1

CHAPTER-I
INTRODUCTION

1.1 Meaning and Nature of the Study

Bank is an institution which deals with money and credit. It accepts deposits from the
public and mobilizes fund to productive sector. It also provides remittance facility to
transfer money from one place to another.

The term Bank is oriented from the French word "banque' and the Italian word "Banco"
which means a bench for keeping, lending and exchanging of money or coins in the
market place by money lender and money exchanger. Bank is a business establishment
that safeguards people's money uses it to make loan and investments, People keep their
money in banks rather than at home for several reasons. Money is safer in the bank than
at home.

Generally bank accepts deposit from business institutions and individuals which is
mobilized into productive sectors mainly business and consumers lending. Bank is
therefore known as a dealer of money. At present context, Bank is not only confined to
accepting deposits and disbursing loan. In addition to this a bank may be engaged
currency, joint venture, underwriting , bank guarantee, discounting bills etc. In short the
term ‘Modem Bank‘ refers to an institution having the following features :

1. It deals with money it accepts deposit and advance loans.

2. It also deals with credit; it has the ability to create credit by expanding its liabilities.

3. It is commercial institution ; it aims at earning profit.

Banks are the principle sources of credit for millions of individual and family and for
many units of the governments. They are among the most important financial institution
in the economy. More over for small local business ranging from grocery stores to
automobiles dealers, banking is often the major source of credit to stock the shelves with
merchandise.
 2

Bank grants more installment loans to consumers than any other financial instition. Bank
is a financial intermediary accepting deposits and granting loans. It offers the Widest
menu of services of any financial institution. In fact a modern bank performs such a
variety of function that it is difficult to give a precise and general definition of a bank. It
is because of this reason that different economist's give different definition of the Bank.

As per Kent - "A bank is an organization whose principle operation are concerned with
the accumulation of the temporally idle money of the general public for the purpose of
advancing to other expenditure."

As per C.R. Crowther - "A banks collects money from those who have it into spare or
who are saving it out of their incomes and it lends this money to those who require it."
The commercial bank Act 2031 "A commercial bank is a bank which deals in exchanging
currency, accepting deposits giving loans and doing commercial transaction."

In conclusion we can say that bank is an institution which accepts deposits from the
public and in turn, advance loan to business and personal customers. It is financial
institution which provides wide range of banking services such as saving, credit payment,
remittance etc. Hence, a bank may be called financial supermarket providing all kinds of
monitory service which is necessary for the industrialization and economic development
of the country.

1.2 Profile Event and Activities of Nepal Bank

Nepal Bank Limited is one of the most popular commercial in Nepal. Nepal Bank
Limited is first bank of Nepal under the segment of Commercial Bank Act. Nepal Bank
Ltd has been established with the objectives of extending professional banking services to
various section of society in the kingdom of Nepal and there are contribute in the
economic in the economic development of the country.

Nepal Bank Ltd has been established with the objectives of extending, professional
banking services to various section of society in the Kingdom of Nepal and there are
 3

contribute in economic development of the country. PNB is providing the top

management service to the under a technical services agreement signed between the two
institutions. Nepal Bank has the advantage of banking expertise and financial strength of
the Joint venture.

Services Provided By the Nepal Bank

NEPAL BANK has followed its believe that the high quality customer services is a
perquisite for the progress of the bank on sustained basis. Hence, NEPAL BANK has
provided the following services.

1. Branch Services

Almost all the branches of NEPAL BANK have been connected with anywhere Branch
Banking System i.e. a person who has an account in any Branch of NEPAL BANK is
enabling to do their transaction from any branch. NEPAL BANK has started 365 days
banking from one of its prime branch located at New Road. Also, draft in India currency
on any Punjab National Bank Branch can be transferred in competitive ratio. Limited
banking services are being rendered on holidays also from the valley branches.

2. Accepting the Deposit

The view point function of commercial bank is to accept deposit. In the same way
NEPAL BANK as a commercial bank has services to accept deposit. Deposits are
accepted by NEPAL BANK in many ways -like:

 Current Deposits
 Fixed Deposits
 Call Deposits
 Saving Deposits
 Unfixed Deposits
 Cumulative Deposits
 Recurring Deposits
 4

 Margin Deposits
 Miscellaneous Deposits

3. Agencies Services
On this ground NEPAL BANK perform the following services:

 Issuing the letter of credit, circulate note, bank draft, travelers cheque, etc
 Dealing with the transaction of foreign exchange business.
 Purchase and sales of different types of securities, remittance of fund.
 Serving as an agent of correspondence on behalf of the client.
 Collection & Payment of cheque, bills, promissory notes, coupons, etc.
 Dividends & other types of bonds.
 Acting as executers.
 Keeping valuable articles in safe custody.

