CHAPTER I

INTRODUCTION
1.1 Evolution of the Bank
Banks are among the most important financial institution in the economy and
essential for business in thousands of local towns and cities.A Bank is an
organization whose primary functions are concerned with accumulation of idle
money from general public and advancing loans to individuals, traders, industries
and business houses for expenditure.Generally, the bank collect money from
general public for which it should pay interest regularly.The money thus
accumulated can be invested in different sectors such as business, foreign
trades,agriculture, industry and social works for which it charges certain
percentages of interest which is higher than interest paid by the bank to
accumulate fund.uch charges on advancing loan in the ma!or revenue source of
the bank by which it can bear administration expenses incurring in the process of
operating its activities.Thus, the bank is a good mediator between depositors and
loan takers."
According to #ent $A bank is an organization whose principle operations are
concerned with the accumulation of the temporarily idle money of the general
public for the purpose of advancing to other for expenditure.%
&ence, the bank may be summarized as an institution which excepts deposits
from the public and advance loans by creating money.There is no unanimity
amoung the economists about the origin of the word $Banking'.The term bank
was derived from the (atin word bancus,which refers to the bench on which the
bankers would keep its money and records.&istory tells us that it was the
merchant bankers who first involved the system of banking by trading in
commodities than money. The next stage in the growth of banking was the
Goldsmith.)inally,money lenders in the early age also contributed in the growth
of banking in a large extent.Thus, it is believed that the ancestors of modern
banking system were merchants, Goldsmith and money lenders.The bank called
the $Bank of *enice% was established in *enice, +taly in ,,-. was regarded as the
first modern bank.ubse/uently, following its establishments various banks such
as the Bank of Barcelona 0,12,3, Bank of Geneva 0,12.3, Bank of Amsterdam
0,4253, Bank of &industan 0,..23 were established.
6abil Bank (imited was established in 724. B.. 6abil bank was the first !oint
venture with 8ubai bank (imited of 9nited Arab :mirates.The second !oint
venture bank was 6epal +ndosuez Bank.+t was established in falgun 724; under
the collaboration with +ndosuez Bank of <aris. +n =agh ,4 ,724;, 6epal Grindleys
Bank was establised under the collaboration with the Grindleys Bank of
(ondon.As the country follower liberalization, there was massive entrance of
(i/uidity <osition of 6abil Bank
1
foreign banks as a !oint *enture with &abib bank (imited, <akistan, 6epal B+
bank as the !oint venture with the state bank of +ndia, 6epal Bangladesh Bank as
the !oint venture with +nternational finance investment and commercial bank of
8haka, 6epal bank of >eylon as the !oint venture with the bank of >eylon of
rilanka are the example of expansion of banking industry in 6epal.
1.1.1 Concept of Bankin
Banking is a business much like any other business. The commercial bank is
relatively business concern. A bank provides certain services for its customer
08epositors and Borrowers3 and in return, receives payment in one form or other.
+t tries to earn profit for its stock owners.
?.. ayers defined the bank as, $@rdinary banking business consists of
changing cash for bank deposits and bank deposits for cashA transferring bank
deposits from one person or corporation to anotherAgiving bank deposits in
exchange, government bonds, the secured or unsecured promises of business to
repay etc.
According to 6epal commercial Bank Act 72B,, $A commercial Bank refers to
such type of bank which deals in money exchange, accepting deposit, advancing
loans and other commercial transactions other than one special functions
performed by specified banks. uch as coCoperatives, agriculture and industrial
banks.%
Thus, from above definition, we can say that if any institution fulfills the following
conditions, it will satisfy the definition of banking company D
,. Accepting of deposits from the public or other source, reCpayable on
demand or otherwise.
7. The deposit must be withdrawn by che/ues, draft and order or otherwise.
B. :ven money accepted as deposit must be for the purpose of lending or
investing, making advance and investment of fund are e/ually important
functions.
1. >ommercial bank also provides miscellaneous services like letter credit,
travelerEs che/ue.
1.1.! Develop"ent of #inancial In$titution in Nepal
+n respect of formation of financial institutions in the 6epal, simple lending and
borrowing functions existed during the regime period. +n 1
th
century, king
Fayasthiti =alla divided the people in 41 casts on the basis of their professions.
@ne on them was named $Tankadari% who used to perform simple lending and
borrowing functions.
(i/uidity <osition of 6abil Bank
2
8uring the period of ?ana prime =inister ?anodeep,%Ta!arath Adda% was
established to provide loan facility to government staffs and general public under
the collateral of gold and silver in the term of - percent interest 0,5BB B.G,517
B..3
There were moneylenders known as =arwari merchant,Faminder, Goldsmiths,
ahu and <awan Brokers etc.They still exist in some remote part of nation.+ndian
currency was accumulated in Terai Area. &undi functions had been done through
merchants.
$ainik 8ravya #osh% was established in ,55B B.. specially established for the
future welfare of government staff and sainiks only.ince 72,5 B.. #armachari
anchaya #osh has been performing more functions than ainik 8ravya #osh to
give facility not only to the staff of government but also to the staff of corporation.
+n 6epal, the introduction of modern banking activities had been traced back to
,551 B.. 0,5B.A.8.3 when the 6epal Bank Act 72B, was first <romulgated
during the period of <rime =inister Fuddha hamsher. Before that the credit
needs or people for commercial and other purpose were mostly fulfilled by the
unorganized market of private money lenders.
+n 722. B.., there was great political change.6epal ?astra Bank, central bank of
6epal was established in 72,; B.. with authorized capital of
6?s.,2222222.imilarly, ?astriya Bani!iya Bank as the second commercial bank
of 6epal was established in 7277 B.. An +ndustrial Bank nearly 6epal +ndustrial
8evelopment Bank 06+8>3 was established in 7221 B.., Agriculture
8evelopment Bank 0A8B3 of 6epal established.
