature in the field of research. The effort has been made to grasp knowledge and
information that is available from libraries, document collection center, other
information managing bureaus and concerned commercial bank. This chapter helps
to take adequate feed back to broaden the information base and inputs to the study.
Conceptual framework given by different researcher, author practitioner, scholar
etc. is reviewed from research papers, books, annual reports, and articles etc.,

2.1 Conceptual Review

A commercial bank is business organization that receives and holds deposits of fund
from others, makes loans or extends credits and transfers funds by written order of
deposits (Grolier Incorporated, 1984). Similarly, Commercial Bank Act of Nepal
(1974) has defined that “ A commercial bank is one which exchanges money,
deposits money, accepts deposits, grant loans and performs commercial banking
functions and which is not a bank meant for co-operative, agriculture, industries or
for such specific purpose”.

Commercial bank is a corporation, which accepts demand deposits subject to check

and makes short-term loans to business enterprise, regardless of the scope of its
other services (American Institute of Banking, 1972:345). This Act has laid
emphasis on the functions of commercial bank while defining it. Commercial banks
provide short-term debts necessary for trade and commerce. They take deposits
from the public and grant loans in different forms. They purchase and discount bills
for exchange, promissory notes and exchange foreign currency. They discharge
various functions on the behalf of their customers provided that they are paid for
their services. Optimal investment decision plays a vital role in each and every
organization. But especially for the commercial banks and other financial
institutions theProperty
sound knowledge
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investment is the most
Campus Library 24 because this subject is
relevant for all surrounding that mobilize funds in different sectors in view of
return. As it is concerned to the commercial banks and other financial institutions,
they must mobilize (i.e. investment on different sectors) their collections (deposits)
and other funds towards the profitable, secured and marketable sectors so that they
will be in profit For this purpose these banks and financial institutions should gather
the sufficient information about the firm (client) to which supposed to be invested.
This information include as financial background, nature of business as well as its
ability to repay the loan back. These all information should be gathered from the
viewpoint of security.

The income and profit of the bank depend upon the lending procedure applied by
the bank as well as the lending policy and investments in different securities also
affect the income and profit. In the investment procedures and policies it is always
taken in mind that “A sound lending and investment policy is not only pre-requisite
for bank’s profitability but also crucially significant for the promotion of
commercial saving of a developing country like Nepal”. The sound policies help
commercial banks maximize quality and quantity of investment and thereby,
achieve the own objective of profit maximization and social welfare. Formulation of
sound investment policies and coordinated and planned efforts pushes forward the
forces of economic growth.

Commercial banks, as financial institution, perform a number of internal functions.

Among them, providing credit is considered as most important one. In the words of
H. D. Crosse (1963), "Commercial banks are very risky one. For this, commercial
banks have to pay due consideration while formulating investment policy regarding
loan investment. Investment policy is one facet of the overall spectrum of policies
that guide banks investment operations." A healthy development of any bank
depends heavily upon its investment policy. A sound and viable investment policy
can attract both borrowers and lenders, which helps to increase the volume and
quality of deposits loan and investment. The loan provided by commercial bank is
guided by several principles such as length of time, their purpose, profitability,
safety, etc. These fundamental principles of commercial bank’s investment are filly
considered while making investment policy. Emphasizing upon this H. D. Crosse
Property of Shanker Dev Campus Library 25
stated, “The investment policy should be carefully analyzed”. Commercial bank
should ensure minimum risk and maximum profit from lending.

According to J. H. Clemens (1994), “Commercial bank should consider the national

interest followed by borrower’s interest and the interest of the bank itself before
investing to the borrowers”. To further pursue his view, bank lending must be for
such purpose of the borrowers that are in keeping with the national policy and
bank’s overall investment policy. Thus investment is the most important function of
commercial banks. It is the long-term commitment of bank in the uncertain and
risky environment. It is a very challenging task for commercial bands. So a bank has
to be very cautious while investing their funds in various sectors. The success of a
bank heavily depends upon the proper management of its inventible funds.

Investment management of a bank is guided by the investment policy adopted by

the bank. The investment policy of the bank helps the investment operation of the
bank to be efficient and profitable by minimizing the inherent risk.
Various authors have expressed their views regarding investment policies of
commercial banks, their formulation and implementation differently.

According to S. P. Singh and S. Singh (1983), “The investment (credit) policies of

banks are conditional, to great extent, by the national policy framework; every
banker has to apply his own judgment for arriving at a credit decision, keeping, of
course, his bank’s credit policy also in mind”. They further stated, “The field of
investment is more challenging as it offers relatively greater scope to bankers for
judgment and discretion in selecting their loan portfolio. But this higher degree of
freedom in the field of credit management is also accompanied by greater risk,
particularly during recent years; the credit function has become greater complex.”

James B. Bexley, (1987) express his views as, “Investment policy fixes
responsibilities for the investment disposition of the bank's assets in terms of
allocating funds for investment and loan, and establishing responsibility for day to
day management of those assets.”

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According to Chandler L. V. (1973), “A banker seeks optimum combination of
earning, liquidity and safety while formulating investment policy.” “A sound
investment policy of a bank is such that its funds are distributed on different type of
assets with good profitability on the one hand and provides maximum safety and
security to the depositors and banks on the other hand. Moreover, risk in banking
sectors tends to be concentrated in the loan portfolio. Therefore the banks
investment policy must ensure that it is sound and prudent in order to protect public
funds. Bank makes a variety of loans to a wide variety of customers for different
purposes. Therefore no uniform rules can be laid down to determine a portfolio of a
bank. The environment in which it operates influences the investment policy of the
bank. The nature and availability of funds also differ widely from one region to
another within the country. For example scope of a bank operating in Jumla will be
different from the scope of bank operating in Kathmandu. Therefore, the investment
policy to be applied in Kathmandu may not be applicable to the bank operating in
Jumla” (Baidhya, 1999: 46-47).

Reed et al. (1980: 195) added that “The rate of return on assets is a valuable
measure when comparing the profitability of one bank with another or with the
commercial banking system. A low rate might be the result of conservative lending
and investment policies or excessive operating expenses. Banks could, of course,
attempt to offset this by adopting more aggressive lending and investment policies
to generate more income.”

Investment policies include credit analysis and its principal purpose is to determine
the ability and willingness of a borrower to repay a requested loan in accordance
with the terms of the loan contract. Factors considered in credit analysis are capacity
to borrow, characters (honesty, integrity, industry, morality, ability to create
income, ownership of assets economic conditions, etc. Loans are the most important
assets held by banks and bank lending provides the bulk of bank income (Reed et al,
1980: 203, 235).

In broad sense the investment operation of bank includes lending and investing in
different types of securities. We can say lending is the primary investment activity
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and investment in different types of securities is the secondary investment activity
of the commercial banks.

Reed et al. (1980: 242) further stressed that “More and more banks have developed
formal, written lending policies in recent years. They provide guidance for lending
officers and there by establish a greater degree of uniformity in lending practices.
Since lending is important both to the bank and to the community it serves, loan
policies must be worked out carefully after considering many factors like:
• Capital position.
• Risk and profitability of various types of loans.
• Stability of deposits.
• Economic conditions.
• Influence of monetary and fiscal policy.
• Ability and experience of bank personnel.
• Credit needs of the area served.”

“Every commercial bank has an investment policy, whether it is recognized or not.

Even though a written statement of investment policy is desirable, few banks have
them and few may not have them. The main objectors of a written investment policy
are those who feel that the economic environment of banking changes so rapidly
that a formal written statement would become dated within a short time. It is true
that banking operates in a changing environment, but changes do not occur so
rapidly that they cannot be incorporated into a written policy. The basic factor that
will determine the objectives of a bank’s investment policy are its income and its
liquidity needs, and management’s willingness to trade liquidity for greater income
opportunities and vice-versa, which means accepting greater or lesser degrees of
risk. Formulation of an investment policy must give cognizance to the entire risk
exposure that bank management is willing to assume as well as the risk carried by
the securities that comprise the investment account. One of the acceptable methods
of reducing risk in the investment portfolio of a commercial bank is by
diversification- a basic and important rule of any investment policy. Risks cannot be
completely avoided by diversification, but they can be reduced. A commercial bank
is most concerned withofquality
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risk. A statement of investment policy should designate the person responsible for
handling the investment program. This is fundamental to the efficient operation of
an investment portfolio, in that “too many cooks may spoil the stew”. Since the
board of directors is responsible for the proper investment of the bank’s funds,
periodic reports regarding the investment portfolio should be prepared for the
board’s use in evaluating investment management and establishing investment
policy. The investment policy of a bank should be reviewed occasionally and
modified as economic conditions change” (Reed et al., 1980: 378)

2.1.1 Origin and Historical Growth of Banking

Banking is of ancient origin, though little is known about it before the middle ages.
The origin of commercial banking can be traceable in the ancient era of Greeks and
Mesopotamians as well as Romans, when the practice of storing precious metals and
coins at safe places and loaning out money to the people on interest was prevalent.
The traces of rudimentary banking are found in the Chaldean Egyptian and
Phoenician history. According to Alfred Marshall, “In Greece, the temples of
Delphi and other safer places acted as store houses for the precious metals before
the days of coinage, and private purposes at interest, though they paid none
themselves. Private money changers began with the task of reducing many metallic
currencies, more or less exactly, to a common unit of value, and went on to accept
money on deposit at interest and to lend it out at higher interest permitting
meanwhile drafts to be drawn on them”.

2.1.2 Evolution of Banking in Nepal

The development of modern banks in Nepal does not have as old history as the
developed countries have got. Albeit there are mentions of lending and other
banking activities in the ancient books “Manusmriti” and “Kautilya’s Economics”.
Found evidences have proved that in the Seventh century King Guna Kamdeva had
collected loans from the people to rehabilitate the Kathmandu valley. According to
ancient “Vanshavali”, during the last decade of Eighth century, Shankhadhar, a
local merchant from Kathmandu started the Nepal Era after freeing the people by
paying off their loans and liabilities. By this instance, it can be understood that there
might have the transaction of money depositing and lending. In Fourteenth century,
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the ruler of the then Kathmandu - Jaisthiti Malla segregated the local domiciles into
64 different classes according to professions they had undertaken. Tankadhari was
one of those classes who used to deal in coins and precious metals such as gold.
These Tankadharis were said to have carried out the borrowings and lending on
money (coins). Hence, Tankadharis can be regarded as the traditional bankers of
Nepal. During the Rana Regime, the Rana Prime Minister Ranoddip Singh Rana
established a state-owned lending institution called ‘Tejarath Adda’, which would
provide financial assistance in the form of loans to the government employees
against their personal guarantee (Dhan Jamani) and deduction of a certain amount of
their salary as installment charging 5% interest. Later, this institute started providing
loans to the general people against pledge of precious and valuable materials like
gold, silver etc. In the overall development of the banking system in Nepal, the
Tejarath Adda may be regarded as the father of modern banking institution and for a
quite long time it tendered a good service to government employees as well as to the
general public. After the establishment of Tejarath Adda, its popularity grew up
which resulted in increase of its branches in several parts of the country in later
years. In addition to that, there were moneylenders, scattered in different parts of the
country who also carried out the transaction of lending of money and usury (i.e.
practice of lending of money at excessively high rates of interest).

Though Nepal had rudimentary forms of banking as early as Seventh century, the
history of modern banks in Nepal began only after when the first organized and
modern bank - Nepal Bank Ltd. established in 1937 as a semi-government
organization with an authorized capital, issued capital and paid up capital of Rs. 1
crore, Rs. 25 lacs and Rs. 8.45 lacs respectively. Before that unorganized money
market was the only source of financing for investors in Nepal. Lack of economic
development programmers in those days confined the services of Nepal Bank Ltd.,
in accepting deposits from the public and financing them trade transactions. Later,
the Nepal Rastra Bank was established in 1955 which has helped to make banking
system more systematic and dynamic during that time. As the time passed, the
Rastriya Banijya Bank established in 1966 in order to play a major role not only in
domestic banking but also in the foreign trade.

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2.1.2 Functions of Commercial Banks
A modern commercial bank performs a variety of functions and services. In this
study, functions of commercial banks are grouped under five sub-headings like
acceptance of deposits, advancing of loans, agency functions, purchase and sale of
foreign exchange, and creation of credit. The fundamental functions, performed by
modern commercial banks are discussed below:
i. Acceptance of Deposits: The bank accepts different types of deposits from the
public:

• Fixed Deposit-Money in this account is accepted for a fixed period and

cannot be withdrawn before the expiry of that period.* Current Deposit-
The depositor can withdraw money from this account whenever he
requires it, so it is also known as demand deposit. Generally the bank
grants no interest on this account. On the contrary it can charge a small
amount on the customer for the services by it.
• Saving Deposit-Some restrictions are imposed on the depositor under this
account. For example, he can withdraw only a specified sum of money in
a day or week.

Recurring Deposit The purpose of this account is to encourage regular savings by

the public, particularly by the fixed income group. Generally money in these
accounts is deposited in monthly installments for a fixed period and is repaid to
the depositors along with interest on maturity.

• Call Deposit Call deposit incorporates the characteristics of current and

saving deposit. Current in the sense, deposit is withdrawn at call and
savings in a sense the deposit earns interest. Interest rate on call deposit is
negotiable between the bank and the depositor and hence it is normally
not announced in public.

ii. Advancing of Loans: The various types of loans and advances are as follows:
• Cash Credit It is running loan account, normally granted against stock and
receivables and
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 wherein Credit/Debit transactions are permitted within the sanctioned
limit. The level to which debit balance can be permitted is decided by
Drawing Power or Limit whichever is lower. Cash credit is always
granted against security of certain commodities, products or book
debts/receivables.
Overdraft- The bank allows its respectable and reliable customers to overdraw their
accounts through cheques. The customers, however, pays interest to the bank on the
amount overdrawn by them. An overdraft in granted against security of certain
investments like Bonds/Fixed Deposits or is given without any security.

• Demand/Term Loan- Demand Loan is a loan on repayment basis and is

not a running account. Demand loan once granted will have a debit for the
quantum sanctioned and thereafter only credits for repayment, normally
personal in nature, are permitted. It is given with or without security. If
given against security, the security will be in the form of fixed assets or
fixed deposits and it will never be given against stocks.

• Trusts Receipt Loan- Trust Receipts Loans are sanctioned as a limit to be

utilized against hypothecation of stocks imported under own letters of
credit, normally for a period of 90 days. It is in the nature of demand loan,
which is liquidated by 2-3 installments and the limit is not cancelled with
liquidation but is reinstated. Hence this loan is more in the form of
working capital loan.

• Bill/Cheju Purchase/Discounting - This is the best form of advance in

terms of credit discipline as it is self-liquidating in nature. Any
trader/industrialist receives payments by cheques or draws
Hindis/Documents on the buyer. These cheques/bills of exchange are
discounted by the banks and in turn the banks receive commission.
• Money at call & Short Notice
These loans are generally made to other banks and financial institutions.
Such loans are very short period loans and can be called back by the bank
at a very shortofnotice
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iii. Agency Functions of Banks: The various agency services rendered by the banks
are as follows:
• Transfers of funds - The banks help their customers in transferring funds
from one place to another through an instrument known as bank draft.
• Colleting customers’ funds - The bank collect the funds of its customers
from other banks and credit them to their accounts.
• Purchase and sale of shares and securities for the customers - The bank buys
and sells stocks and shares of private companies as well as government
securities on behalf of its customers.
• Collecting dividends on the shares of the customers - The bank collects
dividends as well as interest on the shares and debentures of the customers
and credits them to their account.
• Payment of insurance premium - The bank pays premium to the insurance
company on behalf of its customers.
• Trustee and Executor - The bank preserves the wills of the customers and
executes them after their deaths.
• Acts as correspondent - The bank may also act as a correspondent, agent or a
representative of its customers.

iv. Purchase and sale of Foreign Exchange: The bank also carries on the business of
buying and selling foreign currencies. Generally, exchange of foreign currencies in
developed countries is done by Exchange Bank but due to lack of exchange banks in
our country this function is done by commercial banks.

v. Creation of Credit: Creation of credit is one of the most important functions of

commercial banks. In order to earn profits, they accept deposits and advance loans
by keeping small cash in reserve for day-to-day transactions. When a bank advances
a loan, it opens an account to draw money by cheque according to his needs. By
granting a loan, the bank creates credit or deposit.

vi. General Utility Services: Apart from agency services, the bank also renders some
useful services known as general utility services. They can be explained as follows:
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(a) Safekeeping of Valuables: During the middle ages, banks began the practice of
holding gold, securities and other valuables owned by their customers in secure
vaults. A modern bank also receives from its customers, valuables such as
securities, jewelry, documents of title to goods, etc. for safe custody. The bank acts
as the custodian of the valuables belonging to the customers. The bank receives
them and returns back when demanded.
(b) Giving information about its customers: Since the bank is closely acquainted
with its customers, it can pass on reliable information in respect of their
creditworthiness to their parties at other places.
(c) Assist in Foreign Trade: The bank assists the traders engaged in foreign trade of
the country. It discounts the bills of exchange drawn by Nepalese exporters on the
foreign importers and enables the exporters to receive money in the home currency.
Similarly it also accepts the bills drawn by the foreign exporters.
(d) Making venture capital loans: Increasingly, banks have become active in
financing the start-up costs of new companies, particularly in high-tech industries.
Because of the added risk involved in such loans, this is generally through a venture
capital firm that is a subsidiary of a bank holding company, and other investors are
often brought in to share the risk.
(e) Financial Advising: Bankers have long been asked for financial advice by their
customers, particularly when it comes to the use of credit and the saving or
investing of funds. Many banks offer a wide range of financial advisory services,
from helping financial planning to consulting to business managers and checking on
the credit standing of firms.
(f) Automated Teller Machine (ATM): Nowadays, banks allow customers to deposit
and draw money from their accounts through Automated Teller Machine.
(g) Anywhere Branch Banking Service (ABBS): Banks offer account holder of a
branch to avail some banking services from other branches, which is called
Anywhere Branch Banking Service.
(h) Tele-banking: Customers may acquire information like, account balance,
exchange rate and may instruct banks to do various jobs over the phone/fax.
(i) Credit/Debit Card: Banks issue credit cards to highly creditworthy customers.
Banks also issue debit cards as well. This relieves the customers from carrying cash.
Beside these functions, a commercial bank also finance internal and foreign trade,
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collects statistics about money, banking, trade and commerce, and underwrite shares
and debentures issued by private companies, offer some of the banking services at
the door of highly valued customers. It also guarantees to other parties on behalf of
its customers to make payment up to a specified sum of money to the beneficiary on
demand in case of default by its customer. Further, a commercial bank also
facilitates the trading between two parties who live in different countries through
letters of credit and guarantees the seller of payment in case the buyer defaults to
pay.

2.1.3 Importance of Commercial Bank

Commercial banks play an important role to the development of the economy. Their
operations stabilize the economic pulse of the economy. The size of their
transactions mirrors the economic happenings in the country. For example, the mass
failures of commercial banks during the 1930’s reflected the phenomenon of severe
global depression in the world. They are as indispensable component of accelerated
growth in developing economy. In fact banks are the nerve center of economy and
the barometer of economic prosperity.

Today, in developing economies, regional balance or reduction in regional

disparities with regard to the levels and the rate of development amongst the
different regions has all along been one of the principal objectives of planned
economic development. In this objective commercial banks can play a very vital
role. Firstly, by accepting deposits the banks promote the habit of thrift and saving
among the people. These savings of the people later result in capital formation in the
economy. Thus, by encouraging savings among the people, the banks promote
capital formation, which is the basis of economic progress.