4. Loan Services
The following are the loan services provided by NEPAL BANK :

 Overdraft
 Short term Loans
 Direct Loans i.e. with collateral
 Financial Advisory
 Housing Loan
 Education Loan
 Vehicles Loan
 Loan against mortgage
 Loan against shares
 Professional Loan scheme
 Home equity loan
 NEPAL BANK property plus
 5

Currently the bank is providing its services through a Wide network of 18 branches
across the nation and over 250 correspondents across the globe. All the major branches of
the bank are connected through anywhere branch banking system (ABBS), a facilities
which enables a customer to do a banking transaction from any of the branches
irrespective of their having account in their other branches. The bank is association with
Smart Choice Technology (SCT) is providing ATM services to its customers, NEPAL
BANK Nepal Bank it card can be accessed at more than 50 ATM’s and over 500 points
of sales across the nation. The bank is also managing the SCT ATM at Tribhuvan
International Airport for the convenience of its customers and the travelers, the first & the
only bank in Nepal to place ATM outlet at the Airport. NEPAL BANK is playing pivotal
role in facilitating remittance to and from across globe. Being the first Nepalese Bank to
open a representative office in Delhi, India, the Nepalese in India can open a/c in Nepal
from the designated branches of Punjab national Bank and remit their saving
economically through banking channel through Nepal. With an aim to facilitate the
remittance of Nepalese Citizens working abroad the bank has entered into arrangement
with renowned bank and exchange companies across the globe.
The bank recognizes the value of offering a complete range of services. The bank is
pioneered on extending various customer friendly products such as Home loan, NEPAL
BANK property plus, and Home equity loan against life insurance policies and loan for
professionals. NEPAL BANK has always endeavored in delivering innovative product
suiting the customer’s requirements and needs thus enriching enabling and beautifying
their lives.

1.3 Statement of the Research Question

This study attempts to answer the following research question
 What is the position of NEPAL BANK Ltd’s profits, loan and deposits over the
different period ?
 How is the relationship between loan and deposits ?
 How is the liquidity position of Nepal Bank Ltd ?
 What is the NEPAL BANK Ltd’s turnover different period ?
 6

1.4 Objectives of the Study

The basic objective of this study is to examine and evaluate the financial performance of
“Nepal Bank Limited”. To achieve these prime objectives, the followings objectives are
also considered in this study.
 To examine the financial statement of the bank and analyze them to see the
financial soundness of the bank.
 To recommend and suggest the bank for their performance.

1.5 Significance of the study

This case study is important for the following reasons :
 To increase the knowledge of student in banking field.
 To practice what we study theoretically.
 This project report is also helpful to general readers who want to know about the
bank.
 To provide information to customers of the bank.
 This project report may help in many was as some suitable suggestion has been
provided here.

1.5 Research Methodology

The research methodology is the process of coming to the solution of the problem
through planned and systematic dealing with the collected analysis and interpretation of
the facts and figures. As this field study is entirely related with the operation performance
of NEPAL BANK Ltd, so only the needed and useful research methodology has been
used, for the pmpose of achieving the objectives, the below mentioned methodology
purposed to follow. It includes research design nature of data, data gathering procedure,
presentation and analysis technique..
 7

Research Design:-

The analysis of this study is based on certain research design. To accomplish any type of
research and to fulfill the objectives of the study, a well-set research design is necessary.
This study is followed on analytical as well as exploratory research design.

For the analytical purpose, the annual report published by the bank and other data has
been collected from different sources, published on different years. Period cover only five
fiscal years.

Sources of Data:-

This case study is primarily based on secondary data that were provided by the NEPAL
BANK Ltd. It include mostly the prospectus of the company and audited annual report
that contain balance sheet and profit and loss a/c. The other additional information has
been collected from various sources.

Data Processing Techniques:-

The collected raw data have been properly presented in tables, charts, diagram and
graphs. The raw data were processed to the simple looking observation with the help of
simple bar diagram, pie charts etc.

