LENDING POSITION OF EVEREST BANK LIMITED OF KATHMANDU

A Project Work Report

By:
BISHAL SUBEDI
Exam Symbol No.: 9260009
TU Registration No.: 7-2-926-101-2016
Texas International College

Submitted To:
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for The Degree of

BACHELOR OF BUSINESS STUDIES(BBS)

Kathmandu, Nepal
December, 2020

i
 DECLARATION

I hereby declare that the project work entitled "LENDING POSITION OF

EVEREST BANK" submitted to the Faculty of Management, Tribhuvan University,
Kathmandu is an original piece of work under the supervision of Mr. Shankar Nepal,
faculty member, Texas International College, Kathmandu and is submitted in partial
fulfillment of the requirements for the award of the degree of Bachelor of Business
Studies(BBS). This project work report has not been submitted to any other university or
institution for the award of any degree or diploma.

.....................................

Signature:
Bishal Subedi
Date:

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 SUPERVISOR’S RECOMMENDATION

The project work report entitled "LENDING POSITION OF EVEREST BANK"

submitted by Bishal Subedi of Texas International College, Kathmandu, is prepared
under my supervision as per the procedure and format requirements laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirements for the
degree of Bachelor of Business Studies (BBS). I, therefore, recommend the project work
report for evaluation.

Signature:
MR. SHANKAR NEPAL
TEXAS INTERNATIONAL COLLEGE
Date:

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 ENDORSEMENT

We hereby endorse the project work report entitled "LENDING OF EVEREST

BANK" submitted by BISHAL SUBEDI of TEXAS INTERNATIONAL COLLEGE,
KATHMANDU in partial fulfillment of the requirements for the Bachelor of Business
Studies (BBS) for external evaluation.

Signature: Signature:
Mr. Shankar Nepal Mr. Bhesraj Pokhrel
Management Research Committee Campus Chief
Texas International College Texas International College
Date: Date:

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 ACKNOWLEDGEMENTS

To acknowledge all the persons who had helped for the fulfillment of the project is not
possible for any researcher but in spite of all that it becomes the foremost responsibility
of the researcher and also the part of research ethics to acknowledge those who had
played a great role for the completion of the project .To bring out this project a successful
one I have received help from various sources. Firstly I acknowledge my wholehearted
thanks to my principal Bhesraj Pokhrel, Texas International College. It gives us a great
pleasure to express my sincere and deepest sense of gratitude to Mr. Shankar Nepal for
suggesting the topic of this thesis, his ready and able guidance throughout the course of
this management thesis .Thanks for his strong support not only in academics but also in
my daily life. I learned a lot from him. He made a lot of effort in checking my writing. I
am greatly indebted to him for his constructive and helpful suggestion from time to time
during the progress of this thesis and without which this project would never have been
completed. I am also thankful to those personal who gave their valuable time in giving us
the necessary data and especially to my respectful teachers Mr. Bibek Bashyal and
Ramesh Bhattarai to make the thesis successful.
I am also grateful to all the staffs of Everest Bank limited and Securities Board of Nepal
for providing the information and necessary data sincerely and timely and other all staffs
of the library and administration of Texas International College and central library of
Tribhuvan University (T.U). I would like to thank all the BBS classmates and BBS
students at Texas International College for their encouragement and friendship and for
providing me valuable suggestions. I dedicate this thesis, my first official academic
paper, to my parents. Given the amount of their love, support, encouragement, and
expectation, I should write and dedicate more and better papers to them.

Bishal Subedi
Texas International College

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 TABLE OF CONTENT

CONTENT PAGE NO
Title Page i
Declaration ii
Supervisor's Recommendation iii
Endorsement iv
Acknowledgement v
Table of Contents vi
List of Table ix
List of figures x
Abbreviation xi

CHAPTER I
INTRODUCTION
1.1 Background of the study 1
1.2 Profile of Organization 2
1.3 Objective of the study 9
1.4 Rationale 10
1.5 Review of Literature 11
1.6 Research Methodology 18
1.7 Limitations of the study 21

CHAPTER II
RESULTS AND ANALYSIS
2.1 Data presentation 22
2.2 Analysis of Results 44
2.4 Findings 46

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 CHAPTER III
DISCUSSION AND CONCLUSION
3.1 Summary 48
3.2 Conclusion 49
BIBLIOGRAPHY 51
APPENDICES 52

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 LIST OF TABLES

Table No Title Page No

Table 1 Total Business of Bank 23
Table 1.1 Position of Total Shareholders fund 24
Table 1.2 Position of Deposit 25
Table 1.3 Position of Loan and advances 26
Table 1.4 Position of Income 27
Table 1.5 Position of Operating Profit 28
Table 1.6 Position of Net Profit after Tax 29
Table 1.7 Position of Total income 30
Table 2 Analysis of Loan and Advances by product 31
Table 3.1 Total Loan and Advances to Total Business Ratio 34
Table 3.2 Total Loan and Advances to Total Deposit Ratio 35
Table 3.3 Interest Income to Total Loan and Advances 36
Table 3.4 Net Profit to Total Loan and Advances 36
Table 3.5 NPAs to Total loan and Advances 37
Table 4 Total Assets to Total Liabilities Ratio 39
Table 5 Loan and Advances to Total Assets Ratio 40
Table 6 Loan and Advances to Total Deposit Ratio 42
Table 7 Loan and Advances to Shareholders Equity Ratio 43
Table 8 Correlation between Total Deposit and Loan and Advances 44

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 LIST OF FIGURES

Figure No Title Page No

1.1 Position of Total Shareholders fund 24

1.2 Position of Deposit 25
1.3 Position of Loan and Advances 26
1.4 Position of Income 27
1.5 Position of Operating Profit 28
1.6 Position of Net Profit after Tax 29
1.7 Position of Total Business 30
2 Analysis of Loan and Advances by Product 32
3.1 Total Loan and Advances to Total Business Ratio 34
3.2 Total Loan and Advances to Total Deposit Ratio 35
3.3 Interest Income to Total Loan and Advances 36
3.4 Net profit to Total Loan and Advances 37
3.5 NPAs to Total Loan and Advances 38
4 Total Assets to Total Liabilities Ratio 39
5 Loan and Advances to Total Assets Ratio 41
6 Loan and Advances to Total Deposit Ratio 42
7 Loan and Advances to Shareholders Equity Ratio 43

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 ABBREVIATIONS

NBL Nepal Bank Limited

NRB Nepal Rastra Bank
EBL Everest Bank Limited
NPR Nepalese Rupee
PNB Punjab National Bank
ATM Automated Teller Machine
ABBS Any Branch Banking System
LIP Life Insurance Policy
BBS Bachelor in Business Studies
PSUs Public Sector Undertakings
SME Small and Medium Enterprises
EBIT Earning Before Interest and Tax
F/Y Fiscal Year
SWOT Strength, Weaknesses, Opportunities, Threats
LC Letter of Credit
NIAT Net Income after Tax
IT Information Technology
LTD Limited

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xi
 CHAPTER I
INTRODUCTION

1.1Background of the Study

The term ‘Bank’ is derived from Italian word ‘Banco’ which means a counter table or
bench used by medieval money exchanges. The banking system in Nepal is a recent
phenomenon which began only in 1996 BS as Nepal Bank Ltd. Was incorporated
under NBL act 2012 after transferring 51% of share to government.
Banks are among the most important financial institutions in the economy of the
country. Bank is a business establishment that safeguards people's money and uses it
to make loans and investments. A bank is an organization concerned with the
accumulation of the idle money of the general public for the purpose of advancing to
others for expenditure or investment. A bank is the institution, which accepts deposits
from the public and in turn advances loans by creating credit.
Banks are the institutions that provide the funding required starting the business to those
with skills and desire to operate the business collecting from those with the money but no
skill or time to operate the business. Bank is a resource of mobilizing institution, which
accepts deposit from various sources, and invests such accumulated resources in the
fields of agriculture, commerce, trade, and industry. In other words, banks are the
institutions offering deposits subject to withdrawal on demand and making loans of a
business nature. Banks offers wide range of financial services like credit, saving,
payment service etc.

It has been seen that the origin of banking was from the ancient time. Although at that
time the banking activities were not in systematic way but banking activities used to hold
from that time. It has been said that the lending and borrowing are as old as money itself
Banking is now an essential part of our economic system. Modern trade and commerce
would almost be impossible without the availability of suitable banking services.

1
1.2 Profile of the Organization

Everest Bank Limited (EBL) which was established in 1994 with a view and objective of
extending professionalized and efficient banking to various segments of the society.
Everest bank limited is a joint venture with Punjab National Bank, India and is a
consistently growing commercial bank of Nepal. The Bank has been rendering
professionalized and efficient banking services to various segment of the society through
its widest domestic network and many correspondents across the globe. Deriving strength
from joint -venture partner, it has been steadily growing in size and operation and has
established itself as one of the leading private sector bank of the country. The Bank has
recorded commendable performance with consistent growth in net-worth and profit
having one of the lowest non-performing assets in the industry. The bank is a symbol of
consistency strength and dependability in the Nepalese Banking Industry.