6abil Bank (imited was established in 721, B.. 6abil bank was the first !oint
venture with 8ubai Bank (td. of 9nited Arab :mirates. The second !oint venture
band was 6epal +ndosuez Bank. +t was established in )algun 7217 under the
collaboration with +ndosuez bank <aris.+n =agh ,4, 721B, 6epal Grindleys Bank
was established under the collaboration with Grindleys Bank of (ondon.As the
country followed economic liberalization, there was massive entrance of foreign
bank in 6epla.The establishment o &imalayan Bank as a !oint venture with &abib
Bank (td. <akistan,6epal B+ Bank (td. as a !oint venture with +.).+.>. Bank (td.
of Bangladesh, Bank of #athmandu as a !oint venture with Thailand Bank,
:verest Bank as a !oint venture with <un!ab 6ational Bank, +ndia, 6epal Bank of
>eylon as a !oint venture with Bank of >eylon of rilanka, are the example of
expansion of Banking industry in 6epal.
1.1.% Bankin Develop"ent of Nepal
The history of banking in 6epal may be described as a component of the gradual
and orderly evolution in the financial and economic spare of the 6epalese
life.:ven, now the finance system is still in the evolutionary phase.The existence
(i/uidity <osition of 6abil Bank
3
of unorganized money market consisting of (andlord, shahukars0rich
merchants3,shopkeepers and other indigenous individual moneylenders has
acted as barrier to institutionalized credit.
imple lending and borrowing functions existed from Gunakamadev in the
(ichhavi period,.;2 B..And in ,,
th
century, in king Fayasthiti =allasHs period
$Tenkadhari% used to perform simple lending and borrowing functions.
8uring the ?ana prime =inister ship of ?anodip ingh $Te!arath Adda% was
established to provide loan facilities for government staffs and to general public
under the collateral of gold and silver in the term of -I interest rate 0,55B
B..3There were money lenders known as =arawaris, Famindar, Goldsmith,
Broker etc.They still exist in some remote part of the 6ation.
$ainik 8ravya #osh% was established in ,5BB B.. specially established for the
future welfare of government staff and sainiks only.ince 72,5 B.. #armachari
anchaya #osh has been performing more functions than ainik 8ravya #osh to
give facility not only to the staffs of government but also to the staffs of
corporations.
+n 6epal, banking in the true sense of term started with the inspection of nepal
Bank (imited on B2
th
kartik,,551 B..?ight for the inspection,it carried out
function of commercial bank.6epal bank act ,5B. was ,
st
<romulgated during the
prime ministership of Fuddha hamsher F.B.?. Before that the credit need for
commercial and other propose were mostly be unrecognized market of the
private money lenders.
6epal bank (td. had a &erculear responsibility of attracting people towards
banking sector from preCdominant ahu maha!anHs transactions and of
introducing other banking services as well. Being a commercial bank, it was but
natural that 6epal Bank (td. paid more attention to profit generating business.But
it is the one of government to look into neglected sectors too.%=uluki #hanna%
which had banking perform some banking functions has issued notes of different
domination such as ,,7,,2 and ,22 rupees.
+n 722. B..,there was great political change.6epal ?astra Bank% as a central
bank of 6epal was established in 72,7 B.. with one crore of authorized
capital.imilarly,?astriya Bani!iya Bank was established in 7277 B.. +n 72,4
B.. with the view to develop the industrial sector.6epal +ndustrial development
corporation was established in 72B1 B..,Agriculture development bank bank
was established.ince the year 72,1 B..0,5;1 A.8.3 &=G of 6epal has
established five rural development banks.6epal commercial bank act 72B,B..
0,5.-A.8.3 has been amended several times in accordance with need.
+n order to establish and develop other !oint venture commercial banks and other
financial institution came into existence.6epal adopted free economic policy,
(i/uidity <osition of 6abil Bank
4
&=G permitted the establishments of different !oint venture banks with foreign
collaborations. +n addition to those commercial banks other regional commercial
banks were also established.
6epal is one of the least developed country under the rank of poverty
line.Agriculture plays a crucial role in the 6epalese economy.The development of
the bank in 6epal is in infant stage.+n this way the bank plays a primitive role for
the economic development of 6epal.
1.! Int&o'uction of Na(il Bank )i"ite'
Before the introduction of 6abil Bank (td. in ,5;1, the financial sectors of 6epal
was sluggish despite all the efforts of the government.The inception of 6epal
Arab Bank in ,5;1 as a first !oint venture bank proved to be a milestone gave a
new ray of hope to the sluggish financial year.
6abil Bank was established in ,5;1 under the 6epal commercial bank Act 72B,.
+t was the first foreign !oint venture bank by the !oint investment of 8ubai Bank
(td. and 6epalese investors included local financial institution and general public
owing 72I and B2I of the total capital respectively and other half portion was
transferred to :mirates Bank +nternational (td. of Bangladesh.6ow,the current
promotor that owns the -2I shares of 6abil Bank (td. in 6.B 0+nternational3 (td.
of +reland.
1.!.1 *ha&e $u($c&iption of Na(il Bank )t'.
Ta(le No.1
6.B. 0+nternational3 (td.,+reland -2I
6epalese <ublic B2I
6epal +ndustrial 8evelopment >orporation ,2I
?astriya Beema ansthan 5.4.I
6epal tock :xchange (td. 2.BBI
Total ,22I

#iu&e No.1
*ha&e *u($c&iption of Na(il Bank )t'.
+.%%,
-../,
0+, %+,
1+,
N.B.1Inte&national2
)TD. I&elan'
Nepale$e Pu(lic
Nepal In'u$t&ial
Develop"ent
Co&po&ation
Ra$t&i3a Bee"a
*an$than
Nepal *tock
E4chane )t'.
(i/uidity <osition of 6abil Bank
5
1.!.! Capital *t&uctu&e of Na(il Bank )t'.

Ta(le No.!
Nrs. In million
Authorized >apital -22
+ssued >apital 15,.4-
<aid up >apital 15,.4-
#iu&e No.!
Capital $t&uctu&e of Na(il Bank )t'.
%%,
%5,
%%,
Autho&i6e' Capital
I$$ue' Capital
Pai' up capital
1.!.% #inancial Hihliht of Na(il in !+1171!