2.1.4 Features of a Sound Investment Policy

The income and profit of the bank depends upon its lending procedures, lending
policy and investment of its funds in different securities. The greater the credit
created by the bank, the higher will be the profitability. A sound lending and
investment policy is not only prerequisite for banks profitability, but also crucially
significant for the promotion of commercial savings of a backward country like
Nepal.
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Many authors have given some necessities or some of the main characteristics for
sound lending and investment policies, which must be considered by the
commercial banks:

I) Safety and Security: The bank should never invest its funds in those securities,
which are too volatile i.e., which are subject to too much depreciation and
fluctuations because a little difference may cause a great loss. It must not invest its
funds into speculative businessman who may be bankrupt at once and who may earn
millions in a minute also. Security means adequate collateral having good value,
which can be easily sold off if required at any point of time. The bank should accept
that type of securities, which are commercial, durable and marketable having fair
market value. For this purpose ‘MAST’ should be applied while reaching and
investment decision, where MAST stands for,
M= Marketability,
A= Ascertainability,
S= Stability,
T= Transferability.

(II) Profitability: A commercial bank can maximize its volume of wealth through
maximization of return on their investments lending. So, they must invest their
funds where they can gain maximum profit. The profit of commercial banks
depends on the interest rate, volume of loan, its time period and nature of
investment in different securities.

(III) Liquidity: Liquidity is the ability of a firm to satisfy its short-term obligations
when they become due for payment. People deposit money at the bank in different
account with confidence that the bank will repay their money when they need. To
maintain such confidence of the depositors, the bank must keep this point in mind
while investing its excess funds in different securities, so that it can meet current or
short-term obligations when they become due for payment.

(IV) Purpose of loan: From the viewpoint of security, a banker should always be
known that why a customer is in the need of loan. If a borrower misuses the loan
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granted by the bank, it can never repay and bank will possess heavy bad debts.
Therefore in order to avoid this situation each and every bank should demand and
examine all the essential detailed information about the scheme of the project or
activities, before lending.

(V) Diversification: “A bank should not lay all its eggs on the same basket”. This
saying is very important to the bank and it should always be careful not to grant
loan in only one sector. To minimize risk, a bank must diversify its investment on
different sectors. Diversification of loan helps to sustain loss according to the law of
average because if securities of a company deprived, there may be appreciation in
the securities of other companies. In this way the loss can be minimized or
recovered.

(VI) Tangibility: Though it may be considered that tangible property does not yield
an income apart from direct satisfaction of possession of property, many times.
Intangible securities have lost their value due to price level inflation. A commercial
bank should prefer tangible security to intangible one.

(VII) Legality: Illegal securities will bring out many problems for the investor. A
commercial bank must follow the rules and regulations as well as different
directives issued by the central bank (Nepal Rastra Bank), Ministry of finance,
Ministry of law and other relevant authorities, while mobilizing its funds.

(VIII) National Interest: In addition to its own profitability, the Bank should also
consider the national interest. Even though the Bank cannot get maximum return
from such investment, it should carry out its obligation towards the society and the
country. The Bank is required to invest on such sectors as per the Government and
Nepal Rastra Bank’s instruction. Investment on government bonds, priority and
deprived sector lending are the examples of such investments.

2.1.5 Review of Articles

In this section, effort has been made to examine and review of some related articles
in different economic journals, World Bank discussion papers. Magazines,
newspapers and other related books and publications.
Property of Shanker Dev Campus Library 37
Krishna D. Bhattarai (2008) has presented an article about the “Non Performing
Assets (NPA) Management”. According to him, a loan is very easy term for a
borrower when he has already taken and for a lender not availed. It is equally
difficult for a borrower to avail and for lender to recover. From a banker’s view, it is
just like a stone to roll down from the top of the hill while sanctioning, but too
difficult to roll back the same stone to the top of the hill while recovering. A loan
not recovered within the given time frame either in the form of interest servicing or
principal repayment is called non-performing loan (NPL). There are other
parameters as well to quantify an NPL. Security not to the extent of loan amount
with specified safety margin, value of security not realizable, possession not as per
the requirement of bank, conflict of charges are the other reason which causes
difficulties while recovering the loan.

Prabhakar Ghimire (2009) has published an article in which he has mentioned that
most of the commercial banks of Nepal are ready to pay the penalty in spite of
investing on rural, priority sector, poverty stricken and deprived areas. In the
directives of Nepal Rastra Bank it is clearly mentioned and directed that all the
commercial banks (under NRB) should invest 12% of its total investments to the
priority sectors. Out of this 12%, they should invest 3% to the lower class of
countrymen. However, these commercial banks are unable to meet the requirements
of NRB.

Dr. Sunity Shrestha (2010) in her article, “Investment policy of commercial banks of
Nepal and its impact on GDP”, has presented with the objectives to make an
analysis of contribution of commercial bank’s lending to the gross domestic product
(GDP) of Nepal. She has set hypotheses that there has been positive impact of
lending of commercial banks to the GDP. In research methodology she has
considered GDP as the dependent variable and various sectors of lending viz,
agriculture, industrial, commercial, service and general and social sectors as the
independent variables. A multiple regression technique has been applied to analyze
the contribution. The multiple regression analysis has shown that all the variables
except service sector lending have positive impact on GDP. Thus, in conclusion she
has accepted the hypothesis i.e.; there has been positive impact on GDP. She has
Property of Shanker Dev Campus Library 38
accepted that there has been positive impact by the lending of commercial banks in
various sectors of economy, except service sector investment.

Prof. Amrit Man Shrestha (2011) in his article “Nepalma Banijya Bank Haruko
Bhumika” has pointed out some important activities and its present scenario. In his
words these activities are to be studied and revised as soon as possible, otherwise
these may be disaster for the sound and effective banking system. The article is
written in Nepali language. Some of the main points of his article are given as:
Possibility of capital flight: - In Nepalese perspective, capital flight became a major
problem. Whatever capitals were constructed in Rana Regime, were already flowed
outside the country. Due to the mis-implementation of “Bhumi Sudhar” most of the
constructed capital was also flowed away outside the country. Due to the unstable
political situation, the possibilities of capital flight seem to be developed in high
scale.

Sekhar Bahadur Pradhan (2012) “Deposits mobilization, its problem and prospects”
has presented a short glimpse on investment in different sectors, its problem and
prospects, through his article.. On his article, he has expressed that, “Deposit is the
life blood of any financial institution, be it commercial bank, finance company,
cooperative or non-government organization”. He also added, in consideration of 10
commercial banks and nearly 3 dozens of finance companies, the latest figure does
produce a strong feeling that a serious review must be made of problems and
prospects of deposit sector. Except few joint venture banks, other organizations rely
heavily on the business deposit receiving and credit disbursement.

Bodhi B. Bajracharya (2013) in his article “Monetary policy and deposit

mobilization in Nepal”, has concluded that mobilization domestic savings is one of
the prime objective of the monetary policy in Nepal and commercial banks and the
more active financial intermediary for generating resources in the form of deposit of
private sector and providing credit to the investor in different sectors of the
economy.

Bhisma Raj Dhungana (2014) has presented an article about “NPL and its
Property of Shanker Dev Campus Library 39
management”. According to him, extension of credit is one of the major activities of
banks and financial institution. Credit usually represents the bulk of the institution’s
earning assets. Interest on credits is major source of income and profitability for the
banks and financial institution. Therefore, quality credit management is a subject of
crucial importance in the bank and financial institutions to maintain sustaiKBLity
and improving operational efficiency. Poor credit management and deterioration in
the quality of loans give birth to NPLs. The internal measures play significant role
to control the growth of NPLs. Best credit practices, culture and policies are
required to strengthen the internal factors. The bank should have a proper system
and competency on risk management and should insure that the risk are accurately
identified, assessed and controlled properly. A proper risk management is
undoubtedly an important tool for a good banking and NPL’s management.The
problem of non-performing loan has been the major issue on baking sector reforms
agenda. Nepal Rastra Bank is very much concerned with this issue and initiating
various measures to enhance the risk management capacities, introducing policies
and issuing regulations in this regard. However, the level of NPLs in the banking
system is decreasing with the implementation of comprehensive financial sector
reform program, but it is still at astounding level at rounding level at around 18% at
mid July 2005. The level of NPL in the financial system of Nepal comprising of 17
commercial banks, 25 development banks, 9 micro credit development banks and 16
finance companies is around 17% (NPR 29.0 billion) as at July 2005. Unless and
until the problem of NPL is resolved, the growth and stability of the financial
system cannot be assured. Therefore, the problem should be resolved as soon as
possible.

2.1.6 Review of Previous Research Work

There are not much articles published related to investment management in Nepal.
Shrestha (2008) has given a short glimpse on the “Portfolio management in
commercial banks; theory and practice”. Mr. Shrestha has highlighted following
issues in the article. The portfolio management becomes very important both for
individuals as well as institutional investors. Investors would like to select a best
mix of investment assets

The Main Objective

Property of Shanker Dev Campus Library 40
 • Higher return, which is comparable with alternative opportunities available
according to the risk class of investors. Good liquidity with adequate safety of
investment. Maximum tax concession. Economic, efficient and effective
investment mix. Flexible investment. Certain capital gains. In view of above
aspect, following strategies can be adopted: Do not hold any single security
i.e.; try to have a portfolio of different securities.
• Do not put all the eggs in one basket i.e.; to have a diversified investment.
• Choose such a portfolio of securities, which ensures maximum return with
minimum risk or lower return but with added objective of wealth
maximization.

The Major findings

• To find out the investible assets ( generally securities ) having scope for better
returns depending upon individual characteristics like age, health, need,
disposition, liquidity, tax liability, etc.
• To find out the risk of the securities depending upon the attitude of investor
toward risk.
• To develop alternative investment strategies for selection a better portfolio that
will ensure a trade-off between risk and return, so as to attach the primary
objective of wealth maximization at lower risk.
• To identify securities for investment to refuse volatility of return and risk.
• Mr. Shrestha has presented two types of investment analysis techniques i.e.;
fundamental analysis and technical analysis to consider any securities such as
equity, debentures or bonds and other money and capital market instruments.
He has suggested that the banks having international network can also offer
access to global financial markets.

Thapa (2009) has expressed his view that the commercial banks including foreign
joint venture banks seem to be doing pretty well in mobilizing deposits. Likewise,
loans and advances of these banks are also increasing. But compared to the high
credit needs particularly by the newly emerging industries, the banks still seem to
lack adequate funds. The banks are increasing their lending to nontraditional sectors
along with the Property
traditionalofsectors.
Shanker Dev Campus Library 41
The Main Objective
• On the other hand, the foreign venture banks have been functioning in an
extremely efficient way.
• They are making huge profit year after year and have been distributing large
amount of loans and dividends to its employees and shareholders.
• Similarly, concentration of these banks to modern off-balance sheet activities
and efficient personnel management has added to the maximization of their
profits.

The Major findings

• These banks have not been able to increase their income from commission and
discount, through traditional off-balance sheet operations.
• On the contrary, they have got heavy burden of personnel and administrative
overheads.
• Similarly, due to accumulated overdue and defaulting loans, profit position of
these banks has been seriously affected.

Shrestha (2010) in her research, “Investment planning of commercial banks in

Nepal”, has made remarkable efforts to examine the investment planning of
commercial banks in Nepal. On the basis of the study she concludes that bank
portfolio (loans and investment) of commercial banks has been influenced by the
variable securities rates. Investment planning of commercial banks has been
influenced by the variable securities rates. Investment planning of commercial
banks in Nepal is directly traced to fiscal policy of government and heavy
regulatory procedure of the central bank (Nepal Rastra Bank). So the investments
are not made in professional manner. Investment planning and operation of
commercial banks in Nepal has not been found satisfactory in terms of profitability,
liquidity, safety, productivity and social responsibility. To overcome this problem,
she has suggested, “commercial banks should take their investment function with
proper business attitude and should perform lending and investment operation
efficiently with proper analysis of the projects”.
Property of Shanker Dev Campus Library 42
The Main Objective
• Deterioration in economic growth rates and activities since last years.
• Poor regulative and supervisory capacity of the central bank in the past.
• Security and conflicts situation at present.
• Other systemic problem that are being faced by all the financial institutions
equally.

The Major findings

• Risk management deficiencies within banks and financial institutions:
• This comprises of poor system, procedures and credit culture in credit
management.
• Management oversight deficiencies in policy level, along with rapid and
aggressive growth strategies in some banks and lack of competencies in the
board of directors to monitor risk.

Shrestha (2011) has conducted a study on “Investment planning of commercial

banks in Nepal” with the objective of:

The Main Objective

• To evaluate the financial performance of commercial banks in Nepal.
• To examine the investment of commercial banks of Nepal with reference to
securities, loans & advances.
• To establish the relationship of bank portfolio variables with the national
income and interest rates.

The Major findings

• The research was conducted on the basis of primary and secondary data of
commercial banks.
• The general trend of commercial banks asset holding is growing. Deposits
have been a major source of funds. The excess reserve level of the banks
allows idle money and loss of opportunity. Debt equity ratio is very high,
greater than 100%.
Property of Shanker Dev Campus Library 43
 • The return ratios are on the average higher for foreign joint venture banks than
for the Nepalese bank but return of asset found to be statistically same. Risk
taking attitude is higher in foreign joint venture banks. The total management
achievement index is higher in case of foreign banks in comparison to the
Nepalese banks.
• The hypothesis that the commercial banks have non-professional style of
decision making in investment has been accepted. The investment of
commercial banks in shares and securities is normal and not found to have
strategic decision towards investment in shares and securities. Yield from the
security has been found to be satisfactory.
• Investment in various economic sectors shows industrial and commercial
sector taking higher share of loan till 1990.

Silwal (2012) has conducted a study on “Lending policy of Commercial Bank in

Nepal”

The Main Objective

• The secured loan analysis showed commercial loan as being very important
followed by social and industrial loans.
• The loan loss ratio has been found to be increased with low recovery of loan.
• Demand of bank credit has been found to be affected by the national income
and lending and Treasury bill rate.
• The investment of commercial banks on government securities has been
observed to be affected by total deposit, cash reserve requirements and
Treasury bill and lending rates.
• Interest rates, lending rate, deposit rate were found to constitute a set of
significant variables affecting the bank portfolio composition.

The Major findings

• Investment in various sectors has a positive impact on the national income
from their respective sectors.
• Lending in priority sector showed cottage a small industry sector sharing
Property of Shanker Dev Campus Library 44
higher loans.
 • Priority sector lending showed positive impact on the national income.

Pokharel (2013) conducted a study on “Investment pattern and policy of Rastriya

Banijya Bank” The research was conducted mainly on the basis of secondary data.
Interview technique has also been used to collect information of the investment
policy of the bank.

The main Objective

• To review of present investment policy of RBB.
• To examine whether the bank has been fully utilizing the deposits mobilized
or not.
• To establish the relationship between deposits, loans and advances and the
effect on them by the change of interest rate.

The Major findings

• To recommend for the improvement in the investment policy.
• From the study of investment pattern of RBB, it is observed that the
investment is mainly towards the security of gold and silver.
• From the study it has been revealed that there has never been any clear
specific investment policy. In fact the bank is running its business without
having any definite direction, except to follow the directives issued by NRB
from time to time in some specific matters.
• The deposit raised by the bank is not properly utilized. This also reflects the
lack of definite policy of the RBB.
• The effect of changes in interest rate has neither contributed to raise deposits
nor has been favorable in investment extension.
• Time to time checking and supervision by the bank should be faithfully
followed.
• To analyze the role of commercial banks in its historical prospective.
• To show the relationship between deposits and loan and advances.
• To identify major weaknesses of lending policy of the commercial banks.

Property of Shanker Dev Campus Library 45

Khadka (2014) conducted a study on “A study on the investment policy of KBL
Bank Ltd in comparison to other Joint Venture Banks of Nepal” with the following
objective:

The Main Objective

• To evaluate the liquidity, asset management efficiency and profitability
position in relation to fund mobilization of KBL Bank Ltd in comparison to
other joint Venture Banks.
• To discuss fund mobilization and investment policy of KBL Bank Ltd in
respect to its fee-based off-balance sheet transactions and fee-based on-
balance sheet transactions in comparison to other JVBs.
• To evaluate the growth ratios of loan and advances and total investment with
respective growth rate of total deposits and net profit of KBL Bank Ltd in
comparison to other JVBs.
• To find out the relationship between deposits and total investment, deposit and
loan and advances, and net profit and outside assets of KBL Bank Ltd in
comparison to other JVBs.

The Major findings

• The liquidity position of KBL Bank Ltd is comparatively worse than that of
other JVBs. KBL Bank Ltd has more portions of current assets as loan and
advances but less portion as investment on government securities.
• KBL Bank Ltd is comparatively less successful in on-balance sheet operation
as well as off-balance sheet operations than that of other JVBs.
• Profitability position of KBL Bank Ltd is comparatively not better than that of
other JVBs. The mean ratio of return on loan and advances of KBL Bank Ltd
has been found slightly lower than that of other JVBs and the return has been
found less homogeneous than that of other JVBs. Similarly the mean ratio of
total interest earned to total outside assets of KBL Bank Ltd has been found
slightly lower than that of other JVBs.
• Though KBL Bank Ltd seems to be more successful to increase its sources of
funds as well as mobilization of it by increasing loan and advances and total
investment, it seems
Property to be failure
of Shanker DevtoCampus
maintain its high
Library 46growth rate at a profit in
 comparison to that of other JVBs (i.e., Nepal Grindlays Bank Ltd and Nepal
Indosuez Bank Ltd).
• There is significant relationship between the deposit and loan advances as well
as outside assets and net profit but not between deposit and total investment in
case of both KBL Bank Ltd and other JVBs.

2.2 Research Gap

Investment in different sectors is made on the basis of the directives and circulars of
Nepal Rastra Bank as well as the investment guidelines and policy of the concerned
commercial banks. The directives of NRB change over time. NRB makes necessary
amendments in prevailing directives and circulars and communicates to commercial
banks. Commercial banks should follow these directives and circulars. Furthermore,
their own investment guidelines and policies should be in line with NRB directives
and circulars. So, the up to dated study over the change of time frame is major
concern for the researcher and concerned organization as well as industry as a
whole. This study covers the more recent financial data, NRB circulars and
guidelines than that of studies previously conducted. No research has yet been
undertaken regarding the sector-wise loan and advances diversification of . Portfolio
management is the major part of the bank's investment. The optimum diversification
of loan and advances reduces the default risk of credit. It is the major concern of
stakeholders to know the portfolio behavior of the bank. This study puts it s efforts
to find out the proportion of total loan and advances of the bank disbursed to
different sector of economic and analyze the diversification of its investment.

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 CHAPTER – III
RESEARCH METHODOLOGY

This chapter describes the methodology employed in this study. Research

methodology is the systematic method of finding solution to a problem i.e.
systematic collection, recording, analysis, interpretation and reporting of
information about various facts of a phenomenon under study. In this study research
methodology describe the methods and processes applied in the entire aspect of the
study. This chapter describes research design, population, sampling procedure,
sources of data and analysis of data.

3.1 Research Design

The research design is the conceptual structure within which research is conducted.
It constitutes the blueprint for the collection, measurement and analysis of data. As
such the design includes an outline of what the researcher will do from writing the
hypothesis and its operational implications to the final analysis of data.

This study is an examination and evaluation of budget process in profit planning

program of NIBL and BOK. Various functional budgets and other related
accounting information and statement of the banks are materials to analyze and
evaluate the profit planning system of banks. Descriptive as well as analytical
approaches have been adopted in this research. This is a comparative study research
of commercial banks.

3.2 Population and Sample

As this research aims at studying the profit planning aspect of the commercial bank
taking the reference of NIBL and BOK and data have been analyze for six years of
its operation. Here, all the commercial banks are population of the study and NIBL
BOK and Kumari have been selected as sample for the present study.

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3.3 Data Collection Procedures and Sources of Data
This study is mostly based on secondary data. However, secondary data and
information have been obtained through informal discussions with the staffs of the
bank. Secondary data have been collected from the annual published accounting and
financial statement of the banks. Similarly other necessary data have collected from
website, newspapers and related publications.

