1

CHAPTER

INTRODUCTION

1.1 Background of the study

Discussing about the history of banking development, we can’t forget the bank of
Casa de san Giorgio in Genoa, which was established in 1128 A.D, bank of Venice
was established in 1157 and the bank of Genoa was established in 1128. In 1201, the
bank of Barcelona was established in Barcelona, In fact modern bank started to take
rapid speed in forming and functioning from 17th century. During this period Bank of
Milan, Bank of Florence and Bank of St. George were established in Genoa. In 1609,
the Bank of Amsterdam was established in Holland, like wise in 1610 Bank of
Hamburg was established in Germany and Bank of England was established in
England (Bhandary, 2003). The people or organization want to save their money in
their own bank account is called deposit. Deposit is the main source of fund. Many
years ago, few people deposited their money at the bank, but now days it is going in
increasing order. Looking to the past period there were only few banks and people
had no idea of doing saving. Nepal bank limited is the first commercial bank of
Nepal. It was established in 1994 B.S (11/15/1937), but due to the lack of guidance,
regulation, promotion and supervision people didn’t believed in it. At this period
people are more encouraged to save the money for the future. (Boland, Vincent (12
June 2009)).
Prabhu bank limited has been taken for the study in the field of total deposit
mobilization Prabhu bank is the depository institution which motivates people to
deposit their money in on their different account, people or any organization want to
save their money in their own account. Deposit is the main source of fund. In case of
defining commercial bank we can find different statement from different person. A
commercial bank is the financial institution which collects saving from many persons
and institution and provides credit or loan facility to different industrial and
commercial business. Commercial banking business consists of changing cash into
bank deposit and bank deposit into cash and transferring from one person to another.
 9

The term bank originated from Latin word “Bencus” which refers to the bench on
which the bankers would keeps its money and his records. Some believe that it has
been originated from Italian word “banco” which means a bench for keeping, lending
and exchanging of money or coins in the market place by moneylenders and money
changers. Bank is established for the custody of money received from or on behalf of
its customer and its essential duty is to pay their draft on it, its profit arise from its
used money from those who have it spare or who are saving it out of their money and
lands this out to those who require it. (Thomas DeMichele Published - September 18,
2016)
According to Bank of England “A Bank is a financial institution that accepts deposit
from the public and creates credit (Rulebook Glossary. 1 January 2014. Retrieved 13
July 2018)
The first commercial bank in Nepal, Nepal Bank Limited (NBL) was established in
the year 1994 B.S. This is a major milestone in the history of Nepal as the country
entered into official financial system. After the nineteen year of establishment of
NBL, the Nepal Rastra Bank (NRB) was established in the year 2013 B.S. Rastriya
Banijya Bank and Agricultural Development Bank ltd. were established in the year
2022 B.S and 2024 B.S respectively. Seven more banks were added in the decade
after 2041 B.S. Only four commercial banks were established from the period of 2051
B.S. There are mainly two reasons for it. In this time period the country saw the
sluggish economic growth due to Maoist insurgency. The second reason being the
reluctance on issuing license by the regulatory body, the NRB.
After the Maoist insurgency came to an end in the year 2063 B.S. at least one
commercial bank was established every year till the year before the last year. The
banking industry, like other sector, recognized growth in the absence of ongoing
conflict. However, this sector was also not immune from poor governance, corruption
and scandals. The government owned banks were the most affected ones due to the
direct political interference in the banking activities. Also there were not much of the
commercial or privately owned banks at that period. The knowledge about the banks
 9

wasn’t spread the people were also uneducated. Thus, the political system had
adversely affected the development of banking sectors.
The number of banks was declining due to the monetary policy of the fiscal year
2074, which required commercial banks to have paid up capital of at least Rs. 8 Arba
at the end of Ashad. This short time frame given to quadruple, the paid up capital will
force bank to merge with each other creating fewer commercial banks in the coming
year. Although, banks can be categorized into different types on the basis of its
function, objectives etc. The word “Bank” will always be synonymous with the
commercial bank its function.
In Nepal, as per the latest data from Nepal Rastra Bank (NRB) there are 27
commercial banks operating successfully.