Everest Bank provides customer-friendly services through its widest network all
connected through core banking solution, which enables customers for operational
transactions from any branches. The bank has 98 Branches, 7 Province Offices, 124
ATMs, 31 Revenue Collection counters and more than 9000 payout agents across the
country making it a very efficient and accessible bank for its customers, anytime,
anywhere.
Owing to its strong credibility, Everest bank has been authorized to collect revenue of
Nepal Government through its 31 revenue collection counter spread across the country. It
is the only private sector commercial bank handling all kinds of accounts of Nepal
Government and having special counter inside Singhadurbar. Everest Bank is responsible
for collecting more than 50% of the total government revenue of our country.
Catering to more than 4 lakhs customer today, the bank has been one of the leading banks
of the country and has been catering its service to various segments of the society since
then. With clients from all walks of life, the bank has helped develop nation corporately,
agriculturally and Industrially.
Joint Venture Partner
Punjab National Bank (PNB), the joint venture partner (holding 20% equity) is one of the
largest nationalized bank in India. With its presence virtually in all important centers in

2
India, PNB offers a wide range of banking services which include corporate and personal
banking, industrial finance, agricultural finance, financing of trade and international
banking. Currently bank has been rendering its service with nearly 7,000 branches and
more than 9,000 ATMs spread all across the India out of which about 62% branches are
in rural and Semi-Urban areas. As a joint-venture partner, PNB has been providing top
management support to EBL under Technical Service Agreement.
Vision
To be a leading Commercial Bank with Pan Nepal presence and become a household
name, providing wide range of financial products and services under one roof.
Mission
Growth through Banking for all
Motto
Consistent in term of Performance and Growth
Strong in terms of its System and Procedures
Dependable in terms of Return to all Stakeholders
Strategic Focus
The bank has set itself the following broad goals:
 Mobilize Deposits through Current, Savings, Term and Call Deposit accounts and
other instruments.
 Grant loans and advances with special thrust on Productive as well as the Retail
Segment.
 Provide Treasury Services following best international practices.
 Facilitate cross border payment services so as to strengthen remittance inflow.
 Provide custody services.
 Provide cash management services and insurance products and other financial
planning services.
 Provide any other service businesses that NRB prescribes from time to time.
Awards and Achievements
 The bank was conferred with the "Best Managed Commercial Bank" by NEWBIZ
BUSINESS Award 2019.

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  The bank was declared second Best Managed Commercial Bank by Abhiyan
National daily in 2018.
 KAROBAR national daily adjudged Everest Bank as number 2 Bank under
CAMELS rating in 2018.
 The bank was conferred with the "Best Managed Commercial Bank" by ASIAN
PAINT NEWBIZ Award 2013.
 The Bank was acknowledged as the "Highest Tax Payer among Commercial
Banks" by Nepal Government for F/Y 2068/2069.
 The bank was adjudged as "Number 1 Bank" under CAMELS rating conducted
by KAROBAR national daily in 2012.
 The bank was conferred with "Bank of the Year 2006, Nepal" by the Banker, a
publication of Financial Times, London.
 The bank was bestowed with the "NICCI Excellence Award" by Nepal India
Chamber of Commerce for its spectacular performance under finance sector.
Pioneering Achievements
 Recognizing the value of offering a complete range of services, the bank
pioneered in extending various customer friendly products such as Home Loan,
Education Loan, Vehicle Loan, Professional Loan etc.
 Everest Bank is one of the first banks to introduce Any Branch Banking System
(ABBS) in Nepal.
 Everest Bank has introduced Mobile Vehicle Banking service (Bank on Wheel) to
serve the segment deprived of proper banking facilities through its Birtamode
Branch, which is the first of its kind.
 Everest Bank has introduced branchless banking system first time in Nepal to
cover unbanked sector of Nepalese society through biometric machine.
 Everest Bank is first bank that launched e-ticketing system in Nepal using which
customers can buy tickets (Airline, Movie etc) through internet.
 Everest Bank has introduced online payment of NTC mobile/PSTN/ADSL bill or
from the counter as well.
 Everest Bank is the first bank to introduce agro-specialized branch "KRISHI
UDHYAM BIKASH SAKHA" at Rajbiraj.

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  Everest Bank has introduced Cash Deposit Kiosk for the first time in Nepal
through which the Customers can deposits Cash conveniently.
 Everest Bank introduced "FREEDOM Savings Account" which allows a mirror to
operate their account independently which is the first of its kind in Nepal.
 Reckoning the importance of digitization in banking system, the bank has
established E-lobby at its Head Office premises.

1.2.1 An Overview of Loan Management

Commercial Banks perform a wide variety spectrum of functions. Loan management is
the most critical factor in determining the strength of any bank. Primary factor that can be
considered as the quality of loan portfolio, mix of risk assets and credit administration
system. However, advancing loan is one of their major function. Bank loans contribute a
lot to the growth of new business, which ultimately improved the economic health of the
country. The role of Bank loan in the economic development of the country is of great
value. Normally Bank loan in four forms name overdraft, cash credit, direct loan and
discounting bills of exchange. Loans and advances constitute a major portion of the assets
of a Bank and the interest income earned from loan and advances is a major contributor
to a Bank's profit. In the loan asset of the Bank turns out to be non-performing or least
liquid, the Bank cannot obtain the targeted return from loans and advances.
1.2.1.1 Major loan products of Everest Bank Limited
A. Major Retail Loan
1. Home loan
Everest bank aims to fulfill the dream of its customers to own a house by providing home
loan in an attractive interest rate. It provides a complete financial assistance for the
construction and purchase of house/apartments, Repairs/renovation/additions/alternation
to the house/flat and purchase of land for the customers to help turn their dream into
reality.
2. Vehicle Loan
Owning a vehicle has been made easier and convenient with Everest Vehicle Loan.
Everest bank aids to purchase car /van/jeep/Multi Utility Vehicles/Sports Utility Vehicle

5
(non-commercial purpose only) for individual and business concerns at an attractive
interest rate with repayment upto 7 years.
3. Education Loan
Everest bank provides loan facilities to help students to achieve their ambition to pursue
higher education in Nepal as well as abroad. Everest education loan covers Admission
Fee, Books and Stationery, Instruments required for the course undertaken by the
borrowing scholar, Monthly fees/Tuition fees, Examination fees, Caution
deposit/building fund/refundable deposit supported by Institution bills/receipts. Any other
expenses required completing the course like study tours, project work, thesis etc.,
Boarding and lodging expenses. Repayment shall start one year after the completion of
study by the borrower or one-month after getting employment whichever is earlier.
The interest shall be regularly paid on monthly/quarterly basis. After the completion of
the course, the principal shall be payable in maximum 84 equal monthly installments.
4. Loan against Life Insurance Policy
EBL has policy of Advancing against the security of Life Insurance Policies(LIP). It
considered in individual cases on merits after ensuring the following:
 There are no encumbrances on the relative policy.
 The age of the assured stands admitted in the book of the respective companies.
 Premium is paid up to date.
Companies approved for allowing advance against LIP
 Rastriya Beema Sansthan
 National Life Insurance Company Ltd.
 Life Insurance Corporation (Nepal) Ltd.
 Metlife Insurance Company Ltd.
 Nepal Life Insurance Company Ltd.
B. SME Loans
Small and medium enterprises are backbone of any developing economy. They are
considered as important engine room for creation of employment and enhancement of
economic growth. With an aim to promote SME development in country, Everest Bank
Ltd. provides SME loan up to Rs. 5.00 Crores with an attractive interest rate. All three
sectors of economy; manufacturing, trading and service sectors can avail SME loan for

6
financing working capital and fixed assets. The bank has already set up dedicated SME
Cell in February 2019 to provide special attention to this segment by formulating
innovative loan products and streamlining procedures.
C. Agricultural Loan
Loan for undertaking various agricultural/allied activities for production (credit required
for raising crops, short term credit for allied agricultural activities)/investment and other
activities as define by NRB to meet the credit and consumption requirements of the
farmers.
 Cereal and cash crops, vegetable and fruit cultivation, floriculture and herbs
production.
 Post harvesting (storage of food crops).
 Livestock, Poultry, fishery and insects keeping.
 Animal husbandry/Slaughter house.
 Irrigation and irrigation equipment (all culverts, canals, hand pump, captive
generator, roar pump), pipelines, pumps etc.
 Agriculture tools and machinery. (Tractor, Thresher, harvester, modern plough,
hoe, cultivator, rotovator, tiller and other motor or manually operated agricultural
equipment).
 Infrastructure/sheds for livestock/birds/fishery etc.
 Infrastructure for agro farming with special technology i.e. tunnel
farming/sprinkle irrigation etc.
 Cold storage construction and management.
 Other activities defined by NRB under agricultural sector from time to time.
D. Major Corporate Loan
1. Working Capital Finance
The bank provides working capital finance to trading firms, industries and other business
entities by assessing current assets and liabilities. The business can draw up to the limit
determined by the drawing power which is appraised on a regular basis.
Bank offers working capital finance to meet short-term fund requirement for managing
the day to day operation of the business. Bank's working capital finance is extended to
meet the different demands from all segments of industry, trade and the service sector.