3.4 Research Variables

Loans/Advances overdrafts and Bills discounted (LDO), customer deposits, total
resources, total deployment interest expenses, other expenses, interest income, other
income etc. of the banks are the research variables of this study.

3.5 Analysis of data

Analysis is the careful study of available facts so that one can understand and drew
conclusion from them on the basis of established principles and sound logic (Cottle
etal; 1988, 29). This study mostly based the analysis of secondary data with the help
of different statistical tools. Therefore the data have been collected accordingly and
managed, analyzed and presented in suitable tables, formats, diagrams, graphs and
charts. Such presentations have been interpreted and explained wherever necessary.
Financial, mathematical and statistical tools are used to analyze the presented data,
which includes ratio analysis, percentage, regression analysis, correlation, mean,
standard deviation, coefficient of variance, percentile increment, etc.

3.6 Statistical tools

To draw the conclusion by analyzing the collected data simple statistical tool like
arithmetic mean, multiple bar diagram, pie-chart are used and tabulation are used to
implicit the comparative results.

3.6.1 Arithmetic mean average

The central values that represent the characteristics of the whole distribution or the
values around which all items of the distribution tend to concentrate are called
average. Arithmetic mean or arithmetic average is one of the important statistical
Property of Shanker Dev Campus Library 49
measures of average. The arithmetic mean of a given set of observation is their sum
divided by the number of observations.

3.6.2 Multiple Bar- diagrams and graphs

Diagrams and graphs are visual aids which give a bird’s eye view of a set of
numerical data which show the information in a way that enables us to make
comparison between two or more than two sets of data. Diagrams are in different
types. Out of these various types of diagram one of the most important form of
diagrammatic presentation of data is multiple bar diagram which is used in cases
where multiple characteristics of the same set of data have to be presented and
compared.

3.6.3 Percentage
Percentage is one of the most useful tools for the comparison of two quantities or
variables. Simply, the word percentage means per hundred. In other words, the
fraction with 100 as its denominator is known as a percentage and the numerator of
this fraction is known as rate of percent.

3.6.4 Coefficient of correlation(R)

Correlation analysis is the statistical tools use to describe the degree to which one
variable is linearly related to another. The coefficient of correlation measures the
direction of relationship between the two sets of figures. It is the square root of the
coefficient of determination. Correlation can either be negative or positive. It always
lies between +1 to -1. The degree of association between the two variables, say X
and Y, and is defined by correlation coefficient (R)

R=
∑ xy
x2 y 2

Where,
X=X- X and Y = Y- Y

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3.6.5 Regression analysis
Regression is the statistical tool which is used to determine the statistical
relationship between two (or more) variables and to make estimation (or prediction)
of one variable on the basis of the other variable(s).In other words, regression is that
statistical tool with the help of which the unknown value of one variable can be
estimated on the basis of known value of the other variable.

3.6.6 Standard deviation (σ)

The standard deviation is the absolute measure of dispersion. It is defined as the
positive square root of the mean of the square of the deviation taken from the
arithmetic mean. The greater the amount of dispersion or variability, the greater the
standard deviation, the greater will be the magnitude of the deviation of the values
from their mean. A small standard deviation means a high degree of uniformity of
the observation as well as homogeneity of a series and a large standard deviation
means just the opposite.

3.6.7 Coefficient of variation (C.V.)

The relative measure of dispersion based on the standard deviation is known as the
coefficient of variation. It is independent of unit. So, two distributions can bitterly
be compared with the help of C.V. for their variability. Less the C.V., more will be
the uniformity, consistency, stable and homogeneous etc. and vice versa.

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 CHAPTER-IV
PRESENTATION AND ANALYSIS OF DATA

This chapter implies the presentation and analysis of data collected from various
secondary sources. The chapter has been divided into two main sections. The first
section of the chapter includes the presentation and analysis of data while the second
section includes major findings of the study.

4.1 Financial Analysis of Commercial Bank

Financial analysis of the process of identifying the financial strength and weakness
of the firm by properly establishing relationship between the items of the balance
sheet. Here relevant ratio is calculated and appropriate interpretations are made.
Analysis of financial ratio shows the performance of the concern banks.

Liquidity Ratio
Commercial Banks must maintain its satisfactory liquidity position to satisfy the
credit needs of the commercial to meet demands for deposits, withdrawals, pay
nation by obligation in time and convert non-cash assets into cash to fulfill
immediate needs without loss of bank and consequent impact on long run profit.

Current Ratio
It is the relationship of current assets and current liabilities. Current assets can be
converted in to cash with in short period of time normally not exceeding one year.
Current liabilities are those obligation which are payable within short period.
Current assets consist of cash and bank balance, money at call or short terms notice,
loan & advances, investment in government securities and other interest receivable
and other miscellaneous current assets. Current liabilities consist of deposits, loan
and advances, bills payable. Tax provision, staff bonus, dividend payable and
miscellaneous current liabilities.

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 Table 4.1
Current Ratio (Times)
Bank Fiscal Year Mean S.D C.V
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 %
NIBL 1.04 1.05 1.06 1.05 0.94 2.38 1.25 0.5055 40.33
KBL 0.76 1.27 0.92 0.94 0.97 2.08 1.16 0.4398 38.02
BOK 1.03 1.06 1.05 1.06 1.02 1.21 1.07 0.0636 5.94
(Source: Annual Report of Bank)

Figure 4.1
Current Ratio (Times)

In the Table and Figure 4.1 current ratio of commercial banks are analyzed. The
table reflects that the current assets of all commercial banks have exceeded the
current liabilities during the five years period. In general it can be said that all the
banks have sound ability to meet their short term obligations in other words bank is
capable of discharging the current obligations. In case of NIBL, the current ratios
are in increasing trend from fiscal year 2008/09 to 2009/010 but it has slightly
decreased in the year 2010/011 by 0.01. KBL has also increasing trend from fiscal
year 2008/09 to 2012/013. Similarly BOK has a fluctuating trend ratio. In an
average, KBL has maintained lower current ratio, which states that liquidity position
of KBL is fair. The value of coefficient of variation of NIBL is 40.33% which is
Property of Shanker Dev Campus Library 53
comparatively lower than KBL and greater than BOK i.e. 40.33% < 38.02% >
 5.94%. Thus it can be said that current ratio of NIBL is less consistence than BOK
and is slightly consistence than KBL.

4.1.1 Cash and Bank Balance to Total Deposit Ratio

Cash and bank balance are assets that constitute the banks first line of defense and
consist of cash and hand foreign cash on hand cheques and other cash items balance
with demotic banks and balance help aboard. This ratio measures the promotion of
most liquid assets i.e. cash and balance among the total current asset of bank. Higher
ratio shows the bank ability to meet demand for cash.

Table 4.2
Cash and Bank Balance to Total Deposit Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mea S.D C.V
(%) (%) (%) (%) (%) (%) n %
NIBL 12.6
18.25 11.03 17.02 7.84 10.39 11.25 3 3.7256 29.50
KBL 5.13 6.78 8.51 6.87 3.83 3.26 5.73 1.8349 32.02
BOK 11.3
19.68 11.95 11.23 10.11 8.28 6.95 7 4.0842 35.93
(Source: Annual Report of Bank)
Figure 4.2
Cash and Bank Balance to Total Deposit Ratio

The Table 4.2 shows cash and bank balance to total deposit ratio of NIBL. KBL and
BOK from the FY 2007/08 to 2012/013.
Property of Shanker Dev Campus Library 54
The Table and Figure 4.2 show the percentage of cash and bank balance to total
deposit ratio position of NIBL, KBL and BOK. The mean standard deviation and
coefficient of variation of cash and bank balance to total deposit ratios of all banks
are better. The above table reflects NIBL has fluctuating trend likewise 18.25%,
11.03%, 17.02%, 7.84%, 10.39% and 11.25% from the FY 2000/01 to 2012/013
respectively. It has maintained highest ratio in the FY 2000/01 i.e. 18.25% and
lowest ratio in the FY 2011/012 i.e. 7.84%. Similarly KBL and BOK have
maintained fluctuating trend from the FY 2000/01 to 2012/013. In average NIBL has
higher cash and bank balance to total deposits ratio than BOK and KBL. It states
that the liquidity position of NIBL is better in this regard. The above analysis helps
to conclude that, the cash and bank balance position of KBL with respect to deposits
is not better against the readiness to serve its customers deposits than that of the
NIBL. So KBL may invest in more productive sectors like short-term marketable
securities, treasury bills etc ensuring enough liquidity which will helps the bank to
improve its profitability.

4.1.2 Cash and Bank Balance to Current Assets Ratio

This ratio measures the proportion of most liquid assets i.e. cash and bank balance
among the total current assets of bank. Higher ratio indicated the bank's ability to
meet the daily cash requirement of their customers’ deposit. Bank has to balance the
cash and bank balance to adequate cash for the customers demand against deposit
when required and less interest is required to be paid against the cash deposit.

The Table 4.3 shows the Cash and bank balance to current asset ratio of NIBL, KBL
and BOK from the FY 2007/08 to 2012/013.

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 Table 4.3
Cash and Bank Balance to Current Assets Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 16.53 9.48 14.54 6.72 10.13 13.62 11.84 3.3457 28.27
KBL 6.18 7.90 8.25 6.81 3.74 4.55 6.24 1.6447 26.36
BOK 17.96 11.04 9.59 8.36 7.95 8.17 10.51 3.4948 33.25
(Source: Annual Report of Bank)
Figure 4.3
Cash and Bank Balance to Current Assets Ratio

In the Table and Figure 4.3 shows the mean standard deviation and coefficient of
variance of cash and bank balance to current asset ratio of all three banks are in
fluctuating trend during the study period. They show the ability to manage the
deposit with drawls from the customers. NIBL has maintained a highest ratio of
16.53% in the year 2000/01. Similarly KBL and BOK have a highest ratio of 8.25%
and 17.96% in the year 2009/010 and 2000/01 respectively. The mean value of
NIBL is highest in comparisons to other banks. Similarly the coefficient of variation
of NIBL is 28.27%, which is higher than KBL and lower than BOK, it reflects that
the current ratio is less heterogeneous than KBL bank.

Property of Shanker Dev Campus Library 56

 Lastly, the analysis reveals that NIBL is better position during the study period as
the bank shows the ability to manage the deposit with drawl from the customers
although it has the fluctuating trend.

4.1.3 Investment on Government Securities to Current Assets Ratio

The ratio examines portion of a commercial banks current assets which invested in
different government securities i.e. treasury bills and government bonds.
Commercial banks are interested to invest their collected fund on different securities
issued by government to utilize their excess funds. Even governments securities are
not so liquid as cash and bank balance of commercial bank, they can easily be sold
in the market or it can also be converted into cash in other ways. The ratio is
computed as:-

Table 4.4
Investment on Government Securities to Current Assets Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 16.30 24.20 20.41 26.24 20.29 29.15 22.77 4.2499 18.67
KBL 20.76 30.95 25.88 25.78 16.12 16.61 22.68 5.3511 23.59
BOK 4.80 8.76 20.91 25.33 23.06 29.81 18.78 8.9746 47.79
(Source: Annual Report of Bank)

Property of Shanker Dev Campus Library 57

 Figure 4.4
Investments on Government Securities to Current Assets Ratio

The Table and Figure 4.4 reflects that investment in government securities to
current asset ratio of NIBL is fluctuating trend, where as BOK in increasing trend
and KBL is in decreasing trend. The mean ratio of NIBL is lesser than KBL and
higher than BOK. It means that NIBL has invest it’s as much as portion of its
current assets as government securities as that of BOK and less than of KBL. The
coefficient of variation of NIBL is lower in comparison to the other banks. Lastly it
can be conclude that it has invested it's more of portion assets as government
securities than other banks and investment made is consistence of coefficient of
variation reveals. But its liquidity portion is slightly poor than other banks ion view
point of investment on government securities.

4.1.4 Loans and Advances to Current Assets Ratio

Loan and advances include short and long term loan overdrafts and cash credit.
Commercial banks should not keep its all collected funds as cash and banks balance
in order to invest as loan and advances to the customers. If sufficient loan and
advances cannot be granted, it should pay interest on those un-utilized deposits
funds. Even high loan and advances may also effects to keep the bank in most liquid
position because they can only be collected at the time of maturity. This, a bank
must maintain its loan and advances on proper way.

Property of Shanker Dev Campus Library 58

 Table 4.5
Loan and Advances to Current Assets Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 59.52 62.09 62.63 62.60 73.60 85.99 67.74 9.3043 13.74
KBL 58.75 55.87 55.93 57.50 70.71 93.25 65.34 13.4841 20.64
BOK 65.92 74.51 62.88 60.30 63.51 81.39 68.09 7.4344 10.92
(Source: Annual Report of Bank)

Figure 4.5
Loan and Advances to Current Assets Ratio

The Table and Figure 4.5 show the percentage of loan and advances ratio to current
assets ratio position of NIBL, BOK and KBL. The loan and advances to current
assets ratio of all banks are in increasing trend. The mean ratio of NIBL is slightly
less than BOK and higher than KBL. It reflects that loan and advances to current
asset ratios of the NIBL has maintained a highest ratio of 85.99% in the FY
2012/013. Similarly KBL and BOK have in 93.25% and 81.39% in the FY
2012/013.The coefficient of variation among ratio is lower in case of NIBL, which
indicates uniformity of NIBL in comparison to other banks. So it can conclude that
Property of Shanker Dev Campus Library 59
 it is better to mobilize its funds as loan and advances. On the other hand satisfactory
than that of other banks from the view point of mean ratios.

4. 2 Asset Management Ratio

Commercial bank must be managed its assets very well to satisfy its customers to
earn high profit and for its own existence. It measures the efficiency of the bank.

4.2.1 Loans and Advances to Total Deposits Ratio

This ratio measures how successfully the banks are able to mobilize the total deposit
on loan and advances for profit generating purpose. Higher the ratio indicates the
better mobilization of total deposits, but too high is not be better from its liquidity
point of view. This table 4.6 elects the percentage of loan and advances to total
deposit ratios position of NIBL, KBL and BOK.

Table 4.6
Loan and Advances to Total Deposit Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 65.71 72.23 73.32 72.97 75.45 71.01 71.78 3.0248 4.21
KBL 48.82 47.97 57.68 58.01 72.57 66.79 58.64 8.8701 15.13
BOK 72.23 80.61 73.62 72.94 66.12 69.23 72.46 4.4475 6.14
(Source: Annual Report of Bank)

Property of Shanker Dev Campus Library 60

 Figure 4.6
Loan and Advances to Total Deposit Ratio

The ratio of NIBL and KBL have in increasing trend where as BOK ratio is in
decreasing trend for 2000/01 to 2011/012. In the case of NIBL has maintained
higher loan and advances to total deposit i.e. 75.45% in a year 2012/013, likewise
KBL has maintained higher ratio in a year 2011/012 and BOK is in 80.61% in a year
2008/09 respectively. The mean value of NIBL i.e. 71.78 is less than BOK and
higher than KBL i.e. 58.64. The CV of NIBL is lower than that of the other banks
which indicate that loan and advances of it is stable and consistent. Lastly it can be
concluded that NIBL is in strong position or in better position regarding the
mobilization of total deposits on loan and advances and acquiring higher profit in
comparison with BOK and lower than KBL. Higher ratio is not good from the view
point of liquidity as the loan and advances are not a liquid as cash and bank balance.

4.2.2 Relationship between Deposit and Loan and Advances

It measures the intensity or magnitudes or degree of relationship between the two
variables. In the analysis, deposit is independent variable (X) and loan and advances
are dependent variable (Y). The objectives of computing coefficient of correlation
(r) between the two variables are to justify whether deposit is significantly used as
loan and advances or not.
The Table 4.7 shows the value of ‘r’, r2, P. Er and 6. P. Er between deposit and loan
and advance of NIBL in comparison with KBL and BOK.
Property of Shanker Dev Campus Library 61
 Table 4.7
Correlation between Deposit and Loan and Advances
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.996406 0.992825 0.001976 0.011854
KBL 0.735985 0.54167374 0.126206 0.757238
BOK 0.981195 0.96274302 0.010259 0.061555
(Source: Annual Report of Bank)

Figure 4.7
Correlation between Deposit and Loan and Advances

The Table and Figure 4.7 show the value of ‘r’, r2, P. Er, 6P. Er between deposit and
loan and advances of NIBL with comparison to BOK and KBL from the 2000/01 to
2012/013. In case of NIBL, it is found that coefficient of correlation between deposit
and loan and advances is 0.996406. It shows the positive relationship between two
variables. The value of coefficient of determination (r2) is 0.992825, which means
99.28% of the variation in the dependent variable (loans and advances), has been
explained by the independent variable (deposit). Similarly, considering the value of
‘r’ i.e. 0.996406 and comparing it with 6 P.Er i.e. 0.011854, we can find, it is greater
than the value of 6P.Er which reveals the value of ‘r’ is significant. Or there is
significant relationship between deposit and loan and advances.
Property of Shanker Dev Campus Library 62
 In the case of KBL and BOK, have positive correlation between deposit and loan
and advances when we consider the value of coefficient of determination (r2) it
indicated than KBL and BOK are 54.16% and 96.27% respectively of the variation
in the dependent variable has been explained by the independent variable. Since the
value r2 of KBL is less than 6P.Er, so its value of r is not significant i.e. there is no
significant relationship between deposit and loan and advances.

After analyzing, the conclusion can be drawn that in NIBL and BKO there is
significant relationship between deposit and loan and advances because ‘r’ is greater
than 6P.Er whereas, in case of KBL ‘r’ is less than 6P.Er. So there is no significant
relationship between deposit and loan and advances. This indicates that NIBL has
higher correlation between deposit and loan and advances as well as higher value of
(r2) than KBL and BOK. It can conclude that it is successful to grant loan and
advances to mobilize the collected deposits in a proper way.

4.2.3 Total Investment to Total Deposit Ratio

The commercial banks must mobilize its deposit fund by investing in different
securities issued by government and other financial, non financial sectors. This ratio
measures the extent to which the banks are capable to mobilize their deposits on
investment in various securities. This ratio is computed by dividing total investment
by total deposit ratio. The Table 4.8 shows the total investment to total deposit ratio
of the banks NIBL, KBL & BOK.

Table 4.8
Total Investment and Total Deposit Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 19.71 30.97 24.70 31.45 21.08 30.43 26.39 4.8058 18.21
KBL 48.64 52.88 44.85 41.33 29.25 31.93 41.48 8.4988 20.49
BOK 7.35 11.66 29.43 32.00 29.05 32.22 23.62 10.1257 42.87
(Source: Annual Report of Bank)

Property of Shanker Dev Campus Library 63

 Figure 4.8
Total Investment and Total Deposit Ratio

From the Table and Figure 4.8, it is found that, total investment to total deposit ratio
all three banks are in increasing and decreasing trend or in fluctuating trend during
study period 2000/01 to 2012/013. The total investment to total deposit ratio of
NIBL has highest ratio of 30.97% in FY 2008/09 and lowest ratio 19.71% in FY
2000/01. Similarly KBL has highest and lowest ratio of 52.88% and 29.25% in FY
2008/09 and 2011/012. BOK has highest and lowest ratio of 32.22% and 7.355 in
FY 2012/013 and 2000/01 respectively.

In comparison with mean value, NIBL has lesser than KBL mean value and higher
than that a BOK i.e. 26.39 < 41.48 > 23.62. Likewise the value of coefficient of
variation on NIBL is lower than that of both banks. After analysis it is clear that the
investment policy of NIBL is in better position in comparisons to both banks. The
total investment to total deposits ratio of NIBL is more homogeneous because it has
low coefficient of variation.

4.2.4 Relationship between Deposit and Total Investment

Coefficient of correlation between deposit and total investment measure the degree
of relationship between these two variables. Deposit is independent variables (X)
and total investment is dependent variable (Y). The purpose of computing it is to
Property of Shanker Dev Campus Library 64
find out whether deposit is significantly used as investment or not.
The Table 4.9 shows the value of ‘r’, r2, P.Er, 6P.Er between outside asset and net
profit of NIBL, KBL and BOK for the study period 2000/01 to 2012/013.