1.2 Profile of Prabhu Bank Limited

Prabhu bank limited was founded in the year 2006 with a view and objective of
extending professionalized and efficient banking services to various segment of the
society. The bank has gone through various phase of its growth trajectory over a short
period of its existence. Growth of Prabhu bank was phenomenal, especially after the
merger of Grand Bank Nepal Limited, Kist Bank Ltd, Prabhu Bikash Bank Ltd,
Gaurishankar Development Bank Ltd and Zenith finance Ltd, in 2016, attaining the
status of “A” class financial institution licensed and regulated by the central bank of
Nepal, Nepal Rastra Bank. NRB’s governor Dr Yuba Raj Khatiwada inaugurated the
merged entity within sometime at the former Kist Bank’s headquarters Babarmahal.
These banks had received the final approval of merger from NRB on August 6 and
from the office of company registrar on August 12. All the four companies had
endorsed the proposal of merger and integrated operation from their respective annual
general meetings (AGMs) held on June 14. The swap ratio as per the DDA is 97.31
for Kist, 107.31 for Prabhu, 107.31 for Gauri Shankar, and 92.31 for Zenith. The
Bank has completed years of journey since the inception and has accommodated
seven different financial institutions in its making.  The bank has a network of 196
Branches, 35 Ext. Counters and 152 ATMs across the country, making it premier
 9

private bank in terms of geographical reach and clientele segments with customer
base of above 1,000,000.
Prabhu Bank VISA Credit Card enables wider access to more than 400,000 ATMs
and 2.5 million Point of Sales (POS) terminals in Nepal, India & Bhutan. All the
branches of the bank are connected through Anywhere Branch Banking System
(ABBS), which enables customers for operational transactions from any branch, with
a mission to become the leading commercial bank in Nepal by providing the finest
quality financial products and services to our customer; Enhance our shareholder’s
value, contribute to the economic prosperity of the country and to create continuous
learning and growth opportunities for the customers. And with a vision to support
individuals, families and businesses to attain financial independence and improve
their financial wellbeing.

1.3 Statement of the Problem

Though the banking system is making much progress, the progress has been set with
the problems and hindrances and another pressing problem is under the developed
country, lack of banking habit in people. This report is conducted to find out the
answers of the following research questions:
 What is the relationship between deposits collection and distribution with
trend?
 What type of deposit schemes are provided to the public?
 What is the trend of deposit mobilization towards investment, loan and advances
and investment of its projection for next 5 years?
1.4 Objectives of the Study
The main objective of this report is to analyze the trend of deposit collection and
mobilization of Prabhu Bank Limited. The study intends to present a brief and clear
picture of deposit and its utilization. The specific objectives are as follows:
 To find out the relationship between deposits collection and distribution with
trend.
 To study the trend of deposit schemes provided to the public.
 9

 To analyze the trend of deposits mobilization towards investment, loan and

advances and investment of its projection for next 5 years.

1.5 Significance of the Study

According to the NRB research report banking and financial institutions are
contributing around 10% to its national GDP. Mainly, this study covers the deposit
and credit portion of PBL. So it helps to reveal the financial position of the bank and
the study occupies an important role in evaluation of overall banking activities of
Prabhu Bank Limited. The significance of the study is:
 This study is important to know how well the bank is utilizing its deposit.
 It is important for investors, customers and personnel of bank to take various
decisions regarding deposits and loan and advances.
 This study may encourage the researchers to research further.
 This study is important for banks to make policies based on recommendation and
suggestions.

1.6 Research Methodology

The research methodology is the process of arriving to the solutions of the problems
through planned and systematic dealing with the collection, analysis and
interpretations of facts and figures. As the research entirely considers about the
“Deposit Analysis of Prabhu Bank Limited”. The main purpose of the study is to
show the deposit and its mobilization in financial sectors. It consists of brief
explanation of research design, nature and source of data, methods of data collection
and methods of tools used for analyzing the data.

Research Design
Research design is a plan, structure and strategy of investigation conceived so as to
obtain answer to research questions and to control variances. It is the arrangement of
conditions for the collection and analysis of data in manner aiming combining
relevance to the research purpose with the economy on procedure. Considering this
study objectives, descriptive and analytical research design has been adopted. Most of
 9

the data and information of the study were related to the past phenomena. Hence it
can be considered as historical research.

Sources of Data
Any information or facts collected through records, observation and measurement is
known as data. The first work of research is data collection. For a deep study of
subject matter, the collection of data relating to the subject is essential. Collecting a
data is not an easy task. The investigator has to face various problems of obtaining or
gathering the direct information or data. While collecting the data, the purpose of data
collection, time and expenses for the data collection are to be considered. Basically
this study is related to secondary data and its sources are explained hereunder:

Secondary Data
The data which were originally collected but obtained from some published or
unpublished sources are secondary data. The secondary data includes annual report,
balance sheet, prospectus, annual general meeting and unpublished records, journals
magazines, government and university publications, NRB as well as the computerized
database.