7
Assistance is extended by way of Fund based and Non-Fund Based facilities to business
entities and public sector undertakings (PSUs). Funded facilities include Overdraft,
Demand Loan, Bill Discounting, etc. Non-funded instruments comprise Letters of Credit
as well as Bank Guarantees to cover advance payments, bid bonds, performance bonds,
etc.
2. Project Finance and Infrastructure Finance
Bank provides fund based and non-fund base credit facilities for new project as well as
expansion, diversification, and modernization of existing projects in Infrastructure and
Non-Infrastructure Sector.
Some of the Major Areas of Project Finance and Infrastructure Finance:
 Power Sector including Renewal Energy Projects in Solar and Hydro Power.
 Aviation Sector
 Telecommunication
 Manufacturing Unit - Cement, Steel, beverage, pipes, poultry/cattle feed, etc.
 Hotels/Resorts
 Hospitals
3. Trade Finance
Through an extensive global network that aid domestic and international transaction, the
bank facilitates export and import in local and foreign market through offering facilities
like LCs, SWIFT transfers and Guarantees etc. The bank also offers Trust Receipt, Pre-
shipment and Post Shipment loans as a part of import/export finance.
4. Consortium Finance
We have been arranging financial closure for Capital Intensive Projects like Hydropower,
Manufacturing industries, Hospital, Airlines, Hotels etc. under our lead. We are open to
exploring of such possibilities of finance as a lead as well as member bank in the future
as well.

1.2.2 Statement of the problem

Banking plays a significant role in the economic development of the country by lending
credit to the people. Although banking industry in Nepal is making remarkable progress
and growth, it's not without the problems. At the present context, the main problem faced
8
by the business sector as well as bank is the unstable political and economic condition of
the country.

Loan is the major source and building better lending position is the major strategy of
every commercial bank. It is necessary to access the appropriate loan management in
commercial bank for performance effectiveness. There is lack of scientific and empirical
research that could identify the issue of loan management of commercial banks. In this
regards the performance of Nepalese commercial bank is to analyzed in terms of their
credit.

Another problem faced by the banking industry is the income verification of the
customer. The success and prosperity of a bank relies heavily on maximization of lending
loans and interest returned from it. Nepalese people do not take the concept of lending
loans seriously. Lending typically occurs in the form of loans. Banks and credit unions
are the most common lenders, but there are variety of options for potential borrowers.
Sometimes the borrower cannot pay their loans or pays before the time which makes the
bank to bear loss of the certain interest. Prices of property like land and building moves
up and down while making a long term cycles.

The present study will try to analyze and examine the practice of lending loans to the
other organization or people of Nepal. This study specially deals with the following
problems.

 Whether or not the lending loan affects the growth of the bank?

 What are the main problems faced by bank while developing and implementing the
policy of lending loans?

 Is there an appropriate environment for bank loan?

 What is the relationship between loans and advances and the net profit?
 What are the future strategies to improve better creditability?

1.3 Objective of the Study

The basis objective of this study analyze the lending position and its effects on the risk
and returns of the Everest Banks in the context of Nepal. The specific objectives are
given below:
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  To analyze the effect of lending position on the growth of Everest Banks in
Nepal.
 To evaluate the lending pattern of Everest Bank during last 5 years.
 To identify the current problems faced by Everest Banks in lending the money
and provide suggestion on the basis of findings for further transactions.
 To evaluate the contribution of loans given by Everest Banks to the country
 To identify the measures for controlling loan risk in Everest Banks.

1.4 Rationale
In the context of Nepal, there is less availability of research works, journals and
articles in the field study concerning the lending position of Everest bank as well as
other financial institutions. As it is a well known fact that the banks can affect the
economic condition of the whole country, the effort is made to highlight the lending
policy of Everest banks expecting that the study can balance the proportion of the
development of both individual and government. On the other hand, the study would
provide information to the management of the bank that would help them to take
corrective action to optimize the value of the bank by using optimal loan structure.
This study can provide information to the shareholders and the public on the
proportion of lending loans. This study will provide information regarding different
beneficial to the general public and student to get the information. After studying
lending strategy, it will give the clear information of lending position of the Everest
Bank Limited.
The following are the few points, which throw lights on the importance of this thesis.
 As a business student, it is a golden opportunity to show skill in financial
analysis; this report will show the intelligence and skill of the student. This
report is a criterion for evaluation of the student's qualification.
 This thesis will provide student an experience in financial analysis.
 This thesis will provide information to the student as to how the business house is
running.
 This thesis might be useful for those who are willing to know something about the
loan management in Bank.

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1.5 Review of Literature

The review of literature is a crucial aspect because it denotes planning of the study. The
main purpose of the study is to find out what works have been done in the area of the
research problem under study. In this chapter, an attempt has been made to review some
of the basic literature pertaining to the lending policy. The relevant literature and articles
were reviewed from international journals and national publications availed from various
libraries and institutions.

It is believed that the review of literature is helpful to show the needs of the research
work and to justify the work. It gives more information and description of the related
theoretical aspects. It tries to clear the conceptual thought and bank related terms.
This topic represents an overview of the currently available literature that is relevant for
this research project. Before giving details regarding the research methodology used in
the study, it is appropriate to present a brief overview of the research articles, case
studies, and books written on this particular topic. The area of study may be within the
country.
Literature review we examine the previous research work in the area and identify the
existing relationship among the variables. It helps the researcher to highlight the gaps
between the research works. The basic purpose of this form review is that the researcher
should examine what has been written previously and learn from the earlier work in the
area. Here the researcher had collected different reports prepared by different people in
the same topic and to compare with his/her research. The researcher has collected the
objective and findings of their report.
Lending loans play an important role on banks profitability since part of banks revenue
generate from the loans from which interest is derived. However, loan risk may be
serious threat to the performance of banks. There are several studies done regarding the
lending loans management in financial institutions regarding the several dimensions.
Lending is the action of allowing a person or organization the use of a sum of money
under an agreement to pay it back later. Granting loans is one of the main sources of
income in all banks and also sources of credit risk. Therefore, the management of the risk
related to that loans affects the profitability of the banks. The indicators of loans:
profitability, business credit, personal credit, liquidity, cash flow coverage ratio and

11
business health, which are the main indicators used to assess the soundness of the
banking system.

1.5.1 Conceptual Review

Lending (also known as "financing") in its most general sense is the temporary giving of
money or property to another person with the expectation that it will be repaid. In a
business and financial context, lending includes many different types of commercial
loans. Lending and borrowing are the same transaction from the two viewpoints.
"Lending is a core function of a bank which contributes significantly to its profit. Banks
lending activities are generally governed by certain principals. Since the lending activities
involve the depositor's money which is repayable on demand .Bank adheres to principal
of safety and security, risk diversification, liquidity, profitability and loan purpose".
In finance, a loan is the lending of money from one individual, organization or entity to
another individual, organization or entity. A loan is a debt provided by an organization or
individual to another entity at an interest rate, and evidenced by a promissory note which
specifies, among other things, the principal amount of money borrowed, the interest rate
the lender is charging, and date of repayment.
A loan entails the reallocation of the subject asset for a period of time, between the lender
and the borrower. In a loan, the borrower initially receives or borrows an amount of
money, called the principal, from the lender, and is obligated to pay back or repay an
equal amount of money to the lender at a later time. The loan is generally provided at a
cost, referred to as interest on the debt, which provides an incentive for the lender to
engage in the loan. In a legal loan, each of these obligations and restrictions is enforced
by contract, which can also place the borrower under additional restrictions known as
loan covenants.
Although this article focuses on monetary loans, in practice any material object might be
lent. Acting as a provider of loans is one of the principal tasks for financial institutions
such as banks and credit card companies. For other institutions, issuing of debt contracts
such as bonds is a typical source of funding.
The banking sector is an indispensable financial service sector supporting
development plans through channelizing funds for fruitful purpose, mobilizing and

12
controlling flow of funds from surplus to deficit units and supporting financial and
economic policies of government. The success of banking is assessed based on profit
and quality of assets it possesses.
Even though bank serves social objective through its priority sector lending, mass
branch networks and employment of many people, maintaining quality asset book and
continuous profit making is important for banks continuous growth. Bank loans are
one of the most important long-term financing sources in many countries. In some
developed countries like Japan, long term bank loans represent more than 70% of its
total long-term debt.
Though lending is the primary activity of the bank, they are very cautious in granting the
loans to their clients because their funds are collected from the general public in the form
of deposits that can be withdrawn at a short notice at any time. For this, the provided loan
and investment should be secured for easy recovery not only backed by fixed collateral
securities. This shows importance of managing lending activities for success and profit.
Lending activities are guided by certain principals like principal of safety and security,
principal of liquidity, principal of risk diversification, principal of profitability and
principal of purpose of loan. Moreover, Bank balance sheet position shows how
effectively management has been able to manage the granting of loans to borrowers. In
order for the bank to secure the risks with lending, research suggests that lending
decisions are based on figures in the balance sheet and income statements (Berry &
Robertson, 2006; Deakin & Hussain, 1994). Such reliance on accounting data requires (i)
a set of company documents compiled according to quality standards and (ii) that the
information available should allow an assessment of present and future financial standing
of the company (Berger and Udell, 2006). Every act of lending by a bank automatically
creates the deposits that will balance it.
Income and profit depends on lending and investment procedure. Moreover lending and
investment are important not only for bank but also to the overall economic development
of the country. Every bank has its own lending policies. Lending policies provides
guidelines for loan officers for granting loans.