Table 4.9
Coefficient of Correlation Deposit and Total Investment
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.935074 0.87436424 0.03459 0.207573
KBL 0.208485 0.04346604 0.263395 1.580367
BOK 0.925525 0.856596 0.039488 0.236929
(Source: Annual Report of Bank)

Figure 4.9
Coefficient of Correlation Deposit and Total Investment

The Table and Figure 4.9 shows the value of ‘r’, r2, P.Er, 6P.Er between deposit and
total investment of NIBL with comparison of BOK and KBL. From table, it is found
that coefficient of correlation between deposit and total investment of NIBL is
0.935074. It shows the positive relationship between two variables i.e. deposit,
independent (X) and total investment, dependent (Y). Moreover, when we consider
the value of coefficient of determination (r2) it is 0.87436424 and it means 87.43%
of the variation in the dependent variable is explained by the independent variable.
Property of Shanker Dev Campus Library 65
Similarly considering the value of ‘r’ and comparing with 6 P.Er, it is lesser than
6P.Er, which reveals that the value is not significant. Likewise in the case of KBL
value of ‘r’ is less than 6P.Er so we can say that there is also not significant
relationship between total deposit and total investment.

On the other hand, in case of BOK has positive correlation between deposit and total
investment. By considering the probable error since the value of ‘r’ i.e. 0.925525 is
more than 6P.Er i.e. 0.236929, so it indicates that there is significant relationship
between total deposits and total investment. Likewise by the application of
coefficient determination i.e. r2 which indicates BOK to be 85.65 of the variation in
the dependent variable has been explained by the independent variables.

The above analysis clears that in case of NIBL there is not significant relation
between total deposit and total investment because ‘r’ is less than 6P.Er. That means
NIBL has not able to follow the policy of maximizing the investment of their
deposits. It has not certain investment policy to invest their deposit where their as
BOK there is significant relationship between deposit and total investment. Lastly
we can say that BOK has followed the policy of maximizing the investment of their
deposits or BOK is successful in maximizing the investment of their deposit.

4.2.5 Loan and Advances to Total Working Fund Ratio

Loan and advances is the major components of the total working fund, which
indicate the ability of banks to utilize its deposits in the form of loan and advances
to earn high return. It is an appropriate level to generate profit. The ratio reflects the
extend to which the commercial banks are able to utilizing their assets loan and
advances for the purpose of profit generation.
Total working fund is the total assets. It is composed up of current assets, fixed
assets, miscellaneous assets and investment, loan and advance and interest
receivable. The Table 4.10 shows the loan and advance to total working fund ratio
of NIBL, KBL and BOK.

Property of Shanker Dev Campus Library 66

 Table 4.10
Loan and Advances to Working Fund Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 57.77 59.67 60.96 61.24 64.61 61.41 60.94 2.0592 3.38
KBL 43.51 42.43 46.83 48.91 61.60 57.87 50.19 7.1524 14.25
BOK 66.54 72.58 61.02 59.46 59.98 59.12 63.12 4.9135 7.78
(Source: Annual Report of Bank)

Figure 4.10
Loan and Advances to Working Fund Ratio

This Table and Figure 4.10 show that loan and advances to working fund ratio of
NIBL and KBL is an increasing trend. BOK is in decreasing trend during the study
period. NIBL has the highest ratio 61.41% in the FY 2012/013, KBL and BOK has
the highest ratio i.e. 61.60% and 66.54% in the FY 2011/012 and 2007/08.The mean
value of NIBL has maintained average loan and advances to total working fund ratio
than that of KBL and BOK. This regard, NIBL is in better position among other
banks. The coefficient of variation of NIBL is lower than that of both banks i.e.
3.38% < 14.25% > 7.78% respectively, which clear that loan and advances to total
Property of Shanker Dev Campus Library 67
working fund ratio is less variable than other banks.
 4.2.6 Investment on Government Securities to Total Working Funds Ratio.
The commercial banks should never use all the total deposits resources as loan and
advances and other credit from security and liquidity point of view. So to some
extent commercial bank seem to be interested to utilize their resources by
purchasing government securities. This ratio reflects the relationship between the
banks investment securities in comparison to the total working funds.

The Table 4.11 shows the investment on government securities to total working fund
ratio of NIBL, KBL and BOK.

Table 4.11
Investment on Government Securities to Total Working Fund Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 158.19 23.26 19.86 25.67 17.81 20.82 20.54 3.2657 15.90
KBL 15.38 23.51 21.67 21.93 14.05 10.31 17.81 4.8418 27.19
BOK 4.85 8.54 20.29 24.98 21.78 21.65 17.02 7.5074 44.12
(Source: Annual Report of Bank)

Figure 4.11
Investment on Government Securities to Total Working Fund Ratio

Property of Shanker Dev Campus Library 68

 The comparison of mean ratio of NIBL with other two banks reveal that NIBL is
successful; to mobilize their working fund as investment in government securities.
Similarly NIBL is also variability between ratios during the study period is greater
mean value than that of NIBL and BOK. The Table 4.9 reflects that investment on
government securities to total working fund ratio of all three banks are in fluctuating
trend. Likewise the coefficient of variation is higher than that of other two banks i.e.
15.90% < 27.19% < 44.12%. This means NIBL has invest its more portion of
working funds on government securities as than other banks.

4.2.7 Investment on Shares and Debentures to Total Working Fund Ratio

This ratio shows the banks investment in share and debentures of subsidiary and
other companies. Now a day, commercial banks are interested to invest its fund not
on government securities. They are interested to invest in shares and debenture of
different types of companies and also in most of commercial banks in Nepal have
purchased shares of regional development banks and some of them have purchased
the share of other companies too. This ratio reflects the extent on which the banks
are able to mobilize their total assets on purchase of share and debenture of other
companies to generate income and utilize their excess fund. A higher ratio indicated
more portion of investment on shares and debenture out of total working fund. The
Table 4.12 shows the investment ob shares and debenture to total working fund ratio
of NIBL, KBL and BOK from the FY 2007/08 to 2012/013.

Table 4.12
Investment on Shares and Debentures to Total Working Fund Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 0.07 0.26 0.21 0.18 0.16 0.12 0.17 0.0610 36.61
KBL 0.11 0.13 0.13 0.13 0.16 0.12 0.13 0.0153 11.75
BOK 0.40 0.60 0.31 0.24 0.23 0.19 0.33 0.1390 42.33
(Source: Annual Report of Bank )

Property of Shanker Dev Campus Library 69

 Figure 4.12
Investment on Shares and Debentures to Total Working Fund Ratio

The Table and Figure 4.12 depict that NIBL has on decreasing trend in the FY
2009/010 to 2012/013. KBL has maintain same position up to 2010/011 then it has
increasing trend in 2011/012 i.e. 0.13%, 0.13%, 0.13%, 0.16%. Similarly BOK has
also in decreasing trend to investment on shares and debenture to working fund
ratio. In an average, NIBL has maintained medium investment on shares and
debentures to total working fund ratio than other. The coefficient of variation of
NIBL is higher than that of other two banks which indicate that NIBL is more
variable and less consistent.

4.2.8 Total off Balance Sheet Operation to Loan and Advances Ratio
This ratio shows the proportion of free based off balance sheet activities are very
much dependent on made operation management strategy banking net work with
foreign banks etc. Commercial banks should not concentrate only on fund based
activities such as loan and advances, investment on different sectors and so on. It
should pay its attention to increase free based off balance activities. Income
generated through the fee based off balance sheet activities constitutes a significant
proportion in the total income of most of the commercial banks statement. A high
ratio indicates the highest OBS transaction or vice versa.

Property of Shanker Dev Campus Library 70

 Table 4.13
Total OBS Operation to Loan and Advances Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 856.64 3005.76 28.50 0.00 7732.64 0.00 2093.85 4127.05 50.73
KBL 940.05 3948.48 23.81 4992.55 7437.89 67.12 1336.51 4613.61 28.97
BOK 2317.3 4908.46 47.21 5492.35 7755.95 1977.18 4542.7 43.52
70.81
(Source: Annual Report of Bank)

Figure 4.13
Total OBS Operation to Loan and Advances Ratio

In the Figure and Table 4.13 show the total OBS operation to loan and advances
ratio of NIBL is in decreasing trend in FY 2008/09 and stepped up again in FY
2009/010 from 23.80%, to 47.21%, then again decrease. Similarly KBL and BOK
have maintained the maximum ratio of 70.81% and 50.76% in the FY 2009/010 and
2000/01 respectively.

The mean if NIBL is lower than that of other banks i.e.33.022 < 61.73 > 38.26,
which indicates that, NIBL has lowest OBS transaction or vice versa. Has highest
Property of Shanker Dev Campus Library 71
mean ratio than NIBL and BOK. The coefficient of variance of NIBL is lower than
 that of other banks, which indicated that it is giving attention to increase free based
off balance activities.

4.2.9 Loan Loss Relation

It is occurred when the debtors fail to pay their loan. Loss of the loan is not only the
default of debtors but it is because of the failure of recovery of loan by the bank.
Negligence in its part makes a negative impact on the earning and capital of a bank
very badly. Greater loan loss provision is made in income statement if high loss is
expected. But this will lead to low profit and possible losses and produces low
increase or decrease in capital. The loan loss ratio shows how efficiently the bank
manages its loan and advances and makes effort for timely recovery of loan.

Table 4.14
Loan Loss Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 1.11 0.88 0.93 1.39 1.17 0.72 1.03 0.2176 21.06
KBL 2.14 0.00 0.00 0.01 0.04 0.03 0.37 0.7917 213.97
BOK 1.53 2.76 1.82 1.79 2.27 1.08 1.88 0.5324 28.39
(Source: Annual Report of Bank)

Property of Shanker Dev Campus Library 72

 Figure 4.14
Loan Loss Ratio

The above Table and Figure 4.14 reflects that NIBL has fluctuating trend, it has the
maximum ratio of 1.39% in the FY 2010/011 and minimum ratio of 0.72% in the FY
2012/013. Similarly, in case of KBL it has made any provision in the FY 2008/09
and 2009/010. It has also followed the fluctuating trend. Likewise in the case of
BOK, it has followed the fluctuating trend. It has the maximum ratio of 2.76%,
which is highest ratio among three banks.

The mean value of NIBL is average, which indicated that its position is better in this
regard. It has managed its loan and advances and makes effort for timely recovery of
loan. Similarly, the coefficient of variance of NIBL is lower than that of BOK and
highest than KBL. In average, NIBL has no highest loan loss ratio in comparing
with two other banks. So it shows that its performance in terms of recovery of loan
is satisfactory in comparison to KBL and BOK.

4.3 Profitability Ratio

Profitability ratios are useful to measure the efficiency of operation of a firm in term
of profit. Profit is the indicator of the financial performance of any firm.
Commercial banks acquire profit by providing different kinds. Higher the
profitability ratio shows the efficiency of the management. The following
Property of Shanker Dev Campus Library 73
profitability ratios are related to study under this heading.
 4.3.1 Return on Loan and Advances Ratio
Return on loan and advances ratio measures the earning capacity of banks on its
total deposits mobilized on loan and advances. Mostly loan and advances included
loan, cash credit, and overdraft, bills purchased and discounted. In other words
return on loan and advances ratio indicates how efficiently the banks have employed
its resources in the firm of loan and advances.

Table 4.15
Return on Loan and Advances Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 2.32 2.16 1.92 2.44 2.24 2.42 2.25 0.1765 7.85
KBL 3.77 3.65 5.37 5.56 4.90 4.92 4.70 0.7353 15.66
BOK 1.58 0.20 1.81 2.26 2.36 2.79 1.83 0.8274 45.13
(Source: Annual Report of Bank )

Figure 4.15
Return on Loan and Advances Ratio

The Table and Figure 4.15 reveals that NIBL return on loan and advances ratio
has decreasing trend in the beginning years and after 2010/011 it is increase from
Property of Shanker Dev Campus Library 74
1.92% to 2.44% to 2.24% and 2.42% in 2012/013. KBL has maintained
 fluctuating trend where BOK has also decreasing trend in the first two years and
after 2010/011 it able to upgrade it net profit.

The mean of NIBL is lesser than KBL and higher than that of BOK i.e. 2.25 < 4.70
> 1.83 respectively. The standard deviation of NIBL is lesser than both banks.
Similarly the coefficient of variation of NIBL is less than other two banks i.e. 7.85%
< 15.66% < 45.13%. KBL has maintained average C.V. and BOK are in highest C.V
value. Thus it can be concluded that NIBL is in average position in earning loan and
advances in comparison to KBL and BOK.

4.3.2 Return on Total Working Fund Ratio

It also known as return on asset. This ratio measures the profit earning capacity by
mobilizing available resources (total assets). The bank has to earn satisfactory return
on assets or working funds are well manage and are efficiently utilized, maximizing
taxes within the legal options available will also improve the available will also
improve the return or return will be higher. Net profit includes the profit that is left
to the internal equities after all charge and expenses cost.

The Table below shows the return on assets of NIBL, KBL and BOK.

Table 4.16
Return on Total Working Fund Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 1.34 1.29 1.17 1.49 1.45 1.49 1.37 0.1172 8.55
KBL 1.64 1.55 2.51 2.72 3.02 2.85 2.38 0.5773 24.24
BOK 1.05 0.15 1.10 1.34 1.42 1.65 1.12 0.4771 42.66
(Source: Annual Report of Bank)

Property of Shanker Dev Campus Library 75

 Figure 4.16
Return on Total Working Fund Ratio

The above Table and Figure 4.16 reflect the mean, S.D and C.V of NIBL, KBL,
BOK banks from FY 2000/01 to 2012/013. NIBL has the fluctuating trend which
indicates that its profitability ratio is not consistent. It has highest profit ratio is
1.49% in the FY 2010/011 and 2012/013 and minimum profit ratio is 1.17% in the
FY 2009/010. Similarly KBL and BOK has maintained increasing trend of profit
ratio. In average, NIBL, KBL, BOK banks have able to maintain a net profit during
the stuffy period.

If the mean values are observed NIBL is slightly higher than BOK and lower than
KBL i.e. 1.37 < 2.38 > 1.12 respectively. The coefficient of variation of NIBL is
lesser than that of KBL and BOK i.e. 8.56% < 24.24% < 42.66% it indicate, the
return on total working fund ratio of NIBL is stable and consistent in comparison to
KBL and BOK. The analysis clear the profitability ratio with respect to financial
resources investment of NIBL is better as well as stable.

4.3.3 Total Interest Earned to Total outside Assets Ratio

It measures the interest earning capacity of the banks through efficient utilization of
all the outside assets. Higher the ratio indicates better use of outside assets of a
commercial bank. Total outside assets includes loan and advances, investment on
Property of Shanker Dev Campus Library 76
government securities, share and debentures and other all types of investment.
 The Table 4.17 exhibits total interest earned to total outside assets ratio of NIBL,
KBL and BOK.
Table 4.17
Total Interest Earned to Total outside Assets Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 9.85 7.87 7.93 7.81 7.38 6.45 7.88 1.0152 12.88
KBL 8.21 7.17 7.38 7.14 7.20 6.86 7.33 0.4235 5.78
BOK 10.23 8.96 7.81 6.98 7.13 6.75 7.98 1.2441 15.60
(Source: Annual Report of Bank)

Figure 4.17
Total Interest Earned to Total outside Assets Ratio

The comparison of mean ratios of NIBL with other two banks reveal that total
interest earned to total outside assets ratio of NIBL is lowest, which indicate that it
has not able to use its fund (outside assets) to earn high interest income in
comparison to other banks.

The total interest earned to total outside assets ratio of KBL and BOK has
fluctuating trend. In case of KBL it increase at FY 2000/01 i.e. 8.21% and decrease
Property of Shanker Dev Campus Library 77
in the year 2009/010 i.e. 7.14%. Similarly BOK has decrease from 10.23% to
 6.75%. If the coefficient of variation is observed KBL has the lowest of all banks i.e.
5.78% < 12.88% < 15.60% respectively. This reflects that earned to total outside
assets of NIBL is consistent. In other words it is satisfactory in compared to other
banks. So it can conclude that NIBL has better position with respect to the income
earned from the total outside assets.

4.3.4 Total Interest Earned to Total Working Fund Ratio

This ratio is calculated to find out the percentages of interest earned to total assets. It
reflects the extent to which the banks are success in mobilizing there to total assets
to gain higher income as interest. Higher ratio indicated higher earning power of the
banks of its total working fund. The table below shows the interest earned to total
working fund ratio of NIBL, KBL and BOK.

Table 4.18
Total Interest Earned to Total Working Fund Ratio
Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 7.40 6.71 6.46 6.84 6.10 5.66 6.53 0.5526 8.46
KBL 7.13 6.39 6.15 5.98 6.22 5.87 6.29 0.4108 6.53
BOK 7.50 7.45 6.67 5.97 6.16 5.85 6.60 0.6696 10.15
(Source: Annual Report of Bank )

Property of Shanker Dev Campus Library 78

 Figure 4.18
Total Interest Earned to Total Working Fund Ratio

The Table and Figure 4.18 reveals that the ratio of NIBL is in decreasing trend,
where the ratio of KBL is decreasing at the first three years and increases in the fifth
year i.e. 7.13% > 6.39% > 6.15% > 5.98% < 6.22% > 5.87% respectively. The
BOK has maximum ratio is 7.50% in the FY 2000/01 and minimum ratio is 5.85%
in the FY 2012/013. On the other hand the mean value of NIBL has average of other
two banks. It has the mean of 6.53 which is higher than KBL i.e. 6.29 and less than
BOK i.e. 6.60. Similarly the coefficient of variation of NIBL is 8.46% which is also
more than KBL and less than BOK.

After analysis it can be concluded that total interest earned to total working fund of
NIBL is satisfactory in compared to other banks. It indicates the total interest earned
to total working fund ratio is stable. KBL has higher coefficient of variation among
other two banks. That means it is not successful in earning interest income because
high ratio is an indicator of high earning power of the bank on its total working fund
and vice versa.

4.3.5 Total Interest Paid to Total Working Ratio

This ratio is calculated to find out the proportion of interest paid against the total
working fund. Higher ratio indicated the higher interest expenses on total working
Property of Shanker Dev Campus Library 79
 fund and vice-versa. The table below reflects the mean, S.D and C.V of total interest
paid to total working fund ratio.
Table 4.19
Total Interest Paid to Total Working Fund Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 4.54 3.88 3.82 3.29 2.54 2.52 3.43 0.7333 21.37
KBL 3.25 2.64 1.92 1.69 1.42 1.60 2.09 0.6488 31.09
BOK 5.01 4.48 3.72 3.01 2.45 2.51 3.53 0.9666 27.38
(Source: Annual Report of Bank)

Figure 4.19
Total Interest Paid to Total Working Fund Ratio

In the Table 4.19, total interests paid to working fund ratio of the all banks are in
decreasing trends during the study period. NIBL has variable trend from 4.54% to
2.52% in the FY 2000/01 to 2012/013. KBL and BOK have also variable trend from
3.25% to 1.60% and 5.01% to 2.51% respectively.

In comparison of mean value of NIBL with other reveal that NIBL is in average
Property of Shanker Dev Campus Library 80
between KBL and BOK i.e. 3.43 > 2.09 < 3.53. It means NIBL has paid average
 interest. Similarly the coefficient of variance of it has lower among both banks
which indicates that total interest and to total working fund ratio is inconsistent than
that of KBL and BOK.

After analysis it can be concluded that NIBL is in better position from payment of
interest point of view. It seems to be successful to collect its working fund from less
expensive sources in comparison to others.

4.4 Risk Ratio

Risk taking is the prime business of banks investment management which increases
effectiveness and profitability of the bank. Bank has to take risk to get return on
investment. Risk taken is compensated by the increase in profit. So a bank has to
take higher risk if it expects higher return on its investment.