Method of Analysis :-

The data’s that were gathered from different sources converted into number of financial
ratio and various statistical tools have also been used. The required financial tools for this
study are as follows:

 Statistical tools.

 Ratio analysis.

The significance of these tools has continuously been elaborated along with the
presentation and analysis of data.
 8

1.7 Limitation of the Study

This case study has the following limitations :

 Only the NEPAL BANK is taken in study.

 The study is confined to evaluate financial performance NEPAL BANK Ltd.

 The truth of research result is based upon the available data form the bank.

 The study covers fortnightly period only.

 Past five years trends is taken in study.

 Within a limit of time, in addition to being regular in the class, it is quite difficult
to manage for the project work. Hence, a sufficient time could not be spending in
course of collecting information.

 Sometimes the uncooperative behavior of the bank is also creating difficulty in

preparing report.

 Report, preparation costs have to beard by student themselves. Cost is accrued in

every steps of preparing report and it is difficult to spend such a huge amount for
the students.

 Only some statistical methodology has been considered for computation or

analysis of data.

1.8 Organization of the Study

The report is organized in three chapters. Each unit has a clear thematic contain and the
same entire three chapter together present the overall report on the topic.

This study will be divided into three chapters as follows:

 9

Chapter One deals with the subject matter of the study. The outline of the research is
presented in the chapter. The whole research will be based on the introduction chapter. It
deals with general background of the study, statement of the problems, objectives of the
study, Importance of the study, limitations of the study and organization of the study. It
includes a discussion on the conceptual framework on relative topics or previous studies.

Chapter Two explains the Research methodology used to evaluate the data and
information regarding this research. It consists of research design, source of data,
population and sample statistical tools and Graphical tools and it also includes limitation
of the study. It is the main part of the study which fulfills the objective of the study by
presenting data and analyzing them with the help of various tools as per methodology. In
this chapter, descriptive analysis of the gathered data and information using statistical as
well as financial tools is carried out. In this chapter, major findings of the study have
been conducted based on primary and secondary data.

Chapter Three includes the Discussions and conclusion of the study. This chapter deals
with the summarization of the study and gives recommendations for implications of such
report and improvement in the related field.
 10

CHAPTER-II

RESULT AND FINDING

2.1 Data Presentation

This study is done to examine the financial performance of NEPAL BANK Ltd. For this
propose financial tools have been massively used. As a financial tool ratio analysis has
been the major tool in the research. Basically, the research questions have been answered
relying upon the secondary data.

At different places, where it was necessary, the statistical diagram has been used to bring
out the clear picture of the analysis. Specially, these diagram are concerned with the
position of profit, loan, deposit, income, expenditure and fixed assets etc.

Also the tabulation and pie chart is used as the major diagram. Beside the statistical tools
like correlation has been used to so the relationship between the loan and total deposits.

2.2 Position of the Profit under Different Fiscal Years

Table No: 2.1

Years Profit (Rs) Cumulative Profit

2018/19 85347446 246582648

2019/20 94180428 340763076

2020/21 143566683 484329759

2021/22 170807797 655137556

2022/23 240504554 895642110

Source:- Audited Annual Report of “NEPAL BANK Ltd”

 11

The above table shows the profit and cumulative profit made by NEPAL BANK during
the different fiscal year. NEPAL BANK made joint venture ship with PNB of India,
which helped for huge transaction in trade of India with Nepal. PNB is providing it is
own management to this bank will be continued in future.

Figure No. 1

Position of the Profit under Different Fiscal Years

1000000000

900000000

800000000

700000000

600000000

500000000 Profit (Rs)

Cumulative Profit
400000000

300000000

200000000

100000000

0
2018/19 2019/20 2020/21 2021/22 2022/23

As we can see in the figure no.1: the profit position of the “NEPAL BANK Ltd” is in
increasing trend from 2018/19 to 2022/23. It shows that NEPAL BANK has been table to
earn profit yearly. It also shows that the financial performance of NEPAL BANK is In
increasing trend.
 12

2.3 Under different Fiscal Years

Table No: 2.2

Fiscal Years Deposit Amount Increase Increase %

2018/19 5466609805 ------- -------

2019/20 6694963060 1228353255 22.47%

2020/21 8063902086 1368939026 20.44%

2021/22 10097690989 2003788903 19.84%

2022/23 12154450860 2056759880 20.37%

Source:-audited annual report of NEPAL BANK Ltd

The table no. 2 represents the position of deposit over different years. Deposit is the main
source of the commercial bank. They generally yield profit playing with deposit fund
from the public. Public starts to deposit their money in such banks when they have ful
faith upon banks. As in above table and bar diagram, the amount of deposit has rising
trend, so it represents good behavior of banks personal towards the customers, efficient
management in the bank, well managed liquidity position and so on. Hence We can
conclude that the bank has succeeded on winning the market.
 13