Ta(le No.%
NRs. In million
Thi$ 8ea& (ast Jear 9&o:th 1,2
6et Korth ,1;,.4; ,B,1.,5 ,7..1
8eposits ,1,,5.2B ,B11..44 1.55
Gross (oans, Advances L Bills <urchase ;-1;.44 ;,,B.4; -.B4
+nvestments 0+ncludes =oney at call L hort 6otice3 4.-1.;2 4.2,.B; 2.;2
+nterest +ncome ,22,.47 ,2,..;. 0,.423
+nterest expense 7;7.5- B,..B- 0,2.;13
6et +nterest +ncome .,;.4. .22.-7 7.-5
@ther +ncome 0excluding <rovision Krite Back3 171.;7 12B.B4 -.B7
@ther :xpenses BB,.42 B.4..; 0,,.553
<rofit before <rovision M Krite off ,Bonus L tax ;,,.;5 .7..,2 ,,.44
6et <rovision M Book write off ;7.;. 1-.B- ;7..B
taff Bonus .,.51 44.B4 ..1,
>orporate tax L pecial fee 72,..4 ,55.,- ,.B,
6et <rofit after Tax 1--.B7 1,4.71 5.B;
(i/uidity <osition of 6abil Bank
6
1.!.5 O&ani6ation $t&uctu&e of Na(il Bank )t'.
1O&ani6ation $t&uctu&e of Na(il Bank )t'.2
Hea' office

1.!.0 B&anch Net:o&k
6abil bank has ,. branches, the largest number of branches among the !oint
venture banks in 6epal.
,. 6abil house corporation Banking
7. 6ew ?oad
B. #antipath
1. (alitpur
-. Birgun!
4. Biratnagar
.. +tahari
;. <akhara
5. Butwal
(i/uidity <osition of 6abil Bank
7
>hief :xecutive @fficer
0>:@3
=anager +nternal
Audit
=anager
+nternal
>ontrol
enior =anager
>redit L =arketing
enior
=anager
@peration
enior =anager
(egal L
<ersonal
=anager
Treasury
=anager
&ead @ffice
@peration
=anager
>ard ervices
=anager
>orporate Banking
=anager
&ead @ffice
>redit
+ncharge
central
>redit control
,2. <okhara (akeside
,,. Bhairahawa
,7. Forpati
,B. Bhalawadi
,1. 6epalgun!
There are also two banking counters at ,3 Airport and 73 Thamel.6abil was
planning to open a branch office at #olkota but the capital re/uirement of reserve
bank of +ndia was high.Therefore,the proposal was dropped.The head office of
6abil Bank is situated at kamaladi,#athmandu.This head office coCordinate the
activities of 6abil Bank branches all over 6epal to provide better services to its
*+< customer. @ne new branch is opened as corporate at round B2222
depositors at 6abil bank and around ,222 depositors at #amaladi branch.
1.!.. P&o'uct an' $e&vice$ of Na(il Bank )t'.
6abil Bank is well known and famous for providing highly personalized services
to customers. +t provides full range of commercial banking services through its
branch network nation wide.To extend more efficient services to its customers,
6abil Bank has been adopting innovation and latest banking technology.6abil
Bank provides the following services D
1.!...1 Depo$it;
)ollowing types of accounts can be opened at any 6abil branches upon
completion of simple documentary re/uirement.All the accounts can be opened
in various currencies 0against which rates are provided3 sub!ect to rule of opening
and fulfilling the re/uired documents.
aving
>urrent
)ixed
>all
1.!...! 9ua&antee$;
6abil bank issues guarantees and Bonds on behalf of customers to the
beneficiaries in 6epal.9pon fulfillment of re/uirement, 6abil also arranges
insurance of guarantees in the name of foreign beneficiaries through the reputed
+nternational banks.
1.!...% C&e'it Ca&'$D
6abil is the first bank in 6epal to issue ?upee 0valid in 6epal and +ndia3 and
+nternational 0valid worldwide3 master card in 6epal, a global prestigious services
to its esteemed clients.6abil is also expanding credit card facilities by issuing
visa credit cards very soon.
(i/uidity <osition of 6abil Bank
8
1.!...5 Tele (ankin;
Telephone bank is another product provided by 6abil bank to its customer, under
this aggrement, customer can know the balance of hisMher account through
telephone without human assistance.
1.!...0 <e$te&n Union =one3 T&an$fe&;
6abil bank has established uni/ue money remittance system with Kestern 9nion
money remittance system where by money can be remitted anywhere in the
world within minutes. Through onCline computer system funds can be transferred
instantly to about --22 location in ,4- countries of the world.
6epalese wage earners can send money to their near and dear ones in 6epal
within a very short time.By using the above services, you can now send and
receive money within minutes in ,4- countries in the world.
1.!.... *:ift 1*ociet3 fo& :o&l':i'e Inte& Bank #inancial Teleco""unication2;
6abil has standard worldwide transfer of funds by this fast and efficient fund
transfer and messaging system. =essaging and funds transfer and carried
through K+)T with minimum time and cost.
1.!.../ *afe Depo$it )ocke&;
6abil has provided safe deposit (ocker to keep value safety at a minimum
cost.<resently, this facility available at kantipath offfice.
1.!...> Auto"ate' Telle& =achine 1AT=2;
6abil has launched the AT= to its account holders to enable fast withdrawal of
funds.An account holder need not wait a long hours for withdrawing money and
sign che/ues any more.A simple card with a uni/ue <+6 number known only to
the account holder will suffice.
1.!...- Othe& facilitie$;
The bank provide the facilities for the customers like deposit the service loans
and advances,consumer finance, cash management remittance service etc.
1.!./ Int&o'uction to )i?ui'it3
(i/uidity <osition of 6abil Bank
9
(i/uidity is defined as banks capacity to exchange cash for deposits.+n other
words,li/uidity is bank capacity to meet immediate maturing liabilities.<ublic put
their money with a hope that bank repays it as demanded by them. This is the
great trust of public to the bank.+f the bank fails to repay the money on demand,
in such a situation bank may loose the public trust towards the bank and even
very strong banks may collapse.>onsidering this fact,bank should maintain
enough li/uidity to meet the demands.A bank needs li/uidty for transaction
motive,precaution of security motive and speculative motive.