Through these ratios, focus has been made to measure the level of risk inherent in
the NIBL in comparison to the KBL and BOK.

4.4.1Credit Risk Ratio

Bank utilized its collected funds in providing credit to different sectors while
making investment. It is essential for a bank to examine the credit risk involved in
the project. This ratio shows the proportion of non performing assets in total loan
and advances of the bank. Due to the unavailability of the relevant data the ratio is
measure with the help of loan and advances to total assets.

Table 4.20
Credit Risk Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 59.52 62.09 62.63 62.60 73.60 61.50 63.66 4.5691 7.18
KBL 58.75 55.87 55.93 57.50 70.71 56.96 59.29 5.2014 8.77
BOK 65.92 74.51 62.88 60.30 63.51 63.13 65.04 4.5383 6.98
(Source: Annual ReportProperty
of Bank of
) Shanker Dev Campus Library 81
 Figure 4.20
Credit Risk Ratio

The Table and Figure 4.20 shows the percentage of credit risk ratio of NIBL, KBL
and BOK. The credit risk ratio of NIBL is in fluctuating trend during the study
period i.e. it has maintained maximum ratio of 73.60% in the FY 2011/012 and it
has minimum ratio of 59.52% in the year 2000/01. Similarly KBL credit risk ratio is
increasing trend it has maintained maximum ratio of 70.71% and BOK credit risk
ratio is decreasing trend i.e. from 74.51%, 62.88%, and 60.30% and increasing
63.51%, 63.13% respectively.

The mean of NIBL is between KBL and BOK which mean NIBL has average credit
in comparison to both banks. The coefficient of variance of NIBL is 7.18% KBL has
8.77% and BOK has 6.98%. Among three banks BOK has less C.V, it indicates that
its credit policy is consistent than other banks.

4.4.2 Liquidity Risk Ratio

The liquidity risk of the bank defines it liquidity need for deposit. A higher liquidity
indicates less risk and less profitable bank and vice-versa. The ratio of cash and
bank balance to total deposits is the indicator of the bank liquidity needed. The cash
and bank balance are the most liquid assets and they are considered as bank liquidity
sources and deposits as the liquidity needs.
Property of Shanker Dev Campus Library 82
 Table 4.21
Liquidity Risk Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 18.25 11.03 17.02 7.84 10.39 11.25 12.63 3.7256 29.50
KBL 5.13 6.78 8.51 6.87 3.83 3.26 5.73 1.8349 32.02
BOK 19.68 11.95 11.23 10.11 8.28 6.95 11.37 4.0842 35.93
(Source: Annual Report of Bank)

Figure 4.21
Liquidity Risk Ratio

The Table and Figure 4.21 show the percentage of liquidity risk ratio of NIBL, KBL
and BOK. This table reflects the liquidity risk ratio of NIBL is fluctuating trend i.e.
it has maintained a maximum ratio of 18.25% in the FY 2000/01 and the minimum
ratio of 7.84% in the FY 2010/011. Similarly KBL and BOK liquidity risk ratio is in
decreasing trend. The minimum ratios of both banks are 3.26% and 6.95 in the FY
2012/013.

While comparing the mean of three banks, KBL is between NIBL and BOK i.e.
12.63 > 5.73 <Property of Shanker
11.37 which Dev
indicates Campus
that NIBL Library
liquidity 83
risk is average in compare
 to other banks. The coefficients of variance of three banks are 29.50%, 32.02%,
35.93% respectively. In comparison them, NIBL has less C.V which indicates that
liquidity risk ratio of it’s in consistent. The C.V ratio of NIBL is slightly lowers than
that of BOK i.e. 29.50% < 32.02%.

4.4.3 Capital Risk Ratio

The capital risk ratio indicates how much assets value may decline by bank before
the position deposition and other creditors is jeopardized. So a bank needs to
maintain adequate capital in relation to the nature and condition of its assets, its
deposits liabilities and other corporate responsibilities. This ratio measures ability of
bank ti attract deposits and inter-bank funds. It also determines the level of profit. A
bank can earn if a bank choose to take high capital risk.

Table 4.22
Capital Risk Ratio

Fiscal Year
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Mean S.D C.V
(%) (%) (%) (%) (%) (%) %
NIBL 10.63 13.73 10.74 9.82 8.37 6.82 10.02 2.1470 21.43
KBL 15.74 4.99 11.78 12.48 11.68 9.76 11.07 3.2495 29.35
BOK 7.69 10.25 10.60 10.32 10.41 9.50 9.80 1.0022 10.23
(Source: Annual Report of Bank)

Property of Shanker Dev Campus Library 84

 Figure 4.22
Capital Risk Ratio

From the Table and Figure 4.22, it is clearly seen that the percentage of capital risk
ratio of NIBL is decreasing from 13.73% to 6.82% in the FY 2008/09 to 2012/013
during the study period. NIBL has maximum ratio of 13.73% and minimum ratio of
6.82%. Similarly KBL and BOK have followed the fluctuating trend. They have
maximum ratio of 15.74 and 10.60% in the FY 2000/01 and 2009/010 respectively.

The mean value of NIBL has average capital risk ratio in comparison with other two
banks. The coefficient of variance of a NIBL is 21.43% that is higher than that of
BOK’s C.V and lesser than KBL i.e. 21.43% < 29.35% > 10.23% respectively.
Among three banks BOK has less C.V.

Thus it can be concluded that NIBL is stable and heterogeneous than KBL but less
stable and less heterogeneous in comparison to the BOK because it has maintained
less C.V among three banks.

4.5 Growth Ratio

It represents how well the commercial banks those growth ratios are maintaining
their economic and financial position. Here those growth ratios are analyzed and
interpret ate, which are related to the fund mobilization and investment management
Property of Shanker Dev Campus Library 85
of a bank. In this topic, there are four types of growth ratio and under this section
growth ratio of total deposit, total investment, loan and advances and net profit are
calculated.

4.5.1 Growth ratio of total deposit

The comparative Table 4.23 shows that the growth ratio of NIBL deposit is higher
than that of KBL & BOK. NIBL has maintained ratio of 24.72% where as KBL and
BOK 4.08% and 12.91% respectively. This means the performance of Everest Bank
Limited to collect greater deposit compared to other banks. KBL and BOK are
improving year by year. Among three banks KBL has lowest growth ratio i.e.
4.08%.
Table 4.23
Growth Ratio of Total Deposit
Fiscal Year Growth
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 rate (%)
(%) (%) (%) (%) (%) (%)
NIBL 4574.51 5466.60 6694.96 8063.90 10097.69 13802.44 24.72
KBL 15839.00 15506.40 13447.70 14119.03 14586.60 19347.40 4.08
BOK 5713.49 5723.29 6170.71 7741.65 8942.75 10485.00 12.91
(Source: Annual Report of Bank)

Figure 4.23
Growth Ratio of Total Deposit

Property of Shanker Dev Campus Library 86

4.5.2 Growth ratio of loan and advances
The comparative Table 4.24 shows that the growth ratio of NIBL loan and advances
is higher than that of other banks. NIBL has able to maintain of 26.67%, where as
KBL and BOK able to have maintained 10.82% and 11.96% respectively. The
performance of NIBL to grant loan and advances is better in comparison to other
banks i.e. KBL and BOK. The highest growth ratio is 26.67% and lowest growth
ratio is 10.82%. The above table clearly has shown that. NIBL in comparison to
other banks is better year by year.

Table 4.24
Growth Ratio of Loan and Advances
Fiscal Year Growth
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Ratio
(%) (%) (%) (%) (%) (%) (%)
NIBL 3005.76 4044.23 5049.58 6095.84 7900.00 9801.31 26.67
KBL 7732.64 7437.89 7755.95 8189.99 10586.17 12922.50 10.82
BOK 4127.05 4613.61 4542.70 5646.69 5656.69 7259.08 11.96
(Source: Annual Report of Bank )

Figure 4.24
Growth Ratio of Loan and Advances

Property of Shanker Dev Campus Library 87

4.5.3 Growth ratio of total Investment
The Table 4.25 show that the growth ratio of NIBL total investment is lower than
BOK and higher than KBL i.e. 36.03 > 4.31 < 51.74%. The total investment of
NIBL has average position in comparison to the KBL and BOK.

Table 4.25
Growth Ratio of Total Investment
Fiscal Year Growth
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Ratio
(%) (%) (%) (%) (%) (%) (%)
NIBL 901.72 1779.17 1654.00 2535.70 2128.90 4200.52 36.03
KBL 7704.31 8199.51 6031.17 5835.95 4267.23 6178.53 4.31
BOK 419.82 667.46 1816.15 2477.40 2598.25 3378.13 51.74
(Source: Annual Report of Bank)

Figure 4.25
Growth Ratio of Total Investment

4.5.4 Growth ratio of total net profit

The Table 4.26 shows that the growth ratio of BOK total net profit is higher than
two banks. (KBL and NIBL) Net profit of KBL is poor in comparison with NIBL
and BOK. NIBL has able to maintain the growth ratio in average position. So it clear
Property of Shanker Dev Campus Library 88
that BOK has high growth rate in comparison to other bank.
 Table 4.26
Growth Ratio of Total Net Profit
Fiscal Year Growth
Bank 2007/08 2008/09 2009/010 2010/011 2011/012 2012/013 Ratio
(%) (%) (%) (%) (%) (%) (%)
NIBL 69.70 85.33 94.17 143.57 170.80 237.38 27.77
KBL 291.38 271.64 416.24 455.31 518.64 635.30 16.87
BOK 65.36 9.28 82.13 127.48 139.52 202.44 25.37
(Source: Annual Report of Bank )

Figure 4.26
Growth Ratio of Total Net Profit

From the table and figure concluded that NIBL performance regarding the collection
of deposit, granting loan and advances on total investment and net profit is
comparatively better.

4.6 Statistical Tools

4.6.1 Coefficient of Correlation Analysis
In this heading Karl Pearson coefficient of correlation (Direct Method) is used to
find out the relationship between deposit and loan and advances. Deposit and total
investment andProperty
outside assets and net
of Shanker Devprofit and so
Campus on. 89
Library
4.6.2 Client of Correlation between outside Asset and Net Profit
It measures the degree of relationship between two variables. Here outside assets (x)
are independent variables and net profit is dependent variable (y). The objective of
computing coefficient of correlation between outside asset and net profit is to find
out whether net profit is significantly correlated with respect to total assets or not.

The Table 4.27 shows the value of ‘r’, r2, P.Er, 6P.Er between outside asset and net
profit of NIBL, KBL and BOK.

Table 4.27
Coefficient of Correlation between outside Asset and Net Profit
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.991132 0.98234334 0.004862 0.029172
KBL 0.703899 0.4954735 0.138928 0.833569
BOK 0.931841 0.868326862 0.036258 0.217548
(Source: Appendix)

Figure 4.27
Coefficient of Correlation between outside Asset and Net Profit

The above Table and Figure 4.27 shows the value of r, r2, P.Er, 6P.Er between
Property
deposit and loan of Shanker
and advances Dev Campus
of NIBL Library 90
with comparison to KBL and BOK for the
study period 2000/01 to 2012/013. From this table, it has been found that the
coefficient of correlation between total outside i.e. independent variable and net
profit dependent variable is 0.991132 in case of NIBL. It shows positive relationship
between these variables. By considering the value of coefficient of determination
(r2), is 0.98234334 indicated that 98.23% of the variation in the dependent variable
has been explained by the independent variable. Similarly considering the value of r
is greater than the value of 6P.Er, which reveals NIBL is capable to earn net profit
by mobilizing in total outside assets. Likewise, the coefficient of correlation
between total outside assets and net profit in the case of KBL and BOK are
0.703899 and 0.931841. Again when we consider the value of coefficient
determination (r2) i.e. 0.4954735 and 0.868326862, it means 49.54% and 86.83%
respectively in the dependent variable has been explained by the independent
variable. On the basis of comparison between the value of ‘r’ and 6P.Er there is no
significant correlation between two variables because the value of ‘r’ i.e. 0.703899
and 0.931841 is lesser than that of the value 6P.Er i.e. 0.833569 and 0.217548. The
above analysis clears that; the value of ‘r’ in case of NIBL is significant correlation
between mobilizations of funds return. But in the case of KBL and BOK the value
of ‘r’ is far less than 6P.Er, so both banks have no significant correlation between
mobilization of funds and returns.

Coefficient of Correlation between Deposit and Net Profit

The coefficient of correlation between deposit and net profit measures the degree of
relationship between these two variables. Here deposit (X) is independent variable
and net profit (Y) is dependent variable. The objectives of computing between these
two variables are to justify whether net profit is significantly correlated with
deposits or not. The following Table 4.28 shows the value of ‘r’, r2, P.Er, 6P.Er
between deposit and net profit of NIBL, KBL and BOK during the stuffy period.

Property of Shanker Dev Campus Library 91

 Table 4.28
Coefficient of Correlation between Deposit and Net Profit
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.992623 0.985300 0.004048 0.024286
KBL 0.453762 0.2058996 0.218666 1.311997
BOK 0.941281 0.886009909 0.031389 0.188332
(Source: Appendix)
Figure 4.28
Coefficient of Correlation between Deposit and Net Profit

From this Table and Figure, it has been found that the coefficient of correlation
between total deposits and net profit in the case of NIBL is 0.992623, which
indicated the position relationship between these variables. The coefficient of
determination (r2) is 0.985300, which indicates 98.53% of the variation of the
dependent variable has been explained by the independent variable. Similarly, the
value of 6P.Er is lesser than the value of r i.e. 0.024286 < 0.992623, which states
that there exists a significant relationship between deposits and net profit. The
coefficient of correlation between deposits and net profit in case of KBL 0.453762
which indicated a positive relationship between deposit and net profit. The value of
(r2) is 0.2058996 indicates that 20.58% of the variation of the dependent variable has
been explained by the independent variable. The value of ‘r’ is greater than that of
Property of Shanker Dev Campus Library 92
the value of 6P.Er. This states that there is significant relationship between these
variables.

Similarly the coefficient of correlation between these variables in case of BOK is

0.941281, which indicated positive relation. The value of 6P.Er are lesser than the
value of r i.e. 0.188332 < 0.941281 that means there is significant correlation
relationship between two variation. The above analysis clear that, the value of r in
case of NIBL is significant relationship between deposit and net profit. BOK also
shows the positive relationship. The value of (r2) in case of KBL shows lower
percentages of dependency than BOK and higher percentage of dependency than
NIBL i.e. 0985300 > 0.88600 > 0.2058996. The increase in net profit in case of
KBL is due to effective mobilization of deposits and other factor have a less or role
to play in increase in net profit. KBL has not been more successful as NIBL in
mobilization of its deposits.

Coefficient of Correlation between Deposit and Interest Earned

The coefficient of correlation between deposits and interest earned measure the
relationship between these two variables. Deposits are independent variable (X) and
an interest earned is dependent variable (Y). The objectives of calculating r between
two variables are to justify whether deposit is significantly used to earn interest or
not. The Table 4.29 shows the value of ‘r’, r2, P.Er and 6P.Er of NIBL, KBL and
BOK during the study period.

Table 4.29
Coefficient of Correlation between Deposit and Interest Earned
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.988856 0.977836244 0.006103 0.036619
KBL 0.887261 0.78723161 0.058589 0.351532
BOK 0.973789 0.948264 0.014246 0.085476
(Source: Appendix)

Property of Shanker Dev Campus Library 93

The coefficient of correlation ‘r’ between deposit and interest earned in case of
NIBL is 0.988856, which indicates a positive relationship between these variables.
When deposits increase the interest earned subsequently increased but when it fall
the interest earned also fell. The coefficient of determination (r2) is 0.977836244
which indicate that 97.78% of the variation of dependent variable has been
explained by independent variable. Similarly considering the value of ‘r’ and
comparing with 6P.Er it has been found that the value of r is greater than the value
of 6P.Er. This shows that it has significant relationship between deposit and interest
earned. The coefficient of correlation ‘r’ between two variables in case of KBL and
BOK are 0.887261 and 0973789 which indicates that 88.72% and 97.37% of the
variation of dependent variable has been explained by independent variables. The
value of ‘r’ in case of KBL has higher than that of 6P.Er. This states that there is a
significant relationship between deposit and interest earned. Whereas the value of r
in case of KBL has lesser value of 6P.Er i.e. 0.887261 > 0351532 which states that
there is no significant relation between deposit and interest earned.After above
analysis it can be concluded that the relationship between deposit and interest earned
in case of NIBL is highly significant with showing higher dependency. It has
effectively mobilization of deposits which has had a major role to play in its
earning; where as other factors are responsible in the earnings of KBL.

Coefficient of Correlation between Loan and Advances and Interest Paid

It measures the relationships between these variables. Here, loan and advances is
independent variables (X) and interest paid in dependent variable (Y). The purpose
of calculating ‘r’ between these variables is to established whether increase in loan
and advances has play any role in decreasing in interest expenses.
The table 4.30 shows the values of ‘r’, r2, P.Er and 6P.Er of NIBL, KBL and BOK
during the study period.

Property of Shanker Dev Campus Library 94

 Table 4.30
Coefficient of Correlation between Loan and Advances and Interest Paid
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.913502 0.83448 0.045577 0.273461
KBL -0.38218 0.146060 0.235144 1.410862
BOK -0.02945 0.0008671 0.275125 1.650748
(Source: Appendix)

In Table no 4.30 the coefficient of correlation between loan and advances and
interest paid in the case of NIBL is 0913502. It shows the positive relationship
between two variables. The coefficient of determination (r2) in case of NIBL shows
a higher degree dependency than KBL and lower degree dependency than BOK. The
value of r is greater than value of 6P.Er in case of NIBL which states that there is
significant relationship between loan and advances and interest paid. Similarly the
coefficient of correlation between loan and advances and interest paid in the case of
KBL and BOK are -0.38218 and -0.02945. They show the negative relationship
between these variables. The values of coefficient of determination (r2) are 0.146060
and 0.0008671 it means 14.60% and 0.086% of the variation in the dependent
variable is explained by the independent variable. Again considering, the value of r
and comparing with 6P.Er in both cases it is lesser than 6P.Er which reveals that the
value is not significant relationship between two variables. In conclusion, it can be
clear that the relationship between loan and advances and interest in case of NIBL is
highly significant than both other banks. It is successful to utilize the loan and
advances. In case of KBL and BOK have no relationship could be established
between the loan and advances and interest paid.

Coefficient of Correlation between Total Working Fund and Net Profit

The coefficient of correlation between the total working fund and net profit
measures the degree of relationship between them. Here, total working fund is taken
as independent variable (X) and net profit is taken as dependent variable(Y). The
main purpose of calculating ‘r’ is to justify where total working fund is significantly
used to generate earnings
Property of or in otherDev
Shanker words whether
Campus these95
Library variables are significantly
correlated or not. The Table 4.31 shows the value of ‘r’, r2, P.Er, 6P.Er between
these two variables of NIBL, KBL and BOK.