13
1.5.1.1 CONCEPTUAL FRAMEWORK
Lending is the principle business activity for most commercial bank. The loan is typically
the largest assets and the predominant source of revenue. As it is one of the greatest
source of risk to a bank safety and soundness. Whether due to lax credit standards poor
portfolio risk management or weakness in the economy, loan problems have been the
major causes of bank losses and failures. A credit score provides an easy way for lenders
to numerically judge your credit at a point in time. It gauges how likely you are to repay
your loan in a timely manner. The better your history appears, the more attractive you
become as a loan customer. Credit analysis by a lender is used to determine the risk
associated with making a loan. Regardless of the type of financing needed, a bank or
lending institution will be interested in both business and personal financials. The 6 basis
C's of lending are:
1. Character - Specific purpose for loan and serious intent to repay loan
2. Capacity - Customer has legal authority to sign binding contract
3. Cash - Does the borrower have the ability to generate enough cash to repay the loan
4. Collateral - Does the borrower have the adequate assets to support the loan
5. Conditions - Must look at the industry and changing economic conditions to assess
ability to repay
6. Control - Does loan meet written loan policy and how would changing laws and
regulations affects loan

1.5.2 Review of Previous Works

According to Merriam Webster, credit is the provision of money, goods and services
with the expectation of future payment. Credit means assets to the trust of something
offered for acceptance. A credit is a legal contract where one party receives resource or
wealth from another party and promises to repay him on a future date along with the
interest.
Frequently, credit refers to the terms and conditions associated with a deferred payment
arrangement, for example, easy credit and cheap prices. Credit also denotes the
borrowing capability of an organization or person.

14
According to Business dictionary, written or oral agreement for a temporary transfer of a
property (usually cash) from its owner (the lender) to a borrower who promises to return
it according to the terms of the agreement, usually with interest for its use. If the loan is
repayable on the demand of the lender, it is called a demand loan. If repayable in equal
monthly payment, it is an installment loan. If repayable in lump sum on the loan's
maturity(expiration) date, it is a time loan.
LeGrand, 1993 also discusses banks industry specialization by hiring industry specialists.
The objective is to have these lending officers make better credit decisions based on their
specialist knowledge about a certain industry. According to the author, contrary to what
one might think, this activity may not reduce risks. The risk being discussed is the fact
that such a specialized team might have a hard time "walking away" from an industry,
due to the fact that lending teams like this are often compensated for acquiring or holding
onto business. It should be pointed out though, that the presence of industry analysts
should not be viewed as an obstructive mechanism towards diversification.
Kristin Moyer (2009) indicated that loan portfolio has been shown to reduce re-default
and significantly improve average unpaid-principal balance increase in net present value
from modifications using loan portfolio management (relative to non-optimized loan
modifications using general risk scores) from vendors such as Response Analytical
( Distress Portfolio Management and others). Therefore, proposed solution will help
decision makers at the Bank to formulate prudent and effective loan policies and it is
going to help banks to efficiently distribute the funds they have available for loan in order
to maximize their profit being conscious of the various associated risks.
Kroszner (2002) finds that non-performing loans are closely associated with banking
crises. Sultana (2002) also links the Japanese financial crisis to non-performing loans and
finds that Japanese banks still suffer under the weight of thousands of billions of yen of
bad loans resulting from the collapse in asset prices a decade ago in the country's
financial system. According to Mikiko (2002) during the past several years, major
Japanese banks have struggled in the red, with business profits swallowed by the
disposal of NPLs. This has seriously dented public confidence in the deposit system.
Firstly the total amount of deposit in the commercial banking system has the capacity to
create deposit demand resulting from lending activities.

15
Since demand deposit constitutes a large sum of the money supplied, the banking system
is able to expand the nation supply of money. The consent that commercial bank need
liquid asset especially the short term asset that can be converted into cash loan accordant
to him constitute the largest amount of asset.
Good bank lending ensure high profit level, ensure greater return and have underscore of
meeting the social responsibility to the benefit of the society while in the other way bank
lending can affect the bank negatively in various way for instance, it might take a great
chance of their annual profit which the bank need to stay in business with. This and the
indiscriminate extension of loan although within the credit guideline without proper
supervision of such loan and account have led to an increasing trend in the existence of
bad dept.
The bank has failed in the implementation of various checks against bad debt and has
tended to forget every loan committed the moment the contract has been concluded. The
author contention here is that the cause of bad debt is due to improper supervision and
management of loan granted.
Lending can be broken down into two categories: personal (consumer) lending and
business lending. Some types of loans are available in both personal and business
lending, though they are handled differently.
For example, an individual can get a personal credit card to buy groceries and other
basics, and a business can get a business credit card to buy equipment and other business
expenses.
Everest Bank lend money to for-profit companies and other organizations every day. In
fact, business lending makes up a large portion of a commercial bank’s operations. This
makes a commercial bank different from investment bank, although the same institution
can include commercial and investment branches. Everest Bank earn profit, build their
brand and contribute to local and national economies by lending the money.
Earning interest income is the most fundamental incentives for Everest Bank to loan
money to companies. Everest Banks lend as much money as they can at all the times,
charging different interest rates to different customers to balance the different risk
profiles of each borrower. Business loans can be much larger than the personal loans,
providing opportunities to significantly increase loan profit, even with lower interest

16
rates. In addition to interest charges, Everest Banks boost their loan income through fees
and late penalties.
The economic strength of a given region directly affects the income and stability of
Everest Banks in the area. The more entrepreneurs and companies that have access to
debt capital, the more new business will develop and grow. Everest Banks understand
that lending money companies can stimulate local economies by giving economic entities
the fuel they need to grow and generate profit. This can have a range of positive spillover
effects for Everest Banks, such as increase deposits in personal savings accounts caused
by an increase in local employment.
The biggest objective of bank lending is to stimulate the economy. This is done by
lending money to business to help grow their assets. In return, they can hire more people,
produce more goods, and make enough profits to pay back their loan and interest which
earns the bank money.
The main objective of the study is to evaluate the lending pattern of the Everest Banks
secondary data for the analysis.

1.5.3 Lending Process

Bank lending policy refers to the policy and guidelines adopted by a bank to make the
lending process systematic and methodical. Everest Bank deals with other people's
money. They lend the money which they borrow from the depositors. Unless these
deposits are prudently utilized banks are destined to incur losses. Everest Banks cannot
effort to either keep the deposits idle in the vaults or lend the deposits and not recollect.
Hence, a proper lending policy must be in place. There are 6 steps in the lending process.
They are as follows:
1. Finding prospective loan customers
2. Evaluating a prospective customer's character and sincerity of purpose
3. Making site visits and evaluating a prospective customer's credit record
4. Evaluating a prospective customer's financial condition
5. Assessing possible loan collateral and signing the loan agreement
6. Monitoring compliance with the loan agreement and other customer service needs

17
1.5.4 Research Gap
This study focuses the comprehensive analysis of lending position of Everest Bank
considering the major items. Financial tools and statistical tools are used in this study.
The study is limited to the numerical data and the numerical values for measuring the
lending position policy, keeping the thought and intensions away. This study is only
concerned with to fill the above gap and provide the real condition of lending position,
profitability, etc of Everest Bank with the help of various financial and statistical tools.
This study has been conducted considering the data of five years 2015 to 2020. This
study attempts to analyze and evaluate the relationship of lending position and various
variables e.g. income, collateral and so on that will help research student to carry further
studies as well it will be helpful to the interested groups in the selected companies to
analyze their position at present and search for the prospective investors.
Several studies can be found in literature. Hence, this study will made an effort on fund
should be mobilized in more productive sector to increase profit, extend more facilities to
customer.

1.6 Research Methodology

Research can be defined as an organized, systematic, database, critical, scientific inquiry
or investigation into a specific problem, undertaken with the objective of finding answer
or solutions to it. It is the systematic and objective analysis and recording of controlled
observations that may lead to the developments.
Research has two important aspects. First, it is sufficiently broad to include as types of
investigations requiring solutions to a problem. Second, it explicitly recognizes the
systematic nature of the research process in which data are gathered, recorded, analyzed,
and interpreted in an orderly manner.
Research methodology refers to the various sequential steps to be adopted by a researcher
in studying a problem with certain objects in view. In facts, research methodology is a
systematic way of solving the research problems.
Descriptive research design is used for analyzing the data of this research. It is a research
design that is developed with the aim of studying the subject of research in details and
explain the facts and characteristics related to research problem. It uses scientific method

18
of collecting, classifying and analyzing related data, facts and figures. It helps to focus
and emphasize the useful and final meaningful points so that all the concerned outcome
can achieved from this study.