1.!.> I"po&tance of )i?ui'it3
The li/uidity management function of bank is regular one.:ach and every bank
must attach with great importance of li/uidity for maintaining confidence of
customer and its survival.The importance of li/uidity management are as followsA
1.!.>.1 To "eet the e4pen$e$ fo& the (ank$ 'ail3 a'"ini$t&ative :o&k;
A bank is a legal person.+t canHt run without cash book.The transaction of the
bank is related to the money.many types of expenses go on taking place in the
bank daily.Kith the lack of expenses, it is nearly impossible for the bank to do its
transaction.o the li/uidity is necessary for daily expenses that it is spent in the
administrative functions.The administrative expenditure canHt be fulfilled without
li/uidity.&ence, li/uidity is important for the banks.
1.!.>.! To pa3 all $o&t$ if 'epo$it$;
A bank opens the current, saving and fixed account for its customers and accept
the deposit from the customers.According to the nature of deposit, the banks
should pay in the time when the customers asks.
1.!.>.% To cont&ol the econo"ic fluctuation an' to keep $afe f&o" the &i$k;
+t canHt be said, there will be the same situation of transaction in the bank will
always remain in balanced conditions. There will be effect of internal and external
circumstance in the nation.uch condition may have effect on economic
sector.There is necessity of li/uidity to keep the bank free from such economic
rise and fall or economic crisis.The bank should maintain some li/uidity of some
certain percent cash fund to keep sage from such situation.
1.!.>.5 To fulfill the 'e"an' of 'e(to&$;
A bank provides loan to debtors.The bank earns income from it.=any kinds of
people come to the banks with the purpose of loan.After the loan is granted,the
bank is obliged to give the loan to the debtor.Therefore, there is necessity of
li/uidity in bank to provide fresh loan to the debtors.
(i/uidity <osition of 6abil Bank
10
1.!.>.0 To ain t&u$t of faith;
A bank has a great responsibility because of the financial institution that does
monetary transaction.+t must gain trast of its banking transaction.)or this, a bank
should do many types of function.+t has to pay attention to the time and the will of
the customers to provide the banking services.)or the name and fame, a bank
should earn the trust from the public including other sectors.
1.!.- C&ite&ia fo& "ea$u&in (ank li?ui'it3
+t is very important to study criteria for measuring bank li/uidity.The bank li/uidity
is the most important aspect of a bank.+f there is less bank li/uidity, the bank
cannot be run.+f there is much li/uidity, the bank should bear great loss
economically.The bank should be able to keep the li/uidity in balance.There are
certain criteria forwarded by 6epal ?astra bank,the central bank of 6epal by
which li/uidity position of each and every commercial bank as a individualistic
view as well as whole can be measured.&owever, the bank li/uidity can be
measured by the following ratiosD
1.!.-.1 Depo$it Inve$t"ent Ratio;
Ke can measure the li/uidity by the deposit investment ratio.The depository
deposit the cash in current,saving and fixed accounts.The bank receives the
most li/uid as deposits.The bank invests the capital collected by the depositors in
the various profitable and productive sector in the form of loan.By earning much
profit from it, the bank can get a lot of amount from the amount of deposit.The
bank has the nature of paying low interest to the depositors and taking higher
interest from the place it invested. And the bank canHt invest all the cash on
loan.A part from the deposit invested, the bank also has other cash.Ke can find
out the criteria of li/uidity from it,
1.!.-.! #iel' of Inve$t"ent ;
The criteria of measuring li/uidity in a bank depends on the type of assets which
the bank has made investment. The bank does not waste cash stock received
from different sources of capital.The bank can invest the money, it posses in
different types of assets.uch as house,land for the bank and other permanent
short of assets.+n such condition,the bank has low li/uidity because the
investment made in such nature of assets needs much cash.And the bank gain
income very low for such nature of assets.But in contrast to it, if the bank has
invested in the share of various companies, the investment in government
securities and treasury bills and in the debentures of different business
institution, bank li/uidity is abundant.+n this way, the investment that the bank
deed can be used the criteria of measuring li/uidity.
(i/uidity <osition of 6abil Bank
11
1.!.-.% Ca$h Re$e&ve Ratio;
The cash reserve ratio too can be taken as criteria of measuring bank
li/uidity.The commercial bank should maintain the cash reserve ratio as fixed by
the central bank and also should maintain the statutory li/uidity ratio, in its own
treasury. +t change from time to time.Ke can measure the bank li/uidity from this
too.
1.!.-.5 P&ofita(lit3;
+t is the another criteria for measuring banks li/uidity position.+n case of higher
profitability ratio, the li/uidity position will be higher whereas a lower profitability
ratio then the li/uidity will be lower.
1.!.-.0 Inve$t"ent in loan;
The bank distributes loans in different sectors.The source of loan investment is
important for the various source of income of the bank.+t is important to know
what sort of loan and how much loans the bank has distributed while the bank
distributes the loan.+f the bank is identified with the concept of gaining profit,the
bank flows loan on a long term and mid term basis.+f it has paid its attention to
the safety it invest in short term loan.+f a great deal of amount is invested in the
short term loan,the bank retains high li/uidity.+f it has invested in long term, mid
term, there is more li/uidity.Thus, loan investment too can be the criteria of
measuring the li/uidity.
1.!.-.. *t&uctu&e of (ank;
The organizational structure of a bank i.e. subCdivision branches too gives
speculation of bank li/uidity.+f the structure of the bank is in single nature,there is
higher li/uidity in the bank.+ f the banks have many branches li/uidity is lower
because the li/uidity remains scattered in different branches and sub branches.+n
this way, we can find out the bankHs li/uidity from the structure and the
organizational structure of a bank.