Population and Sample

A population is entire collection of all observation of the interest for the research.
After the selection of subjects or problem for the study, it is very costly and time
consuming for the study of universe (Entire Population). Thus, to make easier to the
study, representative portion of population is selected that is known as sample.
Since, this study is focused on banks; here the population encompasses all the 27
commercial banks functions its operation within the country. Since, study of whole
population may not be possible due to several factors, thus, sampling becomes
essential to draw inference for the population. Among 27 banks one bank that is
Prabhu Bank Limited has been selected by using convenient sampling method to
analyze the total deposit mobilization of Prabhu Bank Limited.
 9

Tools and Techniques of Data Analysis

The thesis will cover and include the financial and statistical tools and techniques to
analyze the data on order to reach the conclusion of research. In order to get the
concrete result from this research, data are analyzed by using different types of tools.
As per the topic requirement, covariance, coefficient of variance, financial analysis,
average, percentage, bar diagram, pie charts etc are used.

Financial Tools
Financial analysis is the process of identifying financial strength and weakness of the
organization by properly establishing the relationship between the items of balance
sheet and the profit and loss account. The different ratio analysis has been used to
study the deposit collection policy of Prabhu Bank Limited with their respective
formula:
 Net profit to total deposit ratio = NPAT / Total deposit
 Total working fund = total deposit + borrowing
 Credit to total deposit = Loan and advances / Total deposit
 Interest expenses to total deposit ratio = Total deposit expenses / Total deposit
 Saving deposit to total deposit ratio = Saving deposit /Total deposit

Statistical Tools
Various statistical tools related to this study will be drawn to make the conclusion
more reliable according to the available financial data. For this arithmetic mean, bar
diagram, etc is used.

Techniques of Analysis
A pilot study is a strategy used to test the questionnaire using a smaller sample
compared to the planned sample size. In this phase of conducting a survey, the
questionnaire is administered to a percentage of the total sample population or in
more informal cases just to a convenience sample. It is trial collection of the data to
detect weaknesses in design and provide proxy data for selection of a profitability
sample. This strategy is based on secondary data. So, study is not necessary, pilot
study is only useful to primary data as questionnaire.
 9

1.7 Limitation of the Study:

Every research has its own limitations. The main focus of this study is to point out
the financial position and its analysis of banking sectors. So the conclusion is based
on the available financial statement which might not be perfectly correct in reality.
However, following are the limitations of the study:
 This report is only based on secondary data.
 Limited time period for the collection of data.
 The accuracy of the research work will be dependent on the data provided by
concerned bank.
 This study covers only five fiscal years.

Report Structure
This report is organized on three chapters, the three chapters consider:
Chapter 1: Introduction, This chapter includes the background of the study,
introduction, and statement of problem, objective of the study, type of data
collections, tools and techniques of analysis, research methodology and limitation of
the study, finally organization of study.
Chapter 2: Results and Analysis, This chapter includes the presentation of data and
analysis of the data that specify the finding of the study.
Chapter 3: Discussion, Conclusion and Implication, in this chapter, discussion,
conclusion and implication are made.
 9

BIBLIOGRAPHY

Books:
Prem P.R., (2016) Fundamentals of Business Research Methods, Kathmandu. Buddha
Academic Enterprises.
Adhikari, D.R & Bhandari, D.R (2016) Entrepreneurship & enterprise development,
Kathmandu, Ashmita’s publisher & distributor (P) ltd.
Poudel, R.B Baral, K.J, Joshi, P.R Gautam, R.R and Rana, S.B (2016), Fundamentals
of Corporate Finance, Kathmandu: Asmita Publications.
Websites:
https://en.wikipedia.org › wiki › Prabhu_Bank
https://www.sharesansar.com › company › prvu
https://www.google.com/search?rlz=1C1CHBF_enNP836NP836&ei=qRUDXrcozL-
BBt6FreAF&q=links+of+prabhu+bank&oq=links+of+prabhu&gs_l=psy-
ab.1.0.33i160.9553.22421..25183...0.2..3.354.6273.1j3-19......0....1..gws-
wiz.....0..0i71j0i67j0j0i131j0i131i273j0i273j0i131i67j0i10j0i22i30j0i22i10i30j33i22i
29i30.IK2c1yQzJjY#