1.6.1 Research Plan and Perspective:

In order to make study reliable and valid, method and analysis used will be carefully
planned and emphasis will be given while designing questionnaire. This help to reduce
personal bias, error of observer and participant's bias. Regarding research perspective I
will also be analyzing and describing how lending policy affects banking performance
and banking services.

1.6.2 Research Ethics:

The research will include primary data, but it will not include any personal information
on individuals. Before sending out the questionnaires, I will check them with my
supervisor. There is no any personal undue pressure during my entire research work and
all participants who are involved in this study were fully informed about the objectives of
the study.

1.6.3 Research Design

Research design means systematic planning of research, usually including (1) the
formulation of a strategy to resolve a particular question; (2) the collection and recording
of the evidence; (3) the processing and analysis of these data and their interpretation; and
(4) the publication of results.
Research design is an overall framework of plan for the collection and analysis of data
that focuses on the data collection method, the research instrument utilized, and the
sampling plan to be followed. Research design is the plan, structure and strategy of
investigation conceived so as to obtain answers to research questions and to control
variance. The problem, the methodology, data gathering, data analysis and report writing
are the basic elements of a research design.
The process used to collect information and data for the purpose of making business
decision. The methodology may include publication research, interviews, surveys and

19
other research techniques, and could include both present and historical information.
Research comprises creative work undertaken on a systematic basis in order to increase
the stock of knowledge, including knowledge of human, culture and society, and the use
of this stock of knowledge to devise new application. Research design is plan, structure
and strategy of investment conceived so as to obtain answer to research question. The
plan is overall scene or program of the research.
It includes an outlines of what the investigator will do in the field study and writing and
their operational implication to the final analysis of data. In this study descriptive as well
as analytical research design has been used.
Research design indicates a plan of action to be carried out in connection with purpose
research work. For these research work the necessary information regarding to Everest
Bank Limited has been collected by interviewing to the concern staff and its websites.

1.6.4 Sources of Data

To analyze topic different data are gathered. The sources from where information
achieved are as follows:
A. Primary Source and
B. Secondary Source.
A. Primary source
The data collected for the first time by the researcher himself from the field of enquiry is
called primary data. Primary data collection includes questionnaire method, Direct
interview method and direct observation method.
a) Questionnaire method:
The related workers are interviewed by preparing the schedule of question in the relevant
topic.
b) Direct interview method:
The direct interview is the raw information, it is collected by interviewing the manager of
the firms.
c) Direct observation method
To acquire the practical knowledge the workers were being observed in the spot.

20
B. Secondary source
The data which are initially collected by someone but obtained from some published
sources are called secondary data. The data from various sources are collected and proper
data for purpose of the study are arranged and analyzed. The sources of secondary data
are:
a) Report provided by the management of the Everest Bank Limited.
b) Office records and magazines.
c) Different related books and journals, daily newspaper report published by different
other medias.
d) Different related Websites.

1.7 Limitations of the study

Despite of effort to collect all information data for over all analysis of organization and
indented system there are still some limitations of the study because of various reasons
and they are as follows:
 Accuracy of the data depends on the accuracy of available data
 Report is based on the answer to the respondent
 Focus only on lending part i.e. loan and advances
 Reality of the data depends on secondary data
 Some data’s couldn’t be published because of organizational rules
 Time and resources lack are the main limitation of the study
 Non-availability of some powerful mathematical and econometric software's for
data analysis
 Questionnaire was distributed only to some selected branch managers of branches
located within Kathmandu valley.
Only the financial tools and statistical tools are used for the study of lending position
of Everest Bank Limited. The study covers the period of 5 fiscal year (2015 - 2020)
only.

21
 CHAPTER II
RESULTS AND ANALYSIS

Under this chapter we analyzed different data of Everest Bank related to the lending
position. We also analyzed the current scenario of lending loans inside the organization
and its impact over financial position.
Everest Bank is in 26th years of its operation in lending loans. Loan is the main income
for the bank. The customers' credibility and loyalty toward this bank is the main reason
for its successful performance. Since the establishment this bank grants loan facility to its
customer. Nowadays Everest Bank is providing different types of loans with vary in
interest rates to different household and business people

2.1 Data presentation and analysis

The organization provides the annual reports, which are necessary for all the parties out
or inside of the organization. The annual reports includes the details of Balance Sheet and
Income Statement. With the help of this annual report , detailed financial position and the
strength of the organization can be determine by the used of financial analysis tools. It
helps to analyze the financial strength and weakness of the firm. The various investor,
manager, creditor and parties involved within the organization and the outsider, do this
financial analysis. The method of financial analysis may vary from parties to parties.
Various analysis have been done in this chapter for the financial analysis purpose. This
includes lending position analysis.

2.1.1Total Business of the Bank

It is the total business of Everest Bank Limited regarding the lending policies. We can
say that the present performance of Everest Bank is quite good than the past by looking at
the following table :

22
Table No.1 Total Business of Bank In crore
Particulars 2072/73 2073/74 2074/75 2075/76 2076/77
(2015/16) (2016/17) (2017/18) (2018/19) (2019/20)

Total Shareholders fund 839.39 1154.46 1613.45 1762.50 1867.78

Deposit 9373.54 9509.45 11551.18 13017.74 14472.83

Loans & Advances 6891.15 7828.46 9418.22 11200.72 11906.92

Total Income 608.75 781.26 1133.74 1445.09 1548.66

Operating profit 283.42 317.96 368.57 435.21 358.27

Net Profit After Tax 173.02 200.62 258.17 305.41 251.62

Total Business 16264.70 17337.91 20969.4 24218.46 26379.75
Source: Annual Report of EBL

The above table shows the consistent progress of the bank over the last five years.
During last F/Y 2076/77, the bank's shareholders fund has increased to Rs. 1867.78 Cr
(from existing Rs. 1762.50 Cr). The total deposits have reached to Rs. 14472.83 Cr
recording growth of 11.17% and loans and advances stood at Rs. 11906.92 Cr showing
growth of 6.30% in F/Y 2076/77. In total, business of EBL has reached to Rs. 26379.75
Cr in the last F/Y 2076/77 i.e. growth of 8.29%.
Due to impact of COVID, during the year under review F/Y 2076/77, operating profit of
EBL has declined by 17.68% to Rs. 358.27 Cr which is less than that year. EBL has been
able to post a after tax net profit of Rs. 251.62 Cr, which is 17.61% lower than the last
year.

2.1.1.1 Analysis of Total Shareholders Fund

Shareholders' funds refers to the amount of equity in a company, which belongs to the
shareholders. The amount of shareholders' funds yields an approximation of theoretically
how much the shareholders would receive if a business were to liquidate.

23
Table No.1.1 Position of Total Shareholders Fund of F/Y 2015/16 to F/Y 2019/2020
(in crore)
Fiscal Year Total Shareholders Fund
2015/16 839.39
2016/17 1154.46
2017/18 1613.45
2018/19 1762.50
2019/20 1867.78

Source: Annual Report of EBL

Figure No. 1.1 Position of Total Shareholders Fund of F/Y 2015/16 to F/Y 2019/2020

2000

1500

1000

500

0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Figure and Table No. 1.1 shows the trending position of the Shareholders fund of five
years from F/Y 2015/16 to F/Y 2019/2020. The shareholders fund is increasing every
years.

2.1.1.2 Analysis of Deposit

A deposit is a financial term that means money held at a bank. A deposit is a transaction
involving a transfer of money to another party for safekeeping. However , a deposit can
refer to a portion of money used as security or collateral for the delivery of a good.

24
Table No. 1.2 Position of Deposits of F/Y 2015/16 to F/Y 2019/20 ( in crore)

Fiscal Year Deposits

2015/16 9373.54
2016/17 9509.45
2017/18 11551.18
2018/19 13017.74
2019/20 14472.83

Source: Annual Report of EBL

Figure No. 1.2 Position of Deposits of F/Y 2015/16 to F/Y 2019/20

16000
14000
12000
10000
8000
6000
4000
2000
0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Figure and Table No. 1.2 shows the trending position of the Deposits of five years from
F/Y 2015/16 to F/Y 2019/2020. The position of deposits is increasing every years.

2.1.1.3 Analysis of Loan and Advances

The term loan and advances referred to the credit. Loan and advances is the amount of
money lent by creditor(Bank) to the borrower (Customer) either based on security or
without security.

25
Table No. 1.3 Position of Loan and advances of F/Y 2015/16 to F/Y 2019/20 (In
crore)
Fiscal Year Loan and advances
2015/16 6891.15
2016/17 7828.46
2017/18 9418.22
2018/19 11200.72
2019/20 11906.92
Source: Annual Report of EBL

Figure No.1.3 Position of Loan and advances of F/Y 2015/16 to F/Y 2019/20

12000

10000

8000

6000

4000

2000

0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Figure and Table No. 1.3 shows the trending position of the loan and advances of five
years from F/Y 2015/16 to F/Y 2019/2020. The loan and advances is increasing every
years.

2.1.1.4 Analysis of Total Income

Bank is a institution which creates credit by accepting deposits from the public. Banks
provide various loans and advances to industries, corporate and individuals. The interest
received on these loans is their income.