1.% P&o(le" I'entification
Though, many banks are being operated in different parts of 6epal.Thus exist
several problems,which are as followsD
i3 +n 6epal , the largest banks namely 6B (td. and ?BB are unable to earn
more profit as compared to !oint venture banks.o, low profitability is the
problem.
ii3 +n 6epal, corruption and reposition occur mainly in the public sector
banks.+n such banks loan are granted only if some benefits to the
concerned employees are granted.
iii3 The another problem is the existence of organized banks which include
money lenders, merchants and goldsmiths who do the lending business
under personal basis.
(i/uidity <osition of 6abil Bank
12
iv3 Another problem of banking in 6epal is traditional system.ome banks
namely 6epal bank (td. and ?astriya Bani!iya Bank still operate with old
lenders and in many branches.
v3 =any banks are still unable to maintain capital ade/uacy ratio in
accordance with the rule and regulation of 6?B as well as internal
standard.
vi3 The problem of banking in 6epal includes less investment in productive
sectors, repotism and favoritism over staffing concentration of banks in
city area, high li/uidity.
vii3 >ut through competition between commercial banks creat a lot of
problem.+n the other hand, it helps to increase the efficiency and
effectiveness of banks.But mostly it creates various problems if ever can
lead the bank to li/uidation.
1.5 *inification of the $tu'3
This is of field report writing mainly deal with the student.Through this type of
report writing fieldwork, students may enable to enchance their knowledge in the
field of problem, =arketing and public relation etc. And they able to deal with
such type of activities.+he main significance of the study are A
i3 To get desired data with some aspect of li/uidity by performing various
finanacial analysis.
ii3 To come to conclusion about the li/uidity position of 6abil Bank.
iii3 To find out the position of 6abil Bank.
iv3 To find out strength and weakness of 6abil Bank.
v3 To find out the marketing style and public relation of the bank.
1.0 )i"itation of the $tu'3
i3 The study only covers seven years beginning from ,55; to 7221.
ii3 There are many factors that effect li/uidity and valuation of firm.&owever
only related factor are taken to consideration in the study.
iii3 The study has been felt to be in ade/uate to some extent due to
availability of sufficient literature !ournals.
iv3 (ack of industry average ratios for comparision.
v3 @nly 6abil Bank (td.is taken.
vi3 @nly seven years trend is taken.
1.. Re$ea&ch =etho'olo3
?esearch methodology refers to the different techni/ues and tools under to make
the study significant and efficient.There are varieties of techni/ues and tools
available to accomplish the study.The financial analysis is ma!or tools.This
analysis is useful to reflect the li/uidity position of the concerned bank.
(i/uidity <osition of 6abil Bank
13
1...1 Re$ea&ch De$in;
?esearch design regers to the prospective method to accomplish the study to
fulfill the ob!ective of the study.The students have only secondary datas
available through the annual report published by the concerned bank.o, to get
desired result efficient, the interview and /uestions are most necessary process
for calculating, tabulating and interpretating.
1...! =etho' Anal3$i$;
*arious finanacial analysis tools have been used in this study.The analysis of
data will be done according to the pattern of data available.The relationship
between different figures related to study topic will be drawn out using ratio
analysis.The various calculated results are tabulated in a choronology order
under different heading which are later on compared with each other to interpret
the result.
1...% *ou&ce of Data;
The source of data means the place or materials from which the re/uired data
have been found.There are mainly secondary datas available for study i.e.the
main source of data is balance sheet of the concerned bank i.e. 6abil Bank from
,55; to 7221 has been used.
1...%.1 P&i"a&3 'ata $ou&ce;
The data which are originally collected by an investigator or an agent for the first
time, for the purpose of statistical en/uiry are known as primary data.The primary
data are collected personally through the /uestionnaries, observation and
interviewing method.These data highlight the real and fact information of 6abil
Bank (td.+n this report structured interview and unstructured observation method
were used.
1...%.! *econ'a&3 'ata;
The source of secondary data are those which has been collected by other
people.ome of the secondary data of 6abil BankHs annual report 0722-M24 to
72,,M,73 were used for making this report.
1...5 Population an' $a"ple
+n our country also there is mainly !oint venture bank have been established
when 6epal has also adopted the economic liberalize.Although there is many
!oint venture banks participating in banking business, to study about these all
banks can not be possible so sampling is re/uired to select one.The population
of !oint venture banks are as followsD
a3 tandard >hartered Bank 6epal (td.
b3 6abil Bank (td.
c3 6epal +ndosuez Bank (td.
(i/uidity <osition of 6abil Bank
14
d3 6epal +++ Bank (td.
e3 :verest Bank (td.
f3 &imalayan Bank (td.
g3 Bank of kathmandu (td.
h3 6epal Bank of >eylon (td.
1...0 Tool$ U$e'
8ifferent tools were use for analyseA
a3 )inancial Tools.
b3 >ash and Bank Balance 0exe. =oney at call to >8 ratio3A
N >ash and Bank Balance 0:xc.mMc3 x ,22I
>urrent 8eposit
c3 >ash and Bank Balance 0+nc. mMc3 to 8eposit 0:xc. )83 ratioA
N >ash and Bank Balance 0+nc. mMc3 x ,22I
8eposit 0:xc. )83
d3 >ash and Bank Balance 0+nc. mMc3 to Total 8eposit ratioA
N >ash and Bank Balance 0+nc. mMc3 x ,22I
Total 8eposit
e3 aving 8eposit To Total 8eposit ?atioA
N aving 8eposit x ,22I
Total 8eposit
f3 )ixed 8epsit To Total 8eposit ?atioA
N )ixed 8eposit x ,22I
Total 8eposit
g3 6?B Balance To Total 8eposit ?atioA
N 6?B Balance x ,22I
Total 8eposit
h3 >ash in &and to Total 8eposit ?atioA
N >ash in &and x ,22I
Total 8eposit
(i/uidity <osition of 6abil Bank
15
i3 =ean 0O3 N P O
n
0J3 N P J
n
!3 tandard deviation 0s.d3
Q N R P0OCO3
7
n
N R P0JCJ3
7
n
k3 >oefficient of variation 0c.v3
>.*. N Q x ,22
O
l3 #arl <earsonHs >orrelation coefficient
Pxy
r N
R Px
7
. P y
7
CHAPTER II
PRE*ENTATION AND ANA)8*I* O# DATA
!.1 Int&o'uction
(i/uidity <osition of 6abil Bank
16
The discussion and analysis section is the heart of the report. This is the section
in which data are presented and analyzed.The discussion of finding will normally
be the longest section of report to get desired ob!ectives described previously
ob!ectives of the study several analytical tools had been employed and used
research methodology and research design. This chapter is basically concerned
with presentation and analysis of datas.+n this chapter the effort had been made
to analyze the li/uidity position of the 6abil Bank.