Figure No: 2

Position of Deposit

Deposit Amount
14000000000

12000000000

10000000000

8000000000 Deposit Amount

6000000000

4000000000

2000000000

0
2018/19 2019/20 2020/21 2021/22 2022/23

In the above figure no. 2 we can see the position of deposit under different fiscal years.
Likewise of the profit position of the NEPAL BANK is also increasing in each year. The
deposit amount in the fiscal years (FY) 2018/19 it‘ has been increase by 22.47% as
compared to FY 2019/20, likewise again it has been is increase by 20.44%,
19.84%,20.37% in FY 2020/21, 2021/22, 2022/23 respectively.

The NEPAL BANK is able to collect more deposit due to the investment of deposit in the
different sector so that it can earn more profit and give the different service to the
customers.
 14

2.4 Position of Total Loan Issued Over Different Period

Table No: 2.3

Fiscal Years Total Loan Increase Increase % Cumulative%

2018/19 3948478042 ------ ----- -----

2019/20 4908460647 959982605 24.32% 24.32%

2020/21 5884122609 975661962 19.87% 44.19%

2021/22 7618671476 1734548867 29.47% 73.66%

2022/23 9518572454 1899900978 24.94% 98.60%

Source:- Audited Annual Report Of NEPAL BANK

The above table shows the position of total loan issued over different years by NEPAL
BANK Ltd. The bank has issued its loan on different heading like hire purchase,
construction, long term loan, export loan, import loan, etc. It signifies that the bank has
been expanding its network since its establishment. The trend of issuing loan is
increasing each year. In the second year it as been increased by 24.32% as compare to
first year. Likewise in third, fourth, and fifth years the loan has been increased by
19.87%, 29.47%, and 24.94% respectively.

Figure No: 3
 15

Total Loan Issued by "NEPAL BANK Ltd" in Different Fiscal Years

Total Loan
12000000000

10000000000

8000000000
Total Loan
6000000000

4000000000

2000000000

0
2018/19 2019/20 2020/21 2021/22 2022/23

From the figure no: 3 we can see the total loan issued by NEPAL ,_BANK in different
fiscal years. The loan issue has been gradually increasing order in past fifth years.

2.5 Position Fixed Assets

Table No: 2.4

Fiscal Year Gross Fixed Depreciation Net Fixed Asset

2018/19 121038478 32563889 88474589

2019/20 156780648 50194793 106585855

2020/21 178074610 67642097 110432513

2021/22 212778606 86977019 125801587

2022/23 298552450 91675420 206877030

Source:- Audited annual report of NEPAL BANK Ltd

 16

From the above table we can see the position of fixed asset of NEPAL BANK in the
different fiscal year. The fixed asset of bank generally comprised furniture, office
equipment, vehicles and others miscellaneous. The table clearly indicates that the bank
posses heavily depreciated assets. The amount of investment on fixed assets in increasing
each year. As per discussion it has become clear that bank has followed reducing balance
methods at the rate and methods prescribed in the schedule 2 of the income tax act, 2058.
Previously it was being calculated as per the methods prescribed by the income tax rules.

Figure no: 4

350000000

300000000

250000000

200000000
Gross fixed Asset
Depreciation
150000000 Net fixed Asset

100000000

50000000

0
2018/19 2019/20 2020/21 2021/22 2022/23

In the figure no: 4 the position of fixed assets and its depreciation is given in the different
fiscal years. From the figure we can analyzed that both Net fixed assets and depreciation
is in increasing trend. We know as the value of fixed assets increase the depreciation will
also increased.
 17

2.6 Major Findings

The following points found as a Findings while observing the financial performance of
Nepal

Bank Ltd.

1. As a result the bank has financial soundness in its financial performance.

2. The return over the equity has found the bank is in proper management in financial
decision.

3.The liquidity position of the bank is satisfactory condition.