26
Table No.1.4 Position of Income of F/Y 2015/16 to F/Y 2019/20 (In crore)
Fiscal Year Income

2015/16 608.75

2016/17 781.26

2017/18 1133.74

2018/19 1445.09

2019/20 1548.66

Source: Annual Report of EBL

Figure No.1.4 Position of Income of F/Y 2015/16 to F/Y 2019/20

1600
1400
1200
1000
800
600
400
200
0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Figure and Table No. 1.4 shows the trending position of the income of five years from
F/Y 2015/16 to F/Y 2019/2020. The income is increasing every years.

2.1.1.5. Analysis of Operating Profit

The income being referred to here is the gross operating earnings of the bank that gives
rise to operating profit. The operating profit is the earnings before interest and tax
(EBIT).

27
Table No.1.5 Position of Operating Profit of F/Y 2015/16 to F/Y 2019/20 (In crore)
Fiscal Year Operating Profit

2015/16 283.42

2016/17 317.96

2017/18 368.57

2018/19 435.21

2019/20 358.27

Source: Annual Report of EBL

Figure No.1.5 Position of Operating Profit of F/Y 2015/16 to F/Y 2019/20

450
400
350
300
250
200
150
100
50
0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Figure and Table No. 1.5 shows the trending position of the operating profit of five years
from F/Y 2015/16 to F/Y 2019/2020. The operating profit is increasing every years.
2.1.1.6. Analysis of Net Profit after Tax
Net income after taxes (NIAT) is a financial terms used to describe a company's profit
after all taxes have been paid. Net income after taxes represents the profit or earnings
after all expense have been deducted from revenue.

28
Table No.1.6 Position of Net Profit after Tax of F/Y 2015/16 to F/Y 2019/20 (In
crore)
Fiscal Year Net Profit after Tax

2015/16 173.02

2016/17 200.62

2017/18 258.17

2018/19 305.41

2019/20 251.62

Source: Annual Report of EBL

Figure No.1.6 Position of Net Profit after Tax of F/Y 2015/2016 to F/Y 2019/20

350
300
250
200
150
100
50
0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years

Figure and Table No. 1.6 shows the trending position of the Net Profit after Tax of five
years from F/Y 2015/16 to F/Y 2019/2020. The Net Profit after Tax is increasing every
years.
2.1.1.7 Analysis of Total Business
The total business is calculated by combining the deposits and loan and advances of the
bank.

29
Table No. 1.7 Position of Total Business of F/Y 2015/16 to F/Y 2019/20 (In crore)
Fiscal Year Total Business

2015/16 16264.70

2016/17 17337.91

2017/18 20969.4

2018/19 24218.46

2019/20 26379.75

Source: Annual Report of EBL

Figure No. 1.7 Position of Total Business of F/Y 2015/16 to F/Y 2019/20

30000

25000

20000

15000

10000

5000

0
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Figure and Table No. 1.7 shows the trending position of the total business of five years
from F/Y 2015/16 to F/Y 2019/2020. The total business is increasing every years.

2.1.2 Analysis of Loan and Advances by product

It is the items or product that comes under the loan and advances of the bank.

30
Table No.2. Analysis of Loan and Advances by product In crore
Particulars 2072/73 2073/74 2074/75 2075/76 2076/77
(2015/16) (2016/17) (2017/18) (2018/19) (2019/20)

Term loans 930.06 1151.88 1533.97 2074.56 2710.85

Overdraft 1682.03 1862.54 1927.86 2293.31 2459.87
Trust receipt/import loans 427.99 325.16 430.35 548.27 569.09
Demand & other W/C 1138.73 1177.01 1341.16 1527.33 1991.13
loans
Personal Residential loans 926.39 1039.24 1386.29 1848.86 2258.48
Real estate loan 346.85 496.61 463.62 400.31 210.99
Margin lending loan 109.19 128.43 110.73 28.06 10.34
Hire Purchase loan 432.14 592.91 647.38 694.63 602.57
Deprived sector loan 21.92 132.79 118.54 60.67 48.37
Bills Purchased 8.31 11.93 10.12 3.43 -
Staff loan 141.84 152.49 111.58 122.51 136.86
Other 589.29 577.50 999.31 958.95 316.77
Grand Total 6754.74 7648.49 9080.91 10560.89 11315.32
Source: Annual Report of EBL

Figure No. 2. Analysis of loan and advances by product of F/Y 2019/20

31
 2.80%
Term loan
1.21%
Overdraft
0.00%
0.43%
Trust receipt/import
5.33%
0.09%
Demand and other
1.86% 23.96% W/C loan
Personal Residential
loan
Real estate loan
19.96%
Margin lending loan

Hire purchase loan

Deprived sector loan

21.74%
Bills purchased

17.60% Staff loan

5.03%
Other

From the above table, term loan, overdraft, trust receipt/import loans, demand and other
W/C loans, personal residential loans, is highest in F/Y 2019/20. The real estate loan,
staff loan, deprived sector, bills purchased and margin lending loan is highest in F/Y
2016/17. The hire purchase loan is highest in F/Y 2018/19. In fiscal year 2019/20 there is
highest loan and advances i.e. Rs. 11315.32 crores.

32
From the above figure or diagram, we can conclude that there is highest amount of term
loan in F/Y 2019/20 as well as there is no bills purchased loan in the same year.

2.1.3 Financial Tools

Financial tools include ratio analysis and various ratios are calculated by using financial
statement of Everest banks which helps to determine organization profitability, leverage,
liquidity and performance. A ratio may be defined as a fixed relationship between two
numbers. Ratio analysis is a process whereby key figures are related to each other and
compared over different accounting period or compared with ratios derived from other
companies, particularly those in the same or similar business.” They are simple to
calculate, easy to use, and provide a wealth of information that cannot be gotten
anywhere else," James O. Gill noted in his book Financial Basics of Small Business
Success. But, he added, "Ratios are aids to judgment and cannot take the place of
experience. They will not replace good management, but they will make a good manager
better. However, financial ratios are short term measure of performance and are not
appropriate for the measurement of long term performances of bank (Sherman and gold,
1985: oral and yolalan, 1990). The basic inputs to ratio analysis are from the banks
income statement and balance sheet. Ratio can be expressed in terms of percentage,
times, proportion and quotient.
We have tried to analyze and evaluate those major financial items, which are mainly
related to the loan of Everest Bank. The ratios are designed and calculated to highlight
the relationship between financial items and figures. It is a kind of mathematical
procedure to derive relationship between two or more variables.
2.1.4 Measurement of Lending Strength
The loaning strength of these two banks is measured in relative measures in this section.
The relationship between various assets and liabilities of the balance-sheet has been
established to show the active strength of loaning of each bank comparatively. An
attempt is made to determine the loaning strength in absolute figure of each bank, since
these two banks are comparable in volume of deposit loans and advances and other
variable also.

33
2.1.4.1 Total Loan and Advances to Total Business Ratio
Table No. 3.1 Total loan and advances to total business ratio (in crore)
Fiscal Years Loan and Advances Total Business Ratio
2015/16 6891.15 16264.70 42.37%
2016/17 7828.46 17337.91 45.15%
2017/18 9418.22 20969.4 44.91%
2018/19 11200.72 24218.46 46.25%
2019/20 11906.92 26379.75 45.14%
Source: Annual Report of EBL

Figure No. 3.1 Total Loan and Advances to Total Business Ratio

47.00%

46.00%

45.00%

44.00%

43.00%

42.00%

41.00%

40.00%
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
Total Business of the bank comprises of Deposits & loans and advances of EBL. In the
last FY, the total business of the bank has reduced to 45.14% from existing 46.25%. Due
to the outbreak of COVID -19 followed by lock down in the country, the whole economy
of the country has affected which has also impacted the business of the bank as well.

2.1.4.2 Total Loan and Advances to Total Deposit Ratio

Table No. 3.2 Total loan and advances to total deposit ratio in crore

34
Fiscal Year Loan and Advances Total Deposit Ratio
2015/16 6891.15 9373.54 73.52%
2016/17 7828.46 9509.45 82.32%
2017/18 9418.22 11551.18 81.53%
2018/19 11200.72 13017.74 86.04%
2019/20 11906.92 14472.83 82.27%
Source: Annual Report of EBL

Figure No. 3.2 Total loan and advances to deposit ratio

90.00%

85.00%

80.00%

75.00%

70.00%

65.00%
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
The bank offers various loan products to its customers Overdraft, Trust receipt/import
loans, Personal Residential loans, Real estate loan, Margin lending loan, Hire purchase
loan etc to its customers. And also in the terms of deposit products, EBL offers various
deposit like Saving, fixed Deposit & current etc. Total Loan & Advances to Total
Deposit Ratio is in fluctuating trend over the years as a result of earthquake, blockade,
market liquidity and COVID pandemic at present.