:very presentation of the data follows its analysis so that can be drawn out and
future prediction can be initiated.)or the propose of the analysis simple method
of financial tools, ratio analysis and statistically tools, mean, standard deviation,
coefficient of variation are used.
!.! Ratio Anal3$i$
?atio analysis is widely used as a tool of financial analysis.+t is defined as a
systematic use of ratioHs to interpreted the financial statement so that the strength
and weakness of a firm as well as its historical performance and current financial
condition can be defined.
!.% Ca$h an' (ank (alance 1E4e. =7c 2 to cu&&ent Depo$it &atio
Ta(le No. 5
(NRs. In million)
8ea& 1 #82 Ca$h an' Bank Balance
1e4c."7c2
Cu&&ent Depo$it Ratio 1In ,2
722-M24 ,B,1.B 7BB1.B -4.B2
7224M2. -4;.4 7BBB.B 71.B4
722.M2; 5,2., 75B-.B B,.2,
722;M25 ;,2.; 75-.., 7..17
7225M,2 5,,.5 7.7B.2 BB.15
72,2M,, ,,1... B27-.2 B..51
72,,M,7 5,1., 7.7B.1 BB.--
Ave&ae %5.>/
0ource D 6abil bankHs annual reports3
(i/uidity <osition of 6abil Bank
17
#iu&e No. %
#iu&e No. 5
The above figure shows that there is fluctuation in cash and banks balance to
current deposit ratio.The ratio of the 6abil bank has decreased from -4.B2 in
7224M2. to 71.B4 in 722.M2;.Then after there is a fluctuation in the cash and
bank balance to deposit >8 ratio.
(i/uidity <osition of 6abil Bank
18
!.5 Ca$h an' Bank Balance 1inc. "7c2 to Depo$it 1E4c #.D.2
Ta(le No.0
(NRs. In million)
8ea& 1 #82 Ca$h an' Bank Balance
1Inc. "7c2
Cu&&ent Depo$it Ratio 1In ,2
722-M24 B.7-.7 4177., -;.2,
7224M2. B.;7.. .B44.B -,.B-
722.M2; --1,.5 5-;-.1 -..;,
722;M25 47;1.5 ,7,,5.. -,.;-
7225M,2 1555.B ,757B.; B;.4.
72,2M,, 1,47., ,,,;-., B..7,,
72,2M,7 B471.B ,252-.1 BB.77
Ave&ae 5..>.
0ource D 6abil bankHs annual reports3
#iu&e No. 0
(i/uidity <osition of 6abil Bank
19
#iu&e No. .
+n the fiscal year 722-M24 ratio has decreased from -;.2,I to -,.B-I and in
the fiscal year 7224M2. it has increased from -,.B-I to -..;,I The above figure
shows that there is fluctuation in the cash and bank balance to deposit.The ratio
in fiscal year 72,,M,7 was BB.77I which was the lowest.Thus, the bank has less
li/uidity then the previous year.But in the fiscal year 7227M2B the ratio is
B..7,,I.Thus, the bank has more li/uidity than the previous year.The bank has
more chance to fulfill the demand of depositors. The average ratio is 14.;4I.
!.0 Ca$h an' Bank Banlance 1Inc. "7c2 to Total Depo$it &atio
Ta(le No. .
(NRs. In million)
8ea& 1 #82 Ca$h an' Bank Balance
1Inc. "7c2
Total Depo$it Ratio 1In ,2
722-M24 B.7-.7 ;.B..- 17.47
7224M2. B.;7.. 5141.1 B5.5.
722.M2; --1,.5 ,7.;2,., 1B.B-
722;M25 47;1.5 ,-;B;.5 B5.4.
7225M,2 1555.B ,-B.2.4 B7.-B
72,2M,, 1,47., ,B1B... B2.54
72,,M,7 B471.B ,B127.1 7..21
Ave&ae %..0-
0ource D 6abil bankHs annual reports3
(i/uidity <osition of 6abil Bank
20
#iu&e No. /
#iu&e No.>
!.. *avin Depo$it to Total Depo$it Ratio
Ta(le No./
(NRs. In million)
8ea& 1 #82 *avin Depo$it Total Depo$it Ratio 1In ,2
722-M24 7-14.. ;.B..- 75.,-
7224M2. BB-7.4 5141.1 B-.17
722.M2; 1,-2.7 ,7.;2., B7.1.
722;M25 15,.., ,-;B;.5 B,.2B
7225M,2 1;;5.2 ,-B.2.4 B,.;,
72,2M,, -7B..1 ,B1B... B;.5;
72,,M,7 -11-.; ,B127.1 12.47
Ave&ae %5.!1
0ource D 6abil bankHs annual reports3
(i/uidity <osition of 6abil Bank
21
#iu&e No. -
#iu&e No.1+
The ratio of saving deposit to Total 8eposit are 75.,-I, B-.17I, B7.1.I,
B,.2BI, B,.;,I, B;.5;I and 1247I in fiscal year 722-M24, 7224M2., 722.M2;,
722;M25, 7225M,2, 72,2M,, and 72,,M,7 respectively.aving deposits in sort of
short term (i/uidity, which can be withdraw by deposits.(ower the ratio of aving
deposit to total deposit higher the li/uidity ratio.
(i/uidity <osition of 6abil Bank
22
!./ #i4e' Depo$it to Total Depo$it Ratio
Ta(le No.>
(NRs. In million)
8ea& 1 #82 #i4e' 'epo$it Total Depo$it Ratio 1In ,2
722-M24 7B,-.1 ;.B..- 74.15
7224M2. 725;., 5141.1 77.,.