Table 4.31
Coefficient of Correlation between Total Working Fund and Net Profit
Banks Evaluation criterions
R r2 P.Er 6P.Er
NIBL 0.991184 0.982448 0.004834 0.029004
KBL 0.611661 0.374128 0.172342 1.034053
BOK 0.955852 0.913653499 0.023777 0.14266
(Source: Appendix)

The Table 4.31 shows the value of ‘r’, r2, P.Er, 6P.Er between outside asset and net
profit of NIBL, KBL and BOK.
The coefficient of correlation ‘r’ between total working fund and net profit in case
of NIBL is 0.991184 which indicates positive relationship between these variables.
The coefficient of determination (r2) is 0.982448, which states that 98.24% of the
variation of the dependent variable has been explained by independent variable.
Similarly considering the value of ‘r’ 0.991184 and comparing it with 6P.Er
0.029004, the value of ‘r’ is greater than the value of 6P.Er, so it is significant
relation between these variables. Similarly the value of ‘r’ between these variables
in case of BOK is 0.955852, which shows the positive relationship. In case of KBL
its value is 0.611661 that means it has significant relation between these variable.
The coefficient of determination r2 in case of KBL and BOK are 0.374128 and
0.913653499, which shows that only 37.41% and 91.36% of the variation of the
dependent variables have been explained by independent variables. The value of
6P.Er is greater than ‘r’ i.e 0.611661< 1.034053 in case of KBL. So there is
significant relation. But, the value of ‘r’ is lesser than 6P.Er in case of BOK, so there
is significant relationship between these variables. After analysis the conclusion can
be drawn that NIBL and BOK are significant relationship between these variable,
which indicated that total working fund is significantly used to generate earnings. In
case of KBL there is significant relation so fell to generate earnings or in other
words these variables
Propertyareofsignificant
Shanker Devcorrelated.
Campus Library 96
4.7 Regression Analysis
Regression of Networking Capital and Net Profit
Regression is the statistical tool which is used to determine the statistical
relationship between two or more variables and so make estimate of one variable on
the basis of the other variable. Regression is the line which gives the best estimate of
one variable for any given value of the other variable. The regression line of Y on X
estimate the most probable values of Y for given values of X.
X is independent variable
Y in dependent variable
The regression equation of Y on X expressed as Y = a + bx
Where, a and b are parameters of the line.
To find out the exact relationship between different variable simple regressions
analysis has been done and results of the analysis have been table.

Table 4.32
Calculation of Regression Equation between Net Profits on Total Working Fund
Banks Regression equation Value (a) constant Regression coefficient
(b)
NIBL Y= -20.85 + a = -20.85 b = 0.0161822
0.0161822X
KBL Y = 272.50495 + a = 272.50495 b = 0.0390619
0.0390619X

BOK Y = 128.40 + a = 128.40 b = 0.027048

0.027048X
Source: Appendix

The Table 4.32 shows the regression equation of net profit and net working fund in
NIBL, KBL and BOK. According to the table regression equation of net profit on
net working fund Y= -20.85 + 0.0161822X in NIBL is negative. The regression
coefficient is positive i.e. 0.0161822 which indicates the positive relationship exists
between net profit and net working fund. In other word, one million increase in net
working funds leads to average about 0.0161822 million increase in net profit. The
Property
value of constant of Shankerlow.
(a) is relatively DevThe
Campus
valueLibrary 97
of (a) indicates that if net working
fund is 0 then the value of net profit is -20.85 million. So from analysis it shows that
the net profit will be decrease and net working fund also decrease.
On the other hand, regression coefficient of (b) is positive in case of KBL which
indicates that one million increase in net working fund lead to an average about Rs. -
0.0390619 increases in net profit. According to the above table regression equation
of net profit on net working fund regression coefficient is positive which reveals the
positive relationship between net and working fund. The test of t statistics helps us
to conclude that in all three cases the results are not statistically significant at 5%
level of significance since the value of t is small than tabulated value.

Table 4.33
Calculation of Regression Equation between Net Profits on Total Deposit
Banks Regression equation Value (a) Regression coefficient
constant (b)
NIBL Y = 17.129 + 0.0185X a = 17.129987 b = 0.0185577

KBL Y = 31.68 +0.0299X a = 31.681826 b = 0.0299269

BOK Y = 136.08 + 0.0322X a = 136.08 b = 0.0322197

(Source: Appendix)

The Table 4.33 is the collection of major output of simple regression analysis of net
profit on total deposit.

The regression equation of net profit (Y) dependent variable on total deposit (X)
independent variable Y = 17.129987 = 0.0185577 in NIBL is positive i.e. 0.0185577
which indicates the positive relationship exists between net profit and total deposit
or it can be said that one million increase in total deposit leads to average 0.0185577
million increase in net profit. The value of constant (a) is relatively high. Similarly
in case of BOK the regression coefficient is positive or in other words one million
increases in total deposit leads to average about 0.0322197 million increase in net
profit. The value of constant (a) indicates that the net profit can be increase and total
deposit also increase. The regression coefficient of (b) is positive in case of KBL i.e.
0.0299269 which indicates that one million increase in total deposit leads to an
Property of Shanker Dev Campus Library 98
average about 0.0299269 increases in net profit. The regression coefficient is
positive which reveals the positive relationship between net profit and total deposit.
From the test of‘t’ statistics it can be concluded that in all three cases the results are
not statistically significant at 5% level of significance since the value of t is smaller
than tabulated value.

4.8 Major Findings of the Study

1. The cash and bank balances to total deposit ratio of NIBL has fluctuating trend.
The main ratio of this bank is higher than KBL and BOK which indicates that its
liquidity position is better to serve its customers deposits withdrawal demands.
The C.V. between the ratios is found to be 29.50%, which shows that the ratios
of NIBL aren’t consistent and more variable.

2. The mean ratio of cash and bank balance to current assets of NIBL is higher than
KBL and BOK. It states that liquidity position of NIBL is better in this regard.
The C.V between them is 31.02%. On the basis of C.V the ratios are seemed to
be variable. NIBL is better position in maintaining its cash and bank balance to
meet its daily requirement to make the payments on customers deposit
withdrawal in comparison with KBL and BOK.

3. The loans and advances to total deposit ratio of NIBL has in increasing trend.
The mean ratio of NIBL is higher than KBL and lower than BOK. The mean
ratio is 71.78% with 4.21% C.V which shows that the ratios are satisfactory
consistent over the study period.

4. Investment to total deposit of all three banks has in fluctuating trend during the
study period. The mean ratio of total investment to total deposit of NIBL is in
between the KBL and BOK. The highest ratio is 31.45% and lowest is 19.71%
with mean ratio 26.39% and C.V of 18.21%. It is in between KBL and BOK so
the ratio is less consistent and more variable. Its overall figure suggests that the
banks have not mobilized significant amount of fund on the government
securities and shares and debentures of other companies.

Property of Shanker Dev Campus Library 99

5. In case of investment on government securities to total working fund mean ratio,
NIBL is higher than that of other compared banks. The mean of the ratio is
20.54% with lowest C.V of 3.26% between them indicates that its ratio is
variable and consistent over the study period.

6. The investment on shares and debenture to total working fund ratios of NIBL
and BOK have fluctuating trend but KBL has increasing trend. The mean ratio
of NIBL is found to be 17.0 with 36.61% C.V between the other compared
banks. It shows the ratio of NIBL is very stable over the study period.

7. Total off balance sheet operation to loan and advances ratios of all three banks
have decreasing trend. The mean of the ratio of NIBL is found to be 2093.85
with C.V 50.73%. It has highest C.V. than that of others compared a bank which
indicates that the ratio is not consistent during the study period. The analysis of
the ratios shows that OBS operation of the bank is in decreasing trend. It may be
due to competition in the banking sector or bank is not getting enough attention
towards non-funded business.

8. The mean ratio of return on loans and advances ratio of NIBL is higher than
BOK and is lower than KBL. The mean of the ratio is found to be 2.25% with
C.V of 7.85%, which indicates that the ratios are less variable. The average ratio
of 2.25% suggests that the earning capacity of the bank's loan and advances is
satisfactory.

9. Return on total working fund ratios are in fluctuating trend during the study
period. Its ratio ranges from 1.17% to 1.49%. The mean ratio of NIBL is in
between KBL and BOK i.e. NIBL ratio is 1.37% with C.V of 8.55%. This
indicates that the ratios are less variable and consistent than that of other
compared banks.

10. The mean ratio of total interest earned to total outside assets of KBL is lowest
of all. The total interest earned to total outside assets ratio of the KBL is less
variable in comparison to NIBL and BOK. Its lowest C.V indicates that the
Property of Shanker Dev Campus Library 100
ratios are satisfactory consistent during the study period.
11. The total interest paid to working fund ratios has decreasing trend during the
study period. The mean ratio of total interest paid to total working fund of NIBL
is average than KBL lower than BOK, which means it has paid average interest
than KBL and BOK. The total interests paid to working fund ratios are lesser
than to total interest earned to total fund ratio. This indicates that the bank is in
profitability position as it is earning higher return than it interest cost.

12. Credit risk ratios of the banks are fluctuating trend. The mean of the ratios of
NIBL is found to be 63.66% which are higher than KBL and lower than BOK.
Similarly its C.V is 7.18% which is less in compared with other banks. It
indicates that its credit policy is consistent than other banks.

13. Liquidity risk ratio of the banks are decreasing trend. The mean liquidity risk
ratio of NIBL is highest of all and C.V of its also lowest in comparison with
other banks. So the ratio of NIBL is less variable than KBL and BOK.

14. The mean capital risk ratio of NIBL is in between the compared banks. The ratio
of NIBL is less variable, which indicates that the capital risk ratio is consistent.

15. The analysis of the growth ratio of total deposits total loan and advances, total
investments, and net profit of NIBL in comparison with KBL and BOK during
the study period shows that the total deposits of the bank is in increasing trend
with the net growth rate of 24.72%. It has maintained growth rate highest that
other compared banks. This means the performance of NIBL to collect deposit in
comparison to other banks is better year by year.

16. The growth rate of NIBL is higher than that of KBL and BOK. It has maintained
growth rate of 26.67%, where as KBL and BOK has 10.82% and 11.96%
respectively. So the performance of NIBL to grant loan and advances in
comparison to other bank is year by year.

Property of Shanker Dev Campus Library 101

17. Total investments of NIBL KBL and BOK have in increasing trend. The total
investment of the NIBL by the year 2010 is projected to be 8879.79 million.
Similarly the total investment of KBL will be 10284.3 million which is highest
among the study period. The total investment of BOK will be 8756.53 million.

Property of Shanker Dev Campus Library 102

 CHAPTER –V
SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary
Commercial banks are major financial institutions, which occupy quite an important
place in the framework of every economy because they provide capital for the
development of industry trade and business and other resources deflect sectors
investing the saving collected as deposit commercial banks , by playing active role
have changed the economic structure of the world. Commercial banks have its own
role and contribution in the economic development; it maintains economic
confidence of various segments and extends credit to people. The banking sector has
to play developmental role to boost the economy by adopting the growth oriented
investment policy and building up the financial structure for future economic
development formulation of sound investment policies and planned effort pushed
forward the force of economic growth. The income and profit of the bank depends
upon its lending procedure, lending policy and investment of its fund utilize in
different securities. Commercial banks able to utilize its deposits properly i.e.
providing loans and advances or lending for a profitable project, the reason behind it
is lack of sound investment policy. The main objective of this study is to evaluate
the profit planning policies adopted by NIBL, KBL and BOK. The study is totally
based on secondary sources of data and required data have been collected by using
various published and unpublished sources.

There are 30 commercial banks have been operating in Nepal which are considered
to be the population of the study and out of them three commercial banks i.e. NIBL,
KBL, BOK has been taken as a sample of the study and the collected data have been
analyzed by using various financial tools and statistical tools like ratio analysis,
correlation coefficient, regression equation etc.

Regarding the profit planning policies of commercial banks there are basically five
basic principles of the bank follow while providing the loans i.e. liquidity,
profitability, security
Propertyand suitability
of Shanker Devdiversification.
Campus Library Various
103 process while making
investment decision are applied in the study i.e. set investment process, security
analysis, portfolio construction, revision, performance evaluation .The data obtained
from annual reports of the concerned banks, likewise the financial statements of six
years were selected for the purpose of evaluation.

5.2 Conclusion
The liquidity position of NIBL is comparatively better than that of KBL and BOK.
In spite of the current ratio is average among the other two banks NIBL has
maintained the cash and bank balance to meet the customers demand. All the three
banks have met the normal standard current assets ratio to meet the short term
obligation of its customers. NIBL has invested highest sectors like government
securities than BOK and lesser portion than that of KBL. BOK had mobilized lots of
its funds in order to gain the high profit.

From the analysis of assets management ratio it can be found that NIBL is in better
position as compared to that of KBL and BOK. The loans and advances to total
deposit ratio, loan and advances to total working fund ratio of NIBL lies In between
those of KBL and BOK. NIBL has invested the highest portion of total working
fund on government securities as compared to KBL and BOK. Due to more efficient
loan policy, KBL suffers less from loan loss provision. It takes low credit risk and
has sufficient deposits of none bearing interest which can be used in a creation
period. Anyhow NIBL has also trying to best in loan loss provision. Investment on
shares and debentures to total working fund ratio is higher in BOK.

The interest earned to total outside assets and return on total working fund ratio of
NIBL is lowest of all. But overall analysis of profitability ratios, NIBL is average
profitable in comparison to other compared bank i.e. KBL and BOK. To make the
profit BOK is taking highest risk by providing the higher portion of its deposit as a
loan.The return on loan and advances ratio and return on assets of NIBL is lowest of
all. The ratio suggests that the earning capacity of the bank's loan and advances is
satisfactory. The return on assets of the bank is good in average; it indicates the
good earning capacity of the bank assets and good utilization of its assets.

Property of Shanker Dev Campus Library 104

The total interest paid to working fund ratio is less than the interest earned to total
working fund ratio. So it is profitable position as it is getting higher return that is
interest cost. The degree of risk is average on NIBL. The credit risk ratio is higher
than the compared banks. However the lowest C.V. of credit ratio and average C. V.
of liquidity risk ratio and capital ratio over the study period provides for the
assurance of consistency of the degree of risk. NIBL has showing its good
performance by increasing the total deposit, loan and advances and investment in
profitable sectors interested earnings by providing loan to clients. The trend of the
total investment, total deposit, loan and advances and net profit of NIBL shows
better position than that of KBL and BOK.

5.3 Recommendations
On the basis of the findings of the study, following recommendations can be
drawn:-
1. In commercial banks the liquidity position affects external and internal factors
such as saving for investment situations, central banks requirements, the leading
policies management capacity etc. In this study it should try to lower the current
liabilities to improve its liquidity position. Current ratio of all three banks is not
satisfactory. It is below its standard rate 2:1. So the banks are suggested to
improve current assets. The ratio of cash and bank balance to total deposit and
current assets of NIBL is higher than that of KBL and BOK. It means NIBL has
higher cash and bank balance which decrease profit of bank, so it is
recommended to mobilize cash and bank balance in profitable as loan and
advances. In practice joint ventured banks are urban based; service quite a few
elite, a fluent big customer are heavily dependent on free based activities. To
overcome its situation they should be accessible to rural areas and possible loan
and advances to its deposit. So the customers is enjoying by getting deposit
borrowing and other services.

2. NIBL has invested its more of the funds that is total investment on total deposit
ratio but the percentages of investment on share and debenture is nominal. So it
is suggested to invest more of its fund in share and debenture of different
companies.Property of Shanker Dev Campus Library 105
3. KBL loan and advances to total deposit ratio is lowest in compared to other
banks. To overcome from the situation it is recommended to follow liberal
lending policy and invest more and more of total deposit in loan and advances
and maintain stability on the investment policy. Profitability ratios of banks are
not satisfactory, if resources held idle bank have to bearded more cost and result
would be lower profit margin. So portfolio condition of a bank should be
regularly revised from time to time. It should always try to maintain the
equilibrium in the portfolio condition of the bank. The bank should use its funds
in more portfolio sectors. It should utilize its risky assets and shareholders' funds
and it should reduce its express and should try to collect cheaper fund being
more profitable.

4. KBL has taken the low credit risk as KBL is one of the largest commercial bank
in Nepal. It must also interest as NIBL and BOK do. The risk taken by NIBL
from the angle of credit risk and capital risk are in an average but the
consistencies of the same are highly volatile which may result higher loss. So it
should not test such risk on an experiment basis it should carefully study it so as
to achieve higher return from the above risk. In the light of growing competition
in the banking sector the business of the bank is customer oriented. It should
strengthen and active its marketing function, as it is an effective tool of
attracting and retaining customers. The bank should develop on “Innovative
approach to bank marketing and formulate new strategies of serving customers
in a more convenient way. The investment policy of NIBL is good in every
aspect as studied above but the consistency in the above investment sectors is in
equilibrium states. It is found that at time bank focuses much of its attention to
one sector leaving other sector untouched, so it is recommended to touch all the
sectors and balance it effectively as to have the optimal performance of the
bank.

Property of Shanker Dev Campus Library 106

To get success itself and to encourage financial and economic development of the
country. Through industrialization and commercialization a commercial bank must
mobilize its fund and debentures of other financial and non financial companies.
And if other sectors go up positively then bank can utilize its fund more and more
by providing them loan or getting sufficient dividend on their share or interest on
their debentures. Commercial banks needed to strengthen its economic structure to
achieve piped overall development. They have to resort to innovative approach of
banking there by bringing professionalism in their business. If they follow those
suggestions they can have better reach to the modern innovative and competitive
banking markets.

Property of Shanker Dev Campus Library 107

BIBIOGRAPHY

Books:
Baidhya, S (1996). Banking Management, Kathmandu: Monitor Nepal.
Balla, V.K. (1993). Investment Managements, New Delhi: S. Chand and Company.
Bexley, J B. (1987). Banking Management, New Delhi: Sujeet Pulication
Charles, P. J. (1991). Investment Analysis and Management, Bombay: Himalyan Publishing
House.
Crosse, H.D. (1963). Management Policies for Commercial Banks, 2nd Ed. Engle cwood cliffs,
Prentic Hall Inc. N.J.
Frank, K. R. (1999). Inestment. The Dryden Press, CBS Publishing Japan Ltd.
John, M.C. & Edward, A. M. (1998). Fundamentals of Investment, St. Pant: West Publishing
Company
Kothari, C.R. (1984). “Quantitative Techniques”, (New Delhi, Vikash Publishing House)
Sharpe J. W. & Gordon, J. A., Bailey, A. (1999). Investment, New Delhi Prentice Hall of India
Pvt. Ltd.
Shrestha, M.K. (1994). Financial Management, Theory and Practice, 1st Ed, Curriculum
Development Center, T.U. Kathmandu.
Van Horne, J.C. (1985). Fundamentals of Financial Management, 5th Ed. New Delhi: Prentice
Hall of India Ltd.
Van Horne, J.C. (1998). Financial Management and Policy, 10th Ed. New Delhi: Prentice Hall
Pvt. Ltd.
Weston, B.G & Bigham, S.J. (1980). Managerial Finance, 7th Ed., U.S.A, The Dryden Press,
Hinsdale Illinois.
Wolf, H.K. Pant, P.R. (1999). Social Science Research and Thesis Writing, Second Edition,
Kathmandu, Buddha Academic Enterprises Pvt. Ltd.

REVIEW OF ARTICLES
Bajracharya, B.B. (2047). Monetary Policy and Deposit Mobilization in Nepal. Rajat Jayanti
Smarika, RBB, Kathmandu.
Bank of Kathmandu Ltd. (2062) Annual Report.Kathmandu: BOK

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Bhisma, R. D. (2014) has presented an article about “NPL and its management”.
Bista, B. (2001). Issues in Banking Reform. Nepal Rastra Bank Samachar, p.33. Gorkhapatra,
2059 Poush 7th
Bodhi, B. B (2013) in his article “Monetary policy and deposit mobilization in Nepal”,
Everest Bank Limited, (2062) Annual Report. Kathmandu: EBL
J. H.C. & M.J.C. (2002). Do Banks Provide Fin+ancial Slack? The Journal of Finance Vol. VII
No. 3.
Kisshi, D.L. (1996). The Changing Face of the Banking Sector and the Nepal Govt. Recent
Budgetary Policy. Nepal Bank Patrika, NBL, Vol, 25, pp. 27-32.
Krishna, D.B. (2008) has presented an article about the “Non Performing Assets (NPA)
Management”.
Morris, F. (1990). Latin Americas Banking System in the 1980. World Bank Discussion paper –
81, The World Bank, Washing Ton DC.
Murrain, R.S (1988). “A Study of Joint Venture Banks in Nepal: Co-Exiting and growing Out,”
Pradharshan Nepal Govt. 52nd, Kathmandu.
NABIL Bank Ltd. (2062) Annual Report. Kathmandu NABIL
Pradhan, K. (1991). Nepalma Banijya Banking, Upalabdhi Tatha Chunauti, Nepal Bank
Patrika, p.13.
Sekhar, B. P.(2012) “Deposits mobilization, its problem and prospects”
Shrestha, M .K. (2008)“Shareholders Democracy and annual metting feedback portfolio
analysis”, Nepal Publication, Kathmandu Pp-50
Shrestha, R. L (2055), A study on Deposit and Credits of Commercial Banks in Nepal. Nepal
Rastra Bank Samachar, NRB.
Shrestha, S. (2055). Lending Operations of Commercial Banbks of Nepal its Impact on GPD.
The Business Voice of Nepal The Special Issue of Banijya Sansar, T.U., Kritipur, pp.
23-27.