2.1.4.3 Interest Income to Total Loan and Advances

Table No. 3.3 Interest Income to Total Loan and Advances in crore
Fiscal Year Interest Income Total Loan and Advances Ratio
2015/16 477.51 6891.15 6.93%

35
2016/17 640.44 7828.46 8.18%
2017/18 936.48 9418.22 9.94%
2018/19 1142.72 11200.72 10.21%
2019/20 1196.02 11906.92 10.51%
Source: Annual Report of EBL
Figure No. 3.3 Interest Income to Total Loan and Advances

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
The above figure and table shows the ratio of interest income to total loan and advances
of EBL bank from F/Y 2015/16 to F/Y 2019/20 which is in increasing trend.
2.1.4.4 Net profit (Net profit after tax) to Total Loan and Advances
Table No. 3.4 Net profit to Total loan and advances in crore
Fiscal Year Net profit Total loan and advances Ratio
2015/16 173.02 6891.15 2.51%
2016/17 200.62 7828.46 2.56%
2017/18 258.17 9418.22 2.74%
2018/19 305.41 11200.72 2.72%
2019/20 251.62 11906.92 2.11%
Source: Annual Report of EBL
Figure No. 3.4 Net profit to Total loan and advances

36
 3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
The above figure and table shows the ratio of net profit to total loan and advances of EBL
bank which is in increasing trend from the fiscal year 2015/16 to 2019/20 which is in
increasing trend till F/Y 2017/18 and after that it decreases.
2.1.4.5 NPAs to Total Loan and Advances
Table No. 3.5 NPAs to Total Loan and Advances in crore
Fiscal Years NPAs Total Loan and Advances Ratio
2015/16 26.44 6891.15 0.38%
2016/17 19.89 7828.46 0.25%
2017/18 18.77 9418.22 0.20%
2018/19 17.72 11200.72 0.16%
2019/20 26.57 11906.92 0.22%
Source: Annual Report of EBL

Figure No.3.5 NPAs to Total Loan and Advances

37
 0.40%
0.35%
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
0.00%
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
A non-performing loan (NPL) is a loan that is in default or close to being in default.
Many loans become non-performing after being in default for 90 days, but this can
depend on the contract terms. Banks usually report their ratio of non-performing loans to
total loans (bank non-performing loans to total gross loans) as a measure of the quality of
their loans outstanding.
2.1.4.6 Total Assets to Total Liabilities Raito
The ratio of total assets to total liabilities measures the volume of total liability in total
assets of the firm. The banking organization creates credit by way of loaning activities
and multiplies their assets many items, than their liability permits. Thus, this ratio
measures the bank ability to multiply its liability into assets. It is always recommended to
have higher ratio of total assets to total liabilities ratio. Since it signifies overall increase
of credit and overall development of the organization, the higher the ratio, higher the
productivity and higher the assets conversion and vice-versa.

Total assets to total liabilities ratio = Total assets

Total liabilities

Table No. 4. Total assets to total liabilities ratio (In crore)

38
 Fiscal Year Total Assets Total Liabilities Ratios

2015/16 11,401.89 10,417.33 1.09

2016/17 11,694.62 10,373.87 1.12

2017/18 14,481.11 12,867.66 1.12

2018/19 17,007.75 15,245.24. 1.11

2019/20 18,502.31 16,638.58 1.11

Source: Annual Report of EBL

Figure No. 4.Total assets to total liabilities ratio

1.125
1.12
1.115
1.11
1.105
1.1
1.095
1.09
1.085
1.08
1.075
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Year
The above table and figure shows the total assets to total liabilities ratio of Everest bank
for the five years from F/Y 2015/16 to F/Y 2019/20. Although the total assets and total
liabilities are highest in the F/Y 2019/20 but the ratio are highest in F/Y 2016/17 and
2017/18.

2.1.4.7 Loan and Advances to Total Assets Ratio

39
Loans and advances are the major area of fund mobilization of commercial banks. Loans
and advances is the first type of application of funds, which has more risk. Loans and
advances and total assets ratio indicates the firm's fund mobilization power in gross. The
high degree of ratio indicates the good performance of banks in mobilizing its funds by
the way of loaning functions. However, in its reserve side the high degree of ratio is
representative of low liquidity ratio.
Granting the loan and advances always carries a certain degree of risk. Thus, this asset of
banking business is related as risky assets. The low ratio shows low productivity and high
degree of safety in liquidity and vice-versa. The interaction of risk and return determine
this ratio.

Loan and Advances to Total Assets Ratio = Loan and Advances

Total Assets

Table No.5. Loan and Advances to Total Assets (In crore)

Fiscal Year Loan and Advances Total Assets Ratio
2015/16 6891.15 11,401.89 0.60
2016/17 7828.46 11,694.62 0.66
2017/18 9418.22 14,481.11 0.65
2018/19 11200.72 17,007.75 0.65
2019/20 11906.92 18,502.31 0.64
Source: Annual Report of EBL

Figure No.5. Loan and Advances to Total Assets

40
 0.67
0.66
0.65
0.64
0.63
0.62
0.61
0.6
0.59
0.58
0.57
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
The above table and figure indicates the performance of EBL regarding the ratio of loan
and advances to total assets. It has high mobilization power in F/Y 2016/17 and low
mobilization power in F/Y 2015/16.

2.1.4.8 Loan and Advances to Total Deposit Ratio

Loans and advances are the major area of fund mobilization of commercial banks. Loans
and advances is the first type of application of funds, which has more risk. Loan and
advances and total deposit ratio indicates the firm's fund mobilization power in gross.
The main sources of bank's loaning are its deposit. Thus, this ratio measures how well
deposits have been mobilized. This ratio measures the ability of a bank generating
income from bank's deposit liability.

Loan and Advances to Total Deposit = Loan and Advances

Total Deposit

Table No. 6. Loan and Advances to Total Deposit Ratio (In crore)

41
 Fiscal Year Loan and Advances Total Deposit Ratio
2015/16 6891.15 9373.54 0.73
2016/17 7828.46 9509.45 0.82
2017/18 9418.22 11551.18 0.81
2018/19 11200.72 13017.74 0.86
2019/20 11906.92 14472.83 0.82
Source: Annual Report of EBL
Figure No. 6. Loan and Advances to Total Deposit Ratio

0.9

0.85

0.8

0.75

0.7

0.65
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years
The above ratio is used to measure the bank's ability to utilize their deposits in terms of
lending loans and advances. Higher the ratio higher the utilizing the deposit and higher
the change to make more profit. In the above figure there is high ratio in the fiscal year
2018/19 which means higher deposit utilization. The more decreasing trends of loan and
advance the possibility of fewer income of banks.

2.1.4.9 Loans and Advances to Shareholders Equity Ratio

Shareholder's equity consists of share capital, share premium, reserve fund and retained
earnings. The ratio between loans and advances to shareholders equity has been able to
generate assets multiply its wealth. The shareholders equity refers to the net shareholders
intake in the business. Thus, this ratio measures the size of business and their success
while converting liabilities into assets.
Loans and Advances to Equity Ratio = Loan and Advances
Net Worth
Table No.7 Loans and Advances to Shareholder's Equity Ratio (In crore)

42
Fiscal Year Loan and Advances Net Worth Ratios

2015/16 6891.15 984.56 6.99

2016/17 7828.46 1320.75 5.92

2017/18 9418.22 1613.45 5.83

2018/19 11200.72 1762.51 6.35

Source: Annual
2019/20 11906.92 1863.73 6.38
Report of EBL
Figure No. 7. Loan and Advances to Shareholder's Equity Ratio

7.2
7
6.8
6.6
6.4
6.2
6
5.8
5.6
5.4
5.2
2015/16 2016/17 2017/18 2018/19 2019/20

Fiscal Years

In the above figure, the ratio of loan and advances to shareholders equity is not
consistency in the entire period of study. The ratio is in fluctuating trend. The
performance of EBL is highest in the fiscal year 2015/16.

43
2.2 Analysis of Result

2.2.1 Analysis of correlation between Total Deposit and Loan and Advances
The Correlation between Total Deposit and Loans and Advances describe the degree of
relationship between two variables. How a unit increases in deposit impact the volume of
loans and advances in measured by the correlation coefficient. Hence, the deposit is the
independent variable and loans and advances is the depended variable. It is denoted by 'r'
if r = 1, the variables are perfectly co-related.
if r = 0, they are not related.
if r < 1, the relation is perfectly negative (negatively co-related).
Table No.8. Correlation between Total Deposit and Loan and Advances
Fiscal Year Loan and Advances(X) Total Deposit(Y)
2015/16 6891.15 9373.54
2016/17 7828.46 9509.45
2017/18 9418.22 11551.18
2018/19 11200.72 13017.74
2019/20 11906.92 14472.83
Correlation (r) 0.9843
Probable error (P.E.) 0.0094

Decision:
As r = + 0.9843 there is high degree of positive relationship between loan and advances
and total deposit or we can say that loan and advances and total deposit is highly
correlated with each other. It means that there is optimum utilization of deposit fund in
the bank.