722.M2; B,51.B ,7.;2., 71.5;
722;M25 B.,5.7 ,-;B;.5 7B.57
7225M,2 7114.; ,-B.2.4 ,-.57
72,2M,, 77-7.4 ,B1B... ,4..4
72,,M,7 715..2 ,B127.1 ,;.4B
Ave&ae !1.!/
0ource D 6abil bankHs annual reports3
#iu&e No.11
(i/uidity <osition of 6abil Bank
23
#iu&e No. 1!
The above figure shows that is fluctuation in fixed deposit to total deposit
ratio.The ratio from 722-M24 to 72,,M,7 are as follows D 7;.15I, 77.,.I, 71.5;I
7B.5BI, ,-.57I, ,4..4I and ,;.4BI respectively.
!.> NRB Balance to Total Depo$it &atio
Ta(le No.-
(NRs. In million)
8ea& 1 #82 NRB Balance Total Depo$it Ratio 1In ,2
722-M24 --5., ;.B..- 4.B5
7224M2. 752.1 5141.1 B.24
722.M2; -BB.B ,7.;2., 1.,.7
722;M25 -,2.7 ,-;B;.5 B.77
7225M,2 B44.B ,-B.2.4 7.B;
72,2M,, ;57.; ,B1B... 4.41
72,,M,7 121.5 ,B127.1 B.27
Ave&ae 5.1!.
0ource D 6abil bankHs annual reports3
(i/uidity <osition of 6abil Bank
24
#iu&e No.1%
#iu&e No. 15
The above table and chart shows that the ratio of 6?B Balance to total deposit
ratio from 722-M24 to 72,,M,7 are as followsA 4.B5I, B.24I, 1.,.7I, B.77I,
7.B;I, 4.41I, B.27I and 1.,74I respectively.
Thus the ratio in 7227M2B which is higher than the ratio of 722,M27 07.B;I3.This
shows that 6abil bank has dept less balance with 6?B and has utilized the
remaining cash balance in productive sectors.
(i/uidity <osition of 6abil Bank
25
!.- Ca$h in Han' to Total Depo$it Ratio
Ta(le No.1+
(NRs. In million)
8ea& 1 #82 Ca$h in han' Total Depo$it Ratio 1In ,2
722-M24 ,,7.- ;.B..- ,.7;
7224M2. ,7B.4 5141.1 ,.B,
722.M2; ,.;.5 ,7.;2., ,.B5
722;M25 ,;7.B ,-;B;.5 ,.,-
7225M,2 7;-.1 ,-B.2.4 ,.;4
72,2M,, ,-..4 ,B1B... ,.,4
72,,M,7 ,44.. ,B127.1 ,.7B
Ave&ae 1.%5
0ource D 6abil bankHs annual reports3
#iu&e No.10
(i/uidity <osition of 6abil Bank
26
#iu&e No. 1.
The above table and chart shows that the ratio of cash in hand to total deposit
from 722-M24 to 72,,M,7 are as followsA ,.7;I, ,.B,I, ,.B5I, ,.,-I, ,.;4I,
,.,4- and ,.7BI.respectively.
!.1+ *tati$tical Anal3$i$
>alculation of mean, standard deviation,coefficient between cash and bank
balance 0:xc. mMc3 and Total deposit.
Ta(le No.11
Jear
0 )J3
>ash and
Bank
Balance 0O3
Total 8eposit
0J3
xN OCO
0OC5B5.43
x
7
yN JCJ
y
7
xy
722- ,B,1.B ;.B..- B.1.. ,12122.25 0B5;,.B3 ,-;-2.15.45 0,15,.5B.,,3
7224 -4;.4 5141.1 0B.,3 ,B.41, 0B7-1.13 ,2-5,,,5.B4 ,72.B;7.1
722. 5,2., ,7.;2., 075.-3 ;.2.7- 4,.B B.-..45 0,;2;.B-3
722; ;,2.; ,-;B;.5 0,7;.;3 ,4-;5.11 B,72., 5.B-271.2, 012,;4;.;;3
7225 5,,.5 ,-B.2.4 07...3 .4..75 74-,.; .2B721B.71 0.B1-1.;43
72,2 ,,1... ,B1B... 72;., 1BB2-. 4, .,;.5 -,4;,..7, ,1542B.25
72,, 5,1., ,B127.1 07-.143 41;B7, 4;B.4 14.B2;.54 0,.121.143
P ON4-...- PJN;52B,.4 Px
7
NB1277,.;5 P y
7
N11,54;72.,4 P xyN0475B11.,43
=ean
+t is the sum of all observation divided by the number of observation or
value.=ean is the arithematic average of total observation or values.
Average >.B.B 0O3 N PO .
n
N 4-...-
.
(i/uidity <osition of 6abil Bank
27
N 5B5.4
Average T.8 0J3 N P J
n
N ;52B,.4
.
N ,7.,;.;
Therefore, the average of cash L bank balance of 6abil bank (td.,for the last
seven year is 6?s.5B5.4 million and the average of total deposit of 6abil bank
(td. is 6?s.,7.,;.; million.
*tan'a&' 'eviation 1$.'2

Q 0T83 N R P0JCJ3
7
n
N R 11,54;72.,4
.
N 7-,7..B
Q 0>BB3 N R P0OCO3
7
n
N B1277,.;5
.
N 772.14
Therefore,the standard deviation based on cash and bank balance of 6abil bank
(td. for the last seven year is 6?s.772.14 million and standard deviation of total
deposit of 6abil bank (td. is 6?s.7-,7..B million.

Coefficient of @a&iation
The coefficient of variation of despersion based on standard deviation multiplied
by ,22 is known as the coefficient of variation 0c.v3.+t is independent of unit.
>.*. T8 N Q 0 T8 3 x ,22
O
N 7-,7..B x ,22
,7.,;.;
N ,5..-I
>.*. >BB N Q 0 >BB 3 x ,22
(i/uidity <osition of 6abil Bank
28
J
N 772.14 x ,22
5B5.4
N 7B.14I
The coefficient of variation measures the consistence 0variation3 of the
observation with reference to above calculation, there is uniformity in the change
of cash and bank balance as compared to the total deposit because coefficient of
variation of cash and bank balance 07B.14I3 is more than the coefficient of
variation of total deposit 0,5..-I3.