Thesis
Khadka, Raja Ram (2014) A study on the investment policy of KBL Bank Ltd in comparison to
other Joint Venture Banks of Nepal, An Unpublished Master Degrees Thesis, Nepal
Commerce Campus.

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Pokharel,Rabindra (2013) Investment pattern and policy of Rastriya Banijya Bank. An
Unpublished Master Degrees Thesis, Shankar Dev Campus.
Shiba Raj Shrestha (2008) Portfolio management in commercial banks; theory and practice. An
Unpublished Master Degrees Thesis, Central Department Management,Faculty of
Management,T.U.
Shrestha, Sunity (2010) Investment planning of commercial banks in Nepal. An Unpublished
Master Degrees Thesis, Central Department Management,T.U.
Shrestha,Indira (2011) Investment planning of commercial banks in Nepal, An Unpublished
Master Degrees Thesis, Nepal Commerce Campus,Faculty of Management,T.U.
Silwal, Udaya Bahadur (2012) Lending policy of Commercial Bank in Nepal. An Unpublished
Master Degrees Thesis, Shankar Dev Campus.

Property of Shanker Dev Campus Library 110

 Appendixes

Calculation of Growth Ratio

Let,
(
1 + g = 9801.31
3005.76
) 1/ 5

Dn = Variable in the nth year

g = 26.67%
D0 = Variable in the initial year
n = no of period study
Total Loans and advances growth rate of
g = Growth rate
KUMARI
Total deposit growth ratio of NIBL
n −1
Dn = D0 (1 + g )
n −1 Dn = D0 (1 + g )
6 −1
13802.44 = 4574.51 (1 + g )
6 −1 12922.5 = 7732.64 (1 + g )

(
1 + g = 13802.44 ) 1/ 5
(
1 + g = 12922.5
7732.64
) 1/ 5

4574.51
g = 10.82%
g = 24.72%
Total deposit growth ratio of KUMARI
n −1 Total Loans and advances growth rate of BOK
Dn = D0 (1 + g )
n −1
Dn = D0 (1 + g )
6 −1
19347.4 =15839 (1 + g )
6 −1
7259.08 = 4127.05 (1 + g )
(
1 + g = 19347.4 )
1/ 5

15839
(
1 + g = 7259.08
4127.05
) 1/ 5

g = 4.08%
g = 11.96%
Total deposit growth ratio of BOK
n −1
Dn = D0 (1 + g )
Total investment growth ratio of NIBL
6 −1
10485= 5713.49 (1 + g ) n −1
Dn = D0 (1 + g )
(
1 + g = 10485
5713.49
) 1/ 5
4200.52 = 901.72 (1 + g )
6 −1

g = 12.91%
(
1 + g = 4200.52
901.72
)1/ 5

Total Loans and advances growth rate of NIBL

n −1 g = 36.03%
Dn = D0 (1 + g )
6 −1
9801.31= 3005.76 (1 + g )
Total investment growth ratio of KUMARI

Property of Shanker Dev Campus Library 111

Dn = D0 (1 + g )
n −1 g = -4.31%

6 −1
6178.53 = 7704 (1 + g )

(
1 + g = 6178.53
7704
) 1/ 5

Total investment growth ratio of BOK

Dn = D0 (1 + g )
n −1 Total net profit growth ratio of KUMARI
n −1
6 −1 Dn = D0 (1 + g )
3378.13 = 419.82 (1 + g )
6 −1
635.3= 291.38 (1 + g )
(
1 + g = 3378.13
419.82
)1/ 5

g = 51.74%
(
1 + g = 635.3
291.38
) 1/ 5

g = 16.87%
Total net profit growth ratio of NIBL

Dn = D0 (1 + g )
n −1 Total net profit growth ratio of BOK
n −1
6 −1 Dn = D0 (1 + g )
237.38 = 69.70 (1 + g )
6 −1
202.44 =65.36 (1 + g )
(
1 + g = 237.38
69.70
)1/ 5

g = 27.77%
(
1 + g = 202.44
65.36
) 1/ 5

g = 25.37%

Property of Shanker Dev Campus Library 112

 Appendix:-1
Trend analysis of total deposit of NIBL
Fiscal Year(t) Total Deposit (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 4574.51 -2 4 -9149.02 2321.84
2008/09 5466.60 -1 1 -5466.60 5219.26
2009/010 6694.96 0 0 0.00 8116.68
2010/011 8063.90 1 1 8063.90 11014.10
2011/012 10097.69 2 4 20195.38 13911.52
2012/013 13802.44 3 9 41407.32 16808.94
Total 48700.10 19 55050.98

a=
∑ y = 48700.1 = 8116.68 b=
∑ xy = 55050.98 = 2897.42
n 6 ∑x 2
19

Appendix:-2
Trend analysis of total deposit of KUMARI
Fiscal Year(t) Total Deposit (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 15839 -2 4 -31678 9774.348
2008/09 15506.43 -1 1 -15506.43 12624.354
2009/010 13447.66 0 0 0.00 15474.36
2010/011 14119.03 1 1 14119.03 18324.366
2011/012 14586.66 2 4 29173.32 21174.372
2012/013 19347.40 3 9 58042.20 24024.378
Total 92846.18 19 54150.12

a=
∑ y = 92846.18 = 15474.36 b=
∑ xy = 54150.12 = 2850.006
n 6 ∑x 2
19

Appendix:-3
Trend analysis of total deposit of BOK
Fiscal Year(t) Total Deposit (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 5713.49 -2 4 -11426.98 3259.459
2008/09 5723.29 -1 1 -5723.29 5361.137
2009/010 6170.71 0 0 0.00 7462.815
2010/011 7741.65 1 1 7741.65 9564.493
2011/012 8942.75 2 4 17885.50 11666.171
2012/013 10485 3 9 31455 13767.849
Property of Shanker Dev Campus Library 113
 Total 44776.89 19 39931.88

a=
∑ y = 44776.89 = 7462.815 b=
∑ xy = 39931.88 = 2101.678
n 6 ∑x 2
19

Appendix:-4
Trend analysis of Loan and advances of NIBL
Fiscal Year(t) Loan & advances(Y) X = t-2003 X2 XY Yc = a + bx
2007/08 3005.76 -2 4 -6011.52 1591.093
2008/09 3948.48 -1 1 -3948.48 3726.113
2009/010 4908.46 0 0 0 5861.133
2010/011 5884.12 1 1 5884.12 7996.153
2011/012 7618.67 2 4 15237.34 10131.173
2012/013 9801.31 3 9 29403.921 12266.193
Total 35166.797 19 40565.381

a=
∑ y = 35166.797 = 5861.133 b=
∑ xy = 40565.381 = 2135.02
n 6 ∑x 2
19

Appendix:-5
Trend analysis of Loan and advances of KUMARI
Fiscal Year(t) Loan & advances (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 7732.64 -2 4 -15465.28 4343.483
2008/09 7437.89 -1 1 -7437.89 6723.84
2009/010 7755.95 0 0 0 9104.197
2010/011 8189.99 1 1 8189.99 11484.554
2011/012 10586.17 2 4 21172.34 13864.911
2012/013 12922.5 3 9 38767.62 16245.268
Total 54625.18 19 45226.78

a=
∑ y = 54625.18 = 19104.197 b=
∑ xy = 45226.78 = 2380.357
n 6 ∑x 2
19

Property of Shanker Dev Campus Library 114

 Appendix:-6
Trend analysis of Loan and advances of BOK
Fiscal Year(t) Loan & advances (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 4127.05 -2 4 -8254.1 2573.297
2008/09 4613.61 -1 1 -4613.61 3961.791
2009/010 4542.70 0 0 0.00 5350.285
2010/011 5646.69 1 1 5646.69 6738.779
2011/012 5912.58 2 4 11825.16 8127.273
2012/013 7259.08 3 9 21777.246 9515.767
Total 32101.712 19 26381.386

a=
∑ y = 32101.712 = 5350.285 b=
∑ xy = 26381.386 = 1388.494
n 6 ∑x 2
19

Appendix:-7
Trend analysis of total investment of NIBL
Fiscal Year(t) Total investment (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 901.72 -2 4 -1803.44 512.1062
2008/09 1693.03 -1 1 -1693.03 1348.8741
2009/010 1653.98 0 0 0 2185.642
2010/011 2535.7 1 1 2535.7 3022.4099
2011/012 2128.9 2 4 4257.8 3859.1778
2012/013 4200.52 3 9 12601.56 4695.9457
Total 13113.85 19 15898.59

a=
∑ y = 1311385 = 2185.642 b=
∑ xy = 15898.59 = 836.7679
n 6 ∑x 2
19

Appendix:-8
Trend analysis of total investment of KUMARI
Fiscal Year(t) Total investment (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 7704.31 -2 4 -15408.62 5390.7288
2008/09 8199.51 -1 1 -8199.51 5880.0904
2009/010 6031.18 0 0 0 6369.452
2010/011 5835.95 1 1 5835.95 6858.8136
2011/012 4267.23 2 4 8534.46 7348.1752
Property of Shanker Dev Campus Library 115
 2012/013 6178.53 3 9 18535.59 7837.5368
Total 38216.71 19 9297.87

a=
∑ y = 38216.71 = 6369.452 b=
∑ xy = 9297.87 = 489.3616
n 6 ∑x 2
19

Appendix: 9
Trend analysis of total investment of BOK
Fiscal Year(t) Total investment (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 419.82 -2 4 -839.64 176.95
2008/09 667.46 -1 1 -667.46 1034.91
2009/010 1816.15 0 0 0 1892.87
2010/011 2477.4 1 1 2477.4 2750.83
2011/012 2598.25 2 4 5196.5 3608.78
2012/013 3378.13 3 9 10134.39 4466.74
Total 11357.21 19 16301.19

a=
∑ y = 11357.21 = 1892.868 b=
∑ xy = 16301.19 = 857.9574
n 6 ∑x 2
19

Appendix: 10
Trend analysis of net profit of NIBL
Fiscal Year(t) Net profit (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 69.7 -2 4 -139.4 31.12
2008/09 85.35 -1 1 -85.35 82.31
2009/010 94.18 0 0 0 133.50
2010/011 143.57 1 1 143.57 184.68
2011/012 170.8 2 4 341.6 235.87
2012/013 237.38 3 9 712.14 287.06
Total 800.98 19 972.56

a=
∑ y = 800.98 = 133.4967 b=
∑ xy = 972.56 = 51.18737
n 6 ∑x 2
19

Appendix:-11

PropertyTrend analysis
of Shanker of net
Dev profit of
Campus KUMARI
Library 116
 Fiscal Year(t) Net profit (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 291.38 -2 4 -582.76 163.62
2008/09 271.64 -1 1 -271.64 297.52
2009/010 416.24 0 0 0 431.42
2010/011 455.31 1 1 455.31 565.32
2011/012 518.64 2 4 1037.28 699.22
2012/013 635.3 3 9 1905.9 833.12
Total 2588.51 19 2544.09

a=
∑ y = 2588.51 = 431.4183 b=
∑ xy = 2544.09 = 133.8995
n 6 ∑x 2
19

Appendix:-12
Trend analysis of net profit of BOK
Fiscal Year(t) Net profit (Y) X = t-2003 X2 XY Yc = a + bx
2007/08 65.36 -2 4 -130.72 12.39
2008/09 9.28 -1 1 -9.28 58.38
2009/010 82.13 0 0 0 104.37
2010/011 127.48 1 1 127.48 150.36
2011/012 139.52 2 4 279.04 196.35
2012/013 202.44 3 9 607.32 242.34
Total 626.21 19 873.84

a=
∑ y = 626.21 = 104.3683 b=
∑ xy = 873.84 = 45.99158
n 6 ∑x 2
19

Property of Shanker Dev Campus Library 117

 Appendix:-13
Coefficient of correlation between deposit between and loan and advances of NIBL
Years Deposit Loan &
(x) Advances X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 4574.51 3005.76 -3542.17 12546991.9 -2855.37 8153154.97 10114226.10
2008/09 5466.60 3948.48 -2650.08 7022941.66 -1912.65 3658241.50 5068689.83
2009/010 6694.96 4908.46 -1421.72 2021297.23 -952.67 907585.84 1354437.43
2010/011 8063.90 5884.12 -52.78 2786.07993 22.99 528.40 -1213.33
2011/012 10097.69 7618.67 1981.00 3924387.43 1757.54 3088936.31 3481692.52
2012/013 13802.44 9801.31 5685.76 32327828.90 3940.18 15524971.20 22402870.60
Total 48700.10 35166.80 0.00 57846233.20 0.00 31333418.17 42420703.14
Mean 8116.68 5861.13

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.996406
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.996406 × 0.996406 = 0.99282537

1− r2 1 − 0.99282537
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.001976
n

6 (P.Er) = 0.011854

Property of Shanker Dev Campus Library 118

 Appendix:-14
Cofficient of correlation between deposit between and loan and advances of KUMARI
Years Deposit Loan &
(x) Advances X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 15839.00 7732.64 364.64 132959.92 -1371.56 1881168.60 -500120.02
2008/09 15506.43 7437.89 32.07 1028.27 -1666.31 2776579.02 -53432.97
2009/010 13447.66 7755.95 -2026.70 4107526.27 -1348.25 1817769.97 2732496.64
2010/011 14119.03 8189.99 -1355.33 1836928.35 -914.21 835774.44 1239055.19
2011/012 14586.66 10586.17 -887.70 788017.15 1481.97 2196243.97 -1315552.32
2012/013 19347.40 12922.50 3873.04 15000413.30 3818.34 14579743.30 14788582.60
Total 92846.18 54625.18 0.00 21866873.24 0.00 24087279.27 16891029.10
Mean 15474.36 9104.20

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.735985
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) =0.735985 × 0.735985 = 0.54167374

1− r2 1 − 0.54167374
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.126206
n 6
6 (P.Er) = 0.757238

Property of Shanker Dev Campus Library 119

 Appendix:-15
Coeicient of correlation between deposit between and loan and advances of BOK
Years Deposit(x) Loan &
Advances X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 5713.49 4127.05 -1749.32 3060137.96 -1223.24 1496303.87 2139835.57
2008/09 5723.29 4613.61 -1739.52 3025947.23 -736.67 542690.05 1281464.58
2009/010 6170.71 4542.7 -1292.11 1669535.33 -807.58 652193.53 1043484.62
2010/011 7741.65 5646.69 278.84 77748.96 296.40 87855.92 82648.09
2011/012 8942.75 5912.58 1479.94 2190207.60 562.29 316175.67 832160.05
2012/013 10485 7259.08 3022.19 9133602.17 1908.80 3643505.99 5768737.66
Total 44776.89 32101.71 0.00 19157179.25 0.00 6738725.03 11148330.56
Mean 7462.81 5350.28

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.981195
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.981195 × 0.981195 = 0.96274302

1− r 2 1 − 0.96274302
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.010259
n 6
6 (P.Er) = 0.061555

Property of Shanker Dev Campus Library 120

 Appendix:-16
Coefficient of correlation between total deposit between and total investment of NIBL
Years Deposit Total
(x) investment X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 4574.51 901.72 -3542.17 12546991.90 -1283.92 1648455.70 4547874.27
2008/09 5466.60 1693.03 -2650.08 7022941.66 -492.61 242666.58 1305462.85
2009/010 6694.96 1653.98 -1421.72 2021297.23 -531.66 282664.48 755876.27
2010/011 8063.90 2535.70 -52.78 2786.07 350.05 122540.60 -18477.23
2011/012 10097.69 2128.90 1981.00 3924387.43 -56.74 3219.65 -112406.28
2012/013 13802.44 4200.52 5685.76 32327828.90 2014.88 4059733.35 11456106.00
Total 48700.10 13113.85 0.00 57846233.20 0.00 6359280.38 17934435.90
Mean 8116.68 2185.64
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.935074
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.935074 × 0.935074 = 0.87436424

1− r2 1 − 0.87436424
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.03459
n 6
6 (P.Er) = 0.207573
Appendix:-17
Coefficient of correlation between deposit between and total investment of KUMARI
Years Deposit Total
(x) investment X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 15839 7704.31 364.64 132959.92 1334.85 1781845.88 486738.22
2008/09 15506.43 8199.51 32.06 1028.27 1830.05 3349112.28 58683.92
2009/010 13447.66 6031.18 -2026.70 4107526.27 -338.27 114427.95 685576.98
2010/011 14119.03 5835.95 -1355.33 1836928.35 -533.50 284624.38 723073.02
2011/012 14586.66 4267.23 -887.70 788017.15 -2102.22 4419337.34 1866149.41
2012/013 19347.4 6178.53 3873.04 15000413.30 -190.92 36451.21 -739447.91
Total 92846.18 38216.71 0.00 21866873.24 0.00 9985799.04 3080773.64
Mean 15474.36 6369.45
Coefficient of Correlation (r):

Property of Shanker Dev Campus Library 121

 n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.208485
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.208485 × 0.208485 = 0.04346604

1− r2 1 − 0.04346604
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.263395
n 6
6 (P.Er) = 1.580367
Appendix:-18
Coefficient of correlation between deposit between and total investment of BOK
Years Deposit Total
(x) investment X = x−x X2 Y = y− y Y2 XY
(y)

2007/08 5713.49 419.82 -1749.32 3060137.96 -1473.05 2169870.41 2398637.40

2008/09 5723.29 667.46 -1739.52 3025947.23 -1225.41 1501624.77 3820067.10
2009/010 6170.71 1816.15 -1292.10 1669535.33 -76.718 5885.65 11206935.00
2010/011 7741.65 2477.4 278.83 77748.96 584.53 341677.66 19179164.00
2011/012 8942.75 2598.25 1479.93 2190207.60 705.38 497563.76 23235500.00
2012/013 10485.00 3378.13 3022.18 9133602.17 1485.26 2206003.21 35419693.00
Total 44776.89 11357.21 0.00 19157179.25 0.00 6722625.46 508540543.00
Mean 7462.815 1892.87
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.925525
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.925525 × 0.925525 = 0.856596

1− r2 1 − 0.856596
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.039488
n 6
6 (P.Er) = 0.236929

Property of Shanker Dev Campus Library 122

 Appendix:-19
Coefficient of correlation between outside assets and net profit of NIBL

Years Outside Net

assets (x) profit X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 3907.48 69.70 -4139.29 17133749.00 -63.80 4070.01 264073.25
2008/09 5641.51 85.35 -2405.26 5785291.54 -48.15 2318.10 115805.49
2009/010 6562.44 94.18 -1484.33 2203245.35 -39.37 1545.80 58359.08
2010/011 8419.82 143.57 373.05 139163.84 10.07 101.47 3757.81
2011/012 9747.57 170.80 1700.79 2892709.41 37.30 1391.54 63445.32
2012/013 14001.82 237.38 5955.05 35462581.20 103.88 10791.74 618629.90
Total 48280.64 800.98 0.00 63616740.37 0.00 20218.67 1124070.87
Mean 8046.77 133.50
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.991132
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.991132 × 0.991132 = 0.98234334

1− r2 1 − 0.98234334
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.004862
n 6
6 (P.Er) = 0.029172