2.2.2 SWOT Analysis

SWOT analysis is an acronym for strength, weakness, opportunities and threats and
structured planning method that evaluates those four elements of an organization. A
SWOT analysis can be carried out for a company, product, place, industry or person. This
could be a best strategic analysis for Everest Bank's loan management. It is vital for the

44
bank because it could generate ideas and policies which could provide a strategic
direction to compete in the market. It involves the specifying the object of the business
venture or project and identifying the internal and external factors that are favorable and
unfavorable to achieve that objective. Identification of SWOTs is important because they
can inform later steps in planning to achieve the objectives. If the objectives are not
attainable, they must select different objectives and repeat the process.
Organization using SWOT analysis must ask and answer questions that generate
meaningful information for each category (strength, weakness, opportunities and threats)
to make the analysis useful and find their competitive advantage. After analyzing the loan
management of Everest Bank, along its environmental scenario, we can hold following
features of the bank.
1. Strengths
 Vast industry
 High growth rate
 Experienced business units
 Skilled workforce
 Successful history of apps intake
 Product knowledge
2. Weakness
 Competitive market
 Future profitability
 Cost structure
 Productivity
 Business capabilities are limited
 Software design, usability, etc.

3. Opportunities
 Global markets
 New product and services
 Growth rate and profitability
 Venture capital

45
  Strong focus on business logic
 Emerging consumers and markets
 Integrated platform
4. Threats
 Growing competition and lower profitability
 Increasing rates of interest
 External business risks
 Government regulations
 No IT buys-in
 Not enough structure
 No competitive analysis

2.3 Major findings

Based on the analysis and the observation of field work study, the major findings on the
loan management are mentioned below:
 After conducting a thorough study of the lending position of Everest Bank
Limited, it can be concluded that Everest Bank perform the loan management
satisfactory till date. All the aspects of loan approval to loan settlement have been
paid due to attention. The loan assets of Everest Bank is increasing during the
study period of five years. It also increase its lending capacity.
 Positive correlation coefficient between total deposit and loan and advance is
good sign until the deposit follows an increasing trend. But once the deposit
suffers decline, loan and advance will also be adversely affected.
 Lending position of the bank shows the safe in case of non-repayment of loan
since is adequate provision. But at the same time it is not possible to rule that a
higher loss provision reflects the efficiency of management.
 The Non-Performing loan ratio is fluctuating. The percentage in fiscal year
2019/20 is 0.22%.
 The interest income to total loan and advance ratio is in increasing trend.

46
 CHAPTER III
DISCUSSION AND CONCLUSION
This is the final chapter of this thesis, which has been divided into summary, conclusion
and recommendations. In this chapter, we examine the processed data to come into new
concluding upon the performance of Everest Bank. It also aims to give forth some
suggestion that must be helpful for further enhancement of the lending operation and
practices of Everest Bank.

47
3.1 Summary
A modern financial system is important in the economy in order to pool and utilize
financial resources, reduce cost and risk, expand and diversify opportunities, increase
productivity and facilitate economic growth. Similarly growth of financial services sector
is important for economic growth. Banking sector provides these financial services and
Everest Bank provides various banking and financial services to the customers. Everest
Banks take deposits from individual and institutional customers, which they then use to
extend credit to other customers. They make money by earning more in interest from
borrowers than pay in interest to those whose deposits they accept.
Basically Everest banks in Nepal have been facing following problems in credit and
investment sector. They provide loan against only fixed collateral but fails to focus on
easy recovery part. Banking sector doesn't have qualified credit staffs and credit
appraisal/analysis regarding borrower and any business entity have not been done
according to financial norms and intentionally accepted standard.
Loan management is simply management of loan and advances. Success of banking
business depends on the efficient and effective management of loan. Poor loan
management has proved to be one of the major causes of bank failure throughout the
world. Thus loan management is always a challenging task in banking since it involves
risk linked with credit operations.
Main objective of research is to analyze loan management practices of Everest banks and
come out with solid recommendation to enhance loan management. However specific
objectives are (a) to assess loan management process, system and practices. (b) to
evaluate capacity of loan management to reduce the impact of non-performing loan. (c) to
assess loan disbursement and its recovery. (d) to examine interest rate on loan and deposit
and repayment of loan. (e) to explore relationship between loan, deposit, investment,
income, borrowing and their impact on profit and performance of bank. (f) to analyze
different benefits that the loan management might bring.
Research work is designed to obtain answer of all research questions. This research has
adopted descriptive and analytical research method to analyze and interpret data. In order
to meet research objective, data which has been collected for the analysis purpose are of
primary and secondary in nature but study is more based on secondary data and data of

48
five years were selected for study. Primary data collected through questionnaire is of
qualitative nature.
3.2 Conclusion
This study shows that there is a significant relationship between bank performance and
loan management. The availability of cash and loanable funds are important to the
successful operations of a Everest bank. However, if there is excess cash, it could lead to
a waste of resources unless properly channeled in to loans. If cash is insufficient to meet
the demands of customers, especially depositor's withdrawals and credible borrowers, it
could lead to loss of public confidence and consequent run on the Everest bank leading to
bank failure. As a result, a Everest bank has to hold a certain amount of cash that will
meet with depositor's withdrawal requirements and other liquidity needs of the Everest
Bank.
It is common practice in the banking sector of Nepal to use consultant to look into
various corporate problems. How many of their recommendations are being successfully
implemented is still questionable although huge sum of money and other resources are
spent in research and implemented. In nutshell, the above outcome have not only
revealed the satisfactory performance of the bank but all the sign of future prosperity and
development can also be expected as well. The problem identification and suggestions
mentioned in this report may not be new.
The analysis of the study reveals that the lending disbursement is satisfactory but the
fluctuating trend of loan disbursement and recovery cannot be overlooked. The amount of
non-performing loan has been declining, which shows the better performance of bank. As
according to the International Banking Norms, the percentage of non-banking loan should
be 4 to 5 percentage of the total outstanding loan. So it is good as required. The reason
for decreasing non-performing loan return off of them according to direction given by
NRB i.e. the non-performing loans overdue above 5 years are to be return off of them, it
implies the annual performance of the bank.
The total loan disbursement, collection and outstanding of Everest Bank Ltd. is
increasing trend. Hence Everest Bank is running through guideline of NRB and its
supervision and direction is always accepted by the bank. Everest Bank Ltd. is operates
as "A" category financial institution. Bearing may constraints, it is going to change

49
lending, recovery and collection policy by time to time in near future. So we can hope it
will make investment in entire sector.

BIBLIOGRAPHY

Rajan B. Paudel, Keshar J. Baral, Padam R. Joshi, Rishi R. Gautam, Surya B. Rana
(2019). Fundamentals of Investment. Kathmandu: Asmita Books Publisher and
Distributors.

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Rajan B. Paudel, Keshar J. Baral, Padam R. Joshi, Rishi R. Gautam, Surya B. Rana
(2019). Fundamentals of Corporate Finance. Kathmandu: Asmita Books Publisher and
Distributors.

Rajan B. Paudel, Keshar J. Baral, Padam R. Joshi, Rishi R. Gautam, Surya B. Rana
(2019). Commercial Bank Management. Kathmandu: Asmita Books Publisher and
Distributors.

Dirgha Rawal, Chandra Kanta Sapkota (2016). Commercial Bank Management.

Kathmandu: Samjhana Publication Private Limited.

Dev Raj Adhikari, Dhruba Lal Pandey (2019). Business Research Methods. Kathmandu:
Asmita Books Publisher and Distributors.

Khadka, S. (2016). Banking and Insurance. Kathmandu: Asia Publication

Website:
 http://www.wikipedia.org/wiki/EverestBankLtd.

 http://wwww.everestbank.com.np

 http://www.google.com/dictionary

 https://en.wikipedia.org/wiki/List_of_banks_in_Nepal

Reports
22nd - 26th Annual Reports of Everest Bank Limited

APPENDICES
Coefficient of Correlation between Total Deposit and Loan and Advances of
EBL (In crore)
Let, X be the Loan and Advances and Y be the Total Deposit respectively.
Years Loan and Total x X

51
 Advances Deposit (X -X) x2 (Y-Y) y2 xy
(X) (Y)
2015/16 6891.15 9373.54 (2557.94) 6543057 (2211.4) 4890289 5656628
.04 .96 .51
2016/17 7828.46 9509.45 (1620.63) 2626441 (2075.49) 4307658 3363601
.59 .74 .35
2017/18 9418.22 11551.18 (30.87) 952.95 (33.76) 1139.73 1042.17
2018/19 11200.72 13017.74 1751.63 3068207 1432.8 2052915 2509735
.65 .84 .46
2019/20 11906.92 14472.83 2457.83 6040928 2887.89 8339908 7097942
.30 .65 .67
N=5 ∑X = ∑Y = ∑x = 0 ∑x2 = ∑y= 0 ∑y2 = ∑xy =
47245.47 57924.74 1827958 1959191 1862895
7.5 2.9 0.16
Mean 9449.09 11584.94

Calculation of mean of loan and advances(X) and total deposit (Y)

X = ∑X = 47,245.47 = 9,449.09
N 5

Y= ∑Y = 57,924.74 = 11,584.94

N 5

Coefficient of Correlation (r):

r= ∑xy
√∑x2 √∑y2

= 18,628,950.16
√18,279,587.5 √19,591,912.9

= 18,628,950.16
4275.46×4426.27

= 0.9843

P.Er. = 0.6745 ×1- r2

√N

52
=0.6745 ×1-(0.9843)2
√5

= 0.0094

53