Aa&l Pea&$onB$ co&&elation (et:een ca$h an' (ank (alance 1E4e. =7c2 an'
total 'epo$it
@ne of the widely used mathematical methods of calculating the correlation
coefficient between two or more than two variables is #arl <earsonHs correlation
coefficient.+t is also known as <earsonHs correlation. +t is denoted by $r% or simple
SrH and is defined byA
Pxy
r N
R Px
7
. P y
7
The value always lies between G, and T, .T, denotes the perfect correlation
between the two variables and T, denotes negative correlation between two
variables.
Pxy
r N
R Px
7
. P y
7
C475B11.,4
N
R B1277,.;5 x 11,54;72.,4
N C475B11.,4
B;..4;-.4B
N C2.,4775;
The value of correlation shows the degree of relationship between the two or
more than two variable. The negative correlation C2.,4775; shows the negative
relationship. &ence, the correlation between cash and bank balance and total
deposit of 6abil bank (td. is negative.
CHAPTER III
(i/uidity <osition of 6abil Bank
29
*U==AR8 AND CONC)U*ION
%.1 *u""a&3
6epal is one of the less developed countries of the world for most of the
developing process. +t is financial depend on the foreign countriesAit is
economically too week in 6epalese banking industries.
=odern commercial banks make the economy always alive and smart to run and
maintain day to day commercial economic and banking transactions.+n short
banking transactions help a country to develop its economy swifty.+t there were
systematic and scientific programs for economic and scientific developments
countries like 6epal would have developed if its economy as much as those
countries which have development like might have been perhaps narrowed
down.
At present commercial banks including !oint venture banks are operating in
6epalese +ndustry.+t is remarkable fact that any country cannot have a developed
economy in the absence of modern banking system.Because any development
works needs a sufficient capital and lack of sufficient capital is also one of the
main reason as to why 6epal has been backward for developing its economy.
o it is very important to find out whether or not the banks are serving an
important contribution to developed different sector of the economy.(i/uidity is
aid to be the general business of fund, which shows the banks ability to meet
cash re/uirements.+n this record, this study has been based upon the ob!ective to
evaluate the li/uidity position of 6abil bank (td.
%.! =aCo& #in'in$
The ma!or findings of this study are as follows A
The cash and bank balance to current deposit ratio is BB.--I in 722BM21.
The cash and bank balance 0+nc. mMc3 to deposit 0:xe. )ixed deposit3 is
BB.77 in 722BM21.
The cash and bank balance 0+nc.mMc3 to total deposit ratio is 7..21 in
722BM21.
The saving deposits to total deposit ratio is 12.47 in fiscal year 722BM21.
The fixed deposit to total deposit ratio is ,;.4B in fiscal year 722BM21.
The 6?B balance to total deposit ratio is B.27 in the financial year
722BM21.
The cash in hand to total deposit ratio is ,.7B in the financial year 722BM21.
%.% Conclu$ion
(i/uidity <osition of 6abil Bank
30
Thus banks play vital role for the country.+t should utilize the resources of the
country and its people in the proper way making all the policy properly.General
activities and management and commercial banks directly effect the economic
development of 6epal.
By the study of a li/uidity position of the 6abil bank (td.,the current deposit of the
financial year is less then the precious year and its ratio is decreased from B..51
to BB.--.The ratio of cash and bank balance 0+nc. mMc3 to deposit 0:xc. )83 is
decreased from B..7,,I to BB.77,the cash and bank balance 0+nc. mMc3 to total
deposit ratio is decreased from B2.54I to 7..21I, the saving deposit is more in
precious year than current year, 6?B balance to total deposit ratio is decreased
from frevious year and the ratio of cash in hand to total deposit is increased from
the year 7227M2B 0,.,4I3 to 722BM21 0,.7BI3.
%.5 Reco""en'ation
ome suggestion and recommndation forwarded on the basis of the study are A
:conomic condition of the country is deteriorating, there is danger in
slacking of the business and industial activities.o, the bank should be
interested only in collecting huge amount of deposit by increasing the
interest rate.
@ther than shareholders annual report, the bank should publish and
distribute booklets containing detail information about its activities and
percormance as well
The bank should follow the discipline and adopt directions of 6epal ?astra
bank.This helps to maintain harmonious relationship between other !oint
venture banks as well.
>onsidering the present economic condition of the country, the banks
should play pivotal rales for the economic development of the
country.They should promote balances regional development by finanacial
funds in remote areas and other priority sections.
&igh interest rate is tool to attract customer, which effent the collection of
fund.The cash deposited by the customer are li/uid asset,which help to
maintain ade/uate li/uidity position of bank.
6abil bank should broaden its basic operational areas other than banking
like agrifulture, industry, financial sectors etc.
Government, 6?B and commercial banks should take necessary steps to
form and regulate banking habit of 6epalese people especially people of
rural areas.
BIB)IO9RAPH8
(i/uidity <osition of 6abil Bank
31
1. <rof. G8 <ant, >haudhary A.#. Business Statistics and Mathemetics.
072-; B..3
2. Annual Report of Nabil Bank from fiscal year 722; to 72,7.
3. Bankin ! financial statistics. G 6?B mid !uly 72,7
". #ommercial Bank Act 2$31% C6?B.
&. Bhandari 8illi ?a!, 'rinciples ! 'ractice of Bankin !
(nsurance,Fan.72,, :dition.
). <radhan, ?adhe hyam% Manaement of *orkin #apital, 6ew 8elhiA
+. Gupta .<., Statistical Method.
,. 6ational Book @rganization,,5;4.
-. #hadka, her Fung%Anal.sis of /inancial Ratio% #athmandu +nstitute of
=anagement,T.9.
1$. <ant, <rem ?a!. /ield0ork Assinment And Report *ritin.
0,
st
:dition 722-3
(i/uidity <osition of 6abil Bank
32