Property of Shanker Dev Campus Library 123

 Appendix:-20
Coefficient of correlation between outside assets and net profit of KUMARI

Years Outside Net

X = x−x X2 Y = y− y Y2 XY
assets (x) profit (y)
2007/08 15436.95 291.38 2308.91 5331065.388 -140.038 19610.7255 -323335.83
2008/09 1563.74 271.64 -11564.3 133733034.5 -159.778 25529.1052 1847724.19
2009/010 13787.13 416.24 659.09 434399.6281 -15.178 230.380791 -10003.86
2010/011 14025.94 455.31 897.9 806224.41 23.8917 570.813329 21452.3574
2011/012 14853.4 518.64 1725.36 2976867.13 87.2217 7607.62495 150488.832
2012/013 19101.08 635.3 5973.04 35677206.84 203.8817 41567.7476 1217793.55
Total 78768.24 2588.51 0.00 178958797.89 0.00 95116.40 2904119.24
Mean 13128.04 431.4183
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.703899
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.703899 × 0.703899 = 0.495473511

1− r2 1 − 0.495473511
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.138928
n 6
6 (P.Er) = 0.833569

Property of Shanker Dev Campus Library 124

 Appendix:-21
Coefficient of correlation between outside assets and net profit of BOK
Years Outside Net profit Y = y− y
X = x−x X2 Y2 XY
assets (x) (y)
2007/08 4546.87 65.36 -2695.71 7266879.36 -39.01 1521.65 105155.26
2008/09 5281.07 9.28 -1961.51 3847541.09 -95.09 9041.78 186517.13
2009/010 6358.85 82.13 -883.73 780987.55 -22.24 494.54 19652.76
2010/011 8124.09 127.48 881.50 777051.06 23.11 534.15 20373.08
2011/012 8510.83 139.52 1268.24 1608445.38 35.15 1235.64 44580.97
2012/013 10633.8 202.44 3391.21 11500339.18 98.07 9618.06 332582.22
Total 43455.51 626.21 0.00 25781243.63 0.00 22445.83 708861.42
Mean 7242.58 104.37
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.931841
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.931841 × 0.931841 = 0.868326862

1− r2 1 − 0.868326862
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.036258
n 6
6 (P.Er) = 0.217548

Appendix:-22
Coefficient of correlation between total deposit and Net profit of NIBL
Years Deposit Net
(x) profit X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 4574.51 69.70 -3542.17 12546991.69 -63.78 4070.02 225978.97
2008/09 5466.60 85.35 -2650.08 7022941.50 -48.15 2318.10 127592.77
2009/010 6694.96 94.18 -1421.72 2021297.14 -39.32 1545.80 55897.47
2010/011 8063.90 143.57 -52.78 2786.077 10.07 101.47 -531.70
2011/012 10097.69 170.80 1981.01 3924387.54 37.30 1391.54 73898.09
2012/013 13802.44 237.38 5685.76 32327829.25 103.88 10791.74 590655.17
Total 48700.10 800.98 0.00 57846233.20 0.00 20218.67 1073490.76
Mean 8116.68 133.49
Coefficient of Correlation (r):
Property of Shanker Dev Campus Library 125
 n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.992623
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.992623 × 0.992623 = 0.985300858

1− r2 1 − 0.985300858
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.004048
n 6

6 (P.Er) = 0.024286

Appendix:-23
Coefficient of correlation between deposit and net profit of KUMARI
Years Deposit(x) Net
profit X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 15839.00 291.38 364.64 132959.92 -140.04 19610.72 -51063.10
2008/09 15506.43 271.64 32.07 1028.27 -159.78 25529.10 -5123.56
2009/010 13447.66 416.24 -2026.70 4107526.27 -15.18 230.38 30761.91
2010/011 14119.03 455.31 -1355.33 1836928.35 23.89 570.81 -32381.22
2011/012 14586.66 518.64 -887.70 788017.15 87.22 7607.62 -77426.99
2012/013 19347.40 635.30 3873.04 15000413.28 203.88 41567.75 789641.30
Total 92846.18 2588.51 0.00 21866873.24 0.00 95116.40 654408.34
Mean 15474.36 431.42
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.453762
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.453762 × 0.453762 = 0.205899635

1− r2 1 − 0.205899635
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.218666
n 6
7 (P.Er) = 1.311997

Property of Shanker Dev Campus Library 126

 Appendix:-24
Coefficient of correlation between total deposit and net profit of BOK
Years Deposit(x) Net
profit X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 5713.49 65.36 -1749.32 3060137.96 -39.01 1521.65 68238.19
2008/09 5723.29 9.28 -1739.52 3025947.23 -95.01 9041.78 165408.47
2009/010 6170.71 82.13 -1292.10 1669535.33 -22.24 494.54 28734.22
2010/011 7741.65 127.48 278.83 77748.96 23.11 534.15 6444.35
2011/012 8942.75 139.52 1479.93 2190207.60 35.15 1235.64 52022.23
2012/013 10485.00 202.44 3022.18 9133602.17 98.07 9618.05 296390.82
Total 44776.89 626.21 0.00 19157179.25 0.00 22445.83 617238.29
Mean 7462.81 104.37

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.941281
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.941281 × 0.941281 = 0.886009909

1− r2 1 − 0.886009909
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.031389
n 6
6 (P.Er) = 0.188332
Appendix:-25
Coefficient of correlation between total deposit and interest earned of NIBL
Years Total Interest
deposit earned X = x−x X2 Y = y− y Y2 XY
(x) (y)
2007/08 4574.51 385.02 -3542.17 12546991.90 -219.76 48293.71 778421.99
2008/09 5466.60 443.82 -2650.08 7022941.66 -160.96 25907.57 426552.91
2009/010 6694.96 520.17 -1421.72 2021297.23 -84.61 7158.56 120289.59
2010/011 8063.90 657.25 -52.78 2786.08 52.47 2753.28 -2769.63
2011/012 10097.69 719.3 1981.01 3924387.43 114.52 13115.22 226868.25
2012/013 13802.44 903.11 5685.76 32327828.91 298.33 89001.80 1696241.45
Total 48700.10 3628.67 0.00 57846233.20 0.00 186230.15 3245604.56
Mean 8116.68 604.78

Property of Shanker Dev Campus Library 127

Coefficient of Correlation (r):
 n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.988856
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.988856 × 0.988856 = 0.977836244

1− r2 1 − 0.977836244
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.006103
n 6
6 (P.Er) = 0.036619

Appendix:26
Coefficient of correlation between total deposit and interest earned of KUMARI
Years Total Interest
deposit earned X = x−x X2 Y = y− y Y2 XY
(x) (y)
2007/08 15839.00 1266.70 364.64 132960.14 135.76 18431.32 49503.85
2008/09 15506.43 1120.70 32.07 1028.29 -10.24 104.82 -328.30
2009/010 13447.66 1017.87 -2026.70 4107525.05 -113.07 12784.37 229155.25
2010/011 14119.03 1001.61 -1355.33 1836927.54 -129.33 16725.73 175282.50
2011/012 14586.66 1068.75 -887.70 788016.62 -62.19 3867.35 55204.47
2012/013 19347.40 1310.00 3873.04 15000415.60 179.06 32063.19 693513.75
Total 92846.18 6785.63 0.00 21866873.24 0.00 83976.79 1202331.53
Mean 15474.36 1130.94

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.887261
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 0.887261 × 0.887261 = 0.78723161

1− r2 1 − 0.78723161
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.058589
n 6
6 (P.Er) = 0.351532

Property of Shanker Dev Campus Library 128

 Appendix:-27
Coefficient of correlation between total deposit and interest earned of BOK
Years Total Interest
deposit earned X = x−x X2 Y = y− y Y2 XY
(x) (y)
2007/08 5713.49 4546.87 -1749.32 3060137.96 -2695.72 7266879.36 4715681.64
2008/09 5723.29 5281.07 -1739.52 3025947.22 -1961.52 3847541.10 3412104.38
2009/010 6170.71 6358.85 -1292.10 1669535.33 -883.73 780987.55 1141878.41
2010/011 7741.65 8124.09 278.83 77748.96 881.50 777051.06 245794.47
2011/012 8942.75 8510.83 1479.93 2190207.60 1268.24 1608445.38 1876920.16
2012/013 10485.00 10633.80 3022.18 9133602.17 3391.21 11500339.20 10248879.10
Total 44776.89 43455.51 0.00 19157179.25 0.00 25781243.63 21641258.15
Mean 7462.81 7242.58
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.973789
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) =0.973789 ×0. 973789 = 0.948264704

1− r2 1 − 0.948264704
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.014246
n 6
6 (P.Er) = 0.085476
Appendix:-28
Coefficient of correlation between loan and advances to interest paid of NIBL
Years Loan and Interest
X = x−x X2 Y = y− y Y2 XY
advances(x) paid (y)
2007/08 3005.76 236.14 -2855.37 8153154.00 -66.885 4473.60 190981.61
2008/09 3948.48 257.05 -1912.65 3658240.85 -45.975 2113.70 87934.22
2009/010 4908.46 307.63 -952.67 907585.52 4.605 21.20 -4387.05
2010/011 5884.12 316.37 22.99 528.40 13.345 178.08 306.76
2011/012 7618.67 299.56 1757.54 3088936.90 -3.465 12.00 -6089.87
2012/013 9801.30 401.4 3940.17 15524972.49 98.375 9677.64 387614.63
Total 35166.80 1818.15 0.00 31333418.17 0.00 16476.25 656360.30
Mean 5861.13 303.02
Coefficient of Correlation (r):

Property of Shanker Dev Campus Library 129

 n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.913502
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.913502 × 0.913502 = 0.834485072

1− r2 1 − 0.834485072
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.045577
n 6
6 (P.Er) = 0.273461

Appendix:-29
Coefficient of correlation between loan and advances to interest paid of KUMARI
Years Loan and Interest
advances paid (y) X = x−x X2 Y = y− y Y2 XY
(x)
2007/08 7732.64 578.36 -1371.56 1881167.70 204.78 41934.85 -280867.3
2008/09 7437.89 462.08 -1666.31 2776577.92 88.50 7832.25 -147468.1
2009/010 7755.95 317.35 -1348.25 1817769.08 -56.23 3161.81 75811.91
2010/011 8189.99 282.95 -914.21 835773.84 -90.63 8213.80 82854.55
2011/012 10586.17 243.54 1481.97 2196244.95 -130.04 16910.40 -192715.8
2012/013 12922.54 357.20 3818.34 14579745.79 -16.38 268.30 -62544.46
Total 54625.18 2241.48 0.00 24087279.2 0.00 78321.41 -524929.3
Mean 9104.19667 373.58
Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = -0.38218
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = -0.38218 × -0.38218 = 0.146060711

1− r2 1 − 0.146060711
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.235144
n 6
6 (P.Er) = 1.410862

Property of Shanker Dev Campus Library 130

 Appendix:-30
Coefficient of correlation between loan and advances to interest paid of BOK
Years Loan and Interest
X = x−x X2 Y = y− y Y2 XY
advances(x) paid (y)
2007/08 4127.05 310.48 -1223.24 1496304.67 25.77 663.92 -31518.74
2008/09 4613.61 285 -736.68 542690.54 0.29 0.08 -211.20
2009/010 4542.7 276.71 -807.59 652194.07 -8.00 64.05 6463.35
2010/011 5646.69 286.3 296.40 87855.73 1.59 2.52 470.31
2011/012 5912.58 241.64 562.29 316175.30 -43.07 1855.31 -24219.89
2012/013 7259.082 308.15 1908.80 3643504.73 23.44 549.28 44735.89
Total 32101.71 1708.28 0.00 6738725.03 0.00 3135.16 -4280.28
Mean 5350.28 284.71

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = -0.02945
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = -0.02945 × -0.02945 = 0.000867175

1− r2 1 − 0.000867175
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.275125
n 6

6 (P.Er) = 1.650748

Property of Shanker Dev Campus Library 131

 Appendix:-31
Coefficient of correlation between total working fund and net profit of NIBL
Years Working Net
X = x−x X2 Y = y− y Y2 XY
fund (x) profit (y)
2007/08 5202.58 69.7 -4336.03 18801112.80 -63.80 4070.02 276624.09
2008/09 6616.89 85.35 -2921.72 8536418.54 -48.15 2318.10 140670.94
2009/010 8052.2 94.18 -1486.41 2209399.82 -39.32 1545.80 58440.54
2010/011 9608.56 143.57 69.95 4893.70 10.07 101.47 704.68
2011/012 11792.12 170.8 2253.52 5078329.86 37.30 1391.54 84063.55
2012/013 15959.28 237.38 6420.68 41225067.46 103.88 10791.74 667000.91
Total 57231.63 800.98 0.00 75855222.18 0.00 20218.67 1227504.69
Mean 9538.605 133.4967
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.991184
n∑ x2 − (∑ x) n∑ y 2 − (∑ y )
2 2
(6 ×) − ( )2 (6 ×) − ( )2
Coefficient of Determination (r2) = 991184 × 991184 = 0.982444814

1− r2 1 − 0.982444814
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.004834
n 6
6 (P.Er) = 0.029004
Appendix:-32
Coefficient of correlation between total working fund and net profit of KUMARI
Years Working Net
X = x−x X2 Y = y− y Y2 XY
fund (x) profit (y)
2007/08 17770.65 291.38 -250.07 62533.35 -140.04 19610.73 35018.92
2008/09 17529.25 271.64 -491.47 241539.52 -159.78 25529.11 78525.71
2009/010 16562.62 416.24 -1458.10 2126045.99 -15.18 230.38 22131.43
2010/011 16745.48 455.31 -1275.24 1626228.64 23.89 570.81 -30467.57
2011/012 17186.33 518.64 -834.39 696201.17 87.22 7607.62 -72776.63
2012/013 22329.97 635.3 4309.25 18569664.00 203.88 41567.75 878577.89
Total 108124.30 2588.51 0.00 23322212.67 0.00 95116.40 911009.75
Mean 18020.7167 431.4183
Coefficient of Correlation (r):
n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.611661
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2
2
Coefficient of Determination
Property of(rShanker
) = 0.611661 × 0.611661
Dev Campus = 0.374128596
Library 132
 1− r2 1 − 0.374128596
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.172342
n 6
6 (P.Er) = 1.034053
Appendix:-33
Coefficient of correlation between total working fund and net profit of BOK
Years Working Net
fund (x) profit X = x−x X2 Y = y− y Y2 XY
(y)
2007/08 6201.93 65.36 -2403.94 5778911.51 -39.01 1521.65 93773.48
2008/09 6356.65 9.28 -2249.22 5058975.63 -95.09 9041.78 213874.19
2009/010 7444.82 82.13 -1161.05 1348029.37 -22.24 494.54 25819.70
2010/011 9496.34 127.48 890.47 792942.75 23.11 534.15 20580.35
2011/012 9857.13 139.52 1251.26 1565659.92 35.15 1235.64 43984.03
2012/013 12278.33 202.44 3672.46 13486986.91 98.07 9618.06 360164.72
Total 51635.20 626.21 0.00 28031506.09 0.00 22445.83 758196.48
Mean 8605.87 104.37

Coefficient of Correlation (r):

n∑ xy − ∑ x∑ y (6 ×) − (×)
r= = = 0.955852
n∑ x − (∑ x) n∑ y − (∑ y )
2 2
2 2
(6 ×) − ( )2 (6 ×) − ( )2

Coefficient of Determination (r2) = 0.955852 × 0.955852 = 0.913653499

1− r2 1 − 0.913653499
Pr obable( P.Er ) = 0.6745 × = 0.6745 × = 0.023777
n 6
6 (P.Er) = 0.14266

Property of Shanker Dev Campus Library 133

 Appendix no:-34
Regression equation between net profit on total working fund of NIBL
Year Working fund (X) Net profit (Y) X2 Y2 XY
2007/08 5202.58 69.70 27066838.66 4858.09 362619.83
2008/09 6616.89 85.35 43783233.27 7284.62 564751.56
2009/010 8052.20 94.18 64837924.84 8869.87 758356.20
2010/011 9608.56 143.57 92324425.27 20612.34 1379500.96
2011/012 11792.12 170.80 139054094.09 29172.64 2014094.10
2006 15959.28 237.38 254698618.12 56349.26 3788413.89
Total 57231.63 800.98 621765134.25 127146.83 8867736.53
X= independent variable
Y= dependent variable

Appendix no:-35
Regression equation between net profit on total working fund of KUMARI
Year Working fund X Net profit Y X2 Y2 XY
2007/08 17770.7 291.38 315796001.42 84902.30 5178012.00
2008/09 17529.3 271.64 307274605.56 73788.29 4761645.47
2009/010 16562.6 416.24 274320381.26 173255.74 6894024.95
2010/011 16745.5 455.31 280411100.43 207307.20 7624384.50
2011/012 17186.3 518.64 295369938.87 268987.45 8913518.19
2012/013 22330 635.3 498627560.20 403606.09 14186229.94
Total 108124.30 2588.51 1971799587.75 1211847.07 47557815.05
X= independent variable
Y= dependent variable

Property of Shanker Dev Campus Library 134

 Appendix no:-36
Regression equation between net profits on total working fund of BOK
Year Working fund X Net profit Y X2 Y2 XY
2007/08 6201.93 65.36 38463935.72 4271.93 405358.14
2008/09 6356.65 9.28 40406999.22 86.12 58989.71
2009/010 7444.82 82.13 55425344.83 6745.34 611443.07
2010/011 9496.34 127.48 90180473.40 16251.15 1210593.42
2011/012 9857.13 139.52 97163011.84 19465.83 1375266.78
2012/013 12278.33 202.44 150757387.59 40981.95 2485625.13
Total 51635.20 626.21 472397152.60 87802.32 6147276.25

X= independent variable
Y= dependent variable

Appendix no:-37
Regression equation between net profits on total deposit of NIBL
Year Total deposit X Net profit Y X2 Y2 XY
2007/08 4574.51 69.7 20926141.74 4858.09 318843.35
2008/09 5466.6 85.35 29883715.56 7284.62 466574.31
2009/010 6694.96 94.18 44822489.40 8869.87 630531.33
2010/011 8063.9 143.57 65026483.21 20612.34 1157734.12
2011/012 10097.69 170.8 101963343.34 29172.64 1724685.45
2012/013 13802.44 237.38 190507349.95 56349.26 3276423.21
Total 48700.10 800.98 453129523.20 127146.83 7574791.77
X= independent variable
Y= dependent variable

Property of Shanker Dev Campus Library 135

 Appendix no:-38
Regression equation between net profit on total deposit of KUMARI
Year Total deposit X Net profit Y X2 Y2 XY
2007/08 15839 291.38 250873921.00 84902.30 4615167.82
2008/09 15506.43 271.64 240449371.34 73788.29 4212166.65
2009/010 13447.66 416.24 180839559.48 173255.74 5597454.00
2010/011 14119.03 455.31 199347008.14 207307.20 6428535.55
2011/012 14586.66 518.64 212770649.96 268987.45 7565225.34
2012/013 19347.4 635.3 374321886.76 403606.09 12291403.22
Total 92846.18 2588.51 1458602396.68 1211847.07 40709952.58
X= independent variable
Y= dependent variable

Appendix no:-39
Regression equation between net profits on total deposit of BOK
Year Total deposit X Net profit Y X2 Y2 XY
2007/08 5713.49 65.36 32643967.98 4271.93 373433.71
2008/09 5723.29 9.28 32756048.42 86.12 53112.13
2009/010 6170.71 82.13 38077661.90 6745.34 506800.41
2010/011 7741.65 127.48 59933144.72 16251.15 986905.54
2011/012 8942.75 139.52 79972777.56 19465.83 1247692.48
2012/013 10485 202.44 109935225.00 40981.95 2122583.40
Total 44776.89 626.21 353318825.59 87802.32 5290527.67

X= independent variable
Y= dependent variable

Property of Shanker Dev Campus Library 136