4. The bank has proper position in profit, deposit loan issued and fixed assets etc.
 18

CHAPTER-III

SUMMARY, CONCLUSION AND RECOMMENDATION

3.1 Summary

The role of the bank has paramount significance in the economic development of the
country. Along with government participation there should be equal participation from
private and public sector to perform development activities to enhance the performance
of the bank in Nepal. This case study is done to evaluate, observe purpose “Nepal Bank
Ltd” has been taken into consideration.

NEPAL BANK has been established with the objectives of extending professional
banking service to the various section of society in the kingdom of Nepal and by
contribution in the economic development of the country. The had come into formal
operation from 1951 A.D. NEPAL BANK is joint venture with PNB, one of the largest
commercial bank of India having over 3700 branches and more than 200 foreign
correspondents around the globe. In Nepal NEPAL BANK have 20 branches all over the
country.

This study had observed the liquidity position, profitability position, net assets position,
profit loan and deposit, return over shares and finally the turnover situation etc. The study
is highly based in the secondary data available by bank.

We can summarize the position of financial performance of NEPAL BANK from our
chapter 3 in the following way.

3.1.1 Position of the profit

If we view the table no. 1 and figure no. 1 in chapter 3 the position of profit is increasing
in every fiscal years. There is highest profit is in FY 2019/20 i.e. 240,504,554 as
compared to other fiscal years. This trend shows that bank is in profitable condition and
has good performance.
 19

3.1.2 Position of Deposit

Deposit is the main source of the commercial bank. They generally yield profit playing
with deposit fund from the public. In‘ table no. 2 and figure no. 2 we can see that the
amount of deposit is in rising trend in the FY 2021/22 it is maximum i.e. l2,l54,450,860.
So, it represents good behavior of banks personal towards the customers, efficient
management in the bank, well managed liquidity position and so on. Hence we can
conclude that the bank has succeeded on winning the market.

3.1.3 Position of Loan

The trend of issuing loan is increasing each year if we see the table no. 3 and figure no. 3
NEPAL BANK issued highest loan in the FY 2022/23 i.e. 9,518,572,454 comparing the
past five fiscal years.

3.1.4 Position Fixed Assets

The fixed assets of bank generally comprised furniture, office equipment's (Especially
computers), vehicles and other miscellaneous. If we see the table no. 4 and figure no. 4
the amount of investment on fixed assets in increasing each year but the bank posses
heavily depreciated assets. In FY 2021/2022 the bank invests highest assets i.e.
206,877,030 than in other fiscal years.

3.2 Conclusion

This report has been prepared as per the requirement of Tribhubhan University regarding
the subject of banking and insurance. I have chosen financial performance of “NEPAL
BANK Ltd” situated as Hetauda for the purpose of the case study. Base on my study I
have found following conclusion.

 Bank has been successful in maintaining good profit.

 Earning per share has also been in increasing trend.

 20

 The total deposit position of the bank shows that bank has been successful in
winning the trust of the customer as the volumes of deposits is increasing is being
higher every year.

 There is moderate degree of positive correlation ship between the total deposit
and loan issued.

 Bank has provided loan and both productive as well as Nepal bank productive
sector for short, medium and long term.

 The turnover of the bank has also been satisfactory.

 Bank has been successful in recovery of the issued in land timely, which is quite
clear form the income generated by the bank.

3.3 Recommendation

Bank’s overall performance seems to be satisfactory. It has highly expanded its network
by issuing loan massively. It may create problem to the bank if it fails to recover the loan
in time. Issuing of short-term does not carry more risk to the bank but issue of long-term
carries more risk. The issue of more long term loan as compared to short term loan May
sometime lead to bankruptcy. These factors should be taken into consideration and
optimum portfolio management technique should be adopted. The present situation of the
bank regarding loan issuing policy raises the question whether the bank can really
recover is loan or not. If it fails due to its policy, what answer its executive’s will?

 Provide to its shareholders and customers.

 Loan should be provided against marketable collateral.

 Besides, it will better of the bank to play with short-term loan rather than long-
term loan.
 21

BIBLIOGRAPHY

Basu A.K., Fundamentals of Banking theory & practice, 1962

Bajracharya, Dilli Raj, Banking and Insurance, 2055

Hriday Bir Singh, Banking & Insurance, Revised 4th Edition 2009, Asia Publication,
Kathmandu.

Hodgman, DR. Commercial Bank Loan and Investment Policy,l979

Bhandari, Dilli Raj (2003), Banking & insurance principle & practice, Ayush Publication,
Kathmandu.