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CHAPTER – I

INTRODUCTION

1.1 Concept & Approach of Bank

Bank is an institute or an organization who deals with Money. Bank, in the simple
sense, is a financial institution, which performs the function of monetary
transactions. It accepts deposits, provides loans to general public, corporate and
public organizations. In another word, Bank is a financial institution, which
receives money from people in terms of deposits in which it provides certain
interest rate except in current deposit. This deposited money is utilized in
profitable purposes such as providing loans to needy persons, organizations, etc
thereby charging them certain interest.

According to BAFIA 2073, Section 47 Sub Section 1 “Bank means corporate body
incorporated to carry on financial transactions.”

According to Oxford Dictionary of Business & Management “A commercial

institution licensed as a taker of deposits. Banks are concerned mainly with making
and receiving payments on behalf of their customer, accepting deposits and making
short-term loans to private individuals, companies and other organizations.”

According to Hulsebury’s Law of England, “A Banker is an individual,

partnership, or corporation, whose sole or predominating business is Banking, that
is the receipt of money on current and deposit account and the payment of cheques
drawn by the collection of cheques paid by a customer.”

According to Horace White, “Bank is manufacturer of credit creation and machine

for facilities exchanges.”

A Bank is a Commercial or Financial Institution that provides financial services,

whose primary functions are accepting deposits and using these deposits for
lending purposes.
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1.1.1 History & Development of Banking
The word ‘Bank’ has been initiated from Latin word ‘Bancus’, French word
‘Banque’, Italian word ‘Banca’, German word ‘Banck’, which means Bench where
sitting over their investment, exchange and keep record of money and cash flows.
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There are much controversy about origin of Bank. History tells us that initiation of
Bank in Eastern side of World was mentioned in Economics of Kautilya and
Manusmirti likely, in Western Banking was started around 2000 BC by Ancient
Greece and Babylone. Famous Economists mentions, “Phoenicia, Chaldea, and
Egypt” as a primary Banks. Some believes Banking system has been started from
the starting time of Human Civilization, some believes Banking practice began
around in 2000 BC. Some believes Banking practice is introduced from England ,
some believes Babylonians & Mesopotamian had developed Banking system ,
some believes Banking system began from Assyria, Ancient Greece , Roman
Empire , Ancient China & India.
Figure No. 1.1.1(a):

Development of World Banking

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Generally, development of Bank divided in two phases of time, Ancient Banking

Era and Modern Banking Era. Ancient Banking Era is the period before 12 th
century which was unorganized and unformed system whereas, Modern Banking
Era is the period after 12th century which is organized and formed Banking system .

Banking system has been started from at the time of Manusmirti. According to
Chanakya’s Economics Banking system began around 2000 BC. The History of
Banking began with the first prototype Bank of Merchants or Merchant Banker of
the ancient world, which made grant loans to farmers and traders who carried
goods between cities. The early Goldsmiths used to have large vaults which sonly
built and heavily guarded. Merchants started to store their gold with the
Goldsmiths of London, who possessed private vaults and charged a fee for that
service. In exchange for each deposits of precious metal, the Goldsmiths issued
receipts certifying the quantity, quality, purity or originality of the metals they held
as a bailee. On the basis of these receipts only original depositor could collect at
the stored goods. Then, Lenders in Ancient Greece and the Roman Empire added
two important innovations: deposits and changed money. As early as 2000 BC, the
Greeks & Babylonians had developed a Banking system formally. Greeks had
established powerful institutions like Emphesus, Delphi, Olympia. In a starting
days these institutions only involved in religion based financial activities such as
accepting deposits and granting loan. Then, Lenders of Ancient Greece started
accepting deposits and granting loan for both religion and non-religion activities.
Assyria and Babylonia with Merchants offered loans of grain as collateral within
Barter system. Then, Egypt, Ancient China and India had started money lending
Banking practices.

Modern Banking was started from ‘The Bank of Venice, Italy’, founded in 1157
and Casa De San Giorgio Bank. Around the 13th century the rich cities of Italy in
the centre and north like Florence, Lucca, Siena, Venice, Genoa were known as
Financial Hubs. Bank of Barcelona and Bank of Genoa were established in 1401
and 1407 respectively. These are recognized forerunners of modern Banks. The
exchange Banking was developed after the incorporated of the Bank of Amsterdam
and German Bank of Hamburg. The Bank of England was first to begin the issue
of Banknotes in 1695. The Royal Bank of Scotland founded to first to begin the
overdraft facility in 1728. The concept of central Bank initiated after establishment
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of Riks Bank of Sweden and Bank of England. The Bank of England started
functioning permanently as the Central Bank for the first time in 1844. From 1833
Joint Stock Commercial Banking has been started. For first time the concept of
Development Bank introduced after establishment ‘Societe General De Belgiaue’,
which is the first ever Development Bank in the World by Belgium in 1822. The
main purpose of the Bank was to corporate Industries and Businesses in form of
Finance. Then France had established the institute ‘Credit Mobiliser’ in 18 Nov.
1852 for providing services as Economically & Financially to the Industries.
Thereafter, the Banking has been developing, updating, mobilizing with time.

Table No. 1.1.1(a):

World’s Some Earliest and Historical Banks and Established Year

Banks Established Year

Bank of Venice, Italy 1157 A.D.
Medici Bank, Italy 1397 A.D.
Bank of Barcelona, Spain 1401 A.D.
Bank of Genoa, Italy 1407 A.D.
Banco De Napoli, Italy 1463 A.D.
Monte De Paschi Di Siena, Italy 1472 A.D.
Bank of Amsterdam, Netherlands 1609 A.D.
Riks Bank of Sweden, Sweden 1656 A.D.
German Bank of Hamburg, Germany 1690 A.D.
Bank of England, United Kingdom of Great Britain 1694 A.D.
Royal Bank of Scotland, U.K. of Great Britain 1728 A.D.
Bank of Hindustan, India 1770 A.D.
Societe General De Belgiaue, Belgium 1822 A.D.
Industrial Development Bank of Japan 1902 A.D.
Commonwealth Development Bank, Australia 1939 A.D.

1.1.2 History & Development of Nepalese Banking

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Historical development of Nepalese Banking System can be divided into three
phases: Wild Cat Era, Government Owned Banking System and Liberalization of
Banking System.
Figure No. 1.1.1(b):

Development of Nepalese Banking

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There is no accurate, physical & transparent evidence about starting period of Wild
Cat Era Banking History. Some facts about Wild Cat Era Banking in Nepal are as
follows:

 According to the sources Nepal had operated Currency around 400 BC by

Suddhodhan, the king of Kapilvastu.
 Lichchhavi King Mandev operated currency ‘Mananka’.
 In the medieval phase of 7th century Anshuvarma and later, Jishnu Gupta
issued ‘Coins’ which were marked by Sun, Moon, Tree, River or other
Natural symbols. Generally, these Coins were making from Gold, Silver and
other Metals.
 King Gunkamdev borrowed loan from the people for renovation of
Kathmandu Valley and started currency ‘Gunanka’.
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 In ending period of 8th century Sankhadhar Sakhwa had paid out all debt
which was borrowed by king Gunkamdev.
 Around 12th century Sadashiv Dev had started Silver’s coins
 In 14th century king Jaysthiti Malla divided 64 caste by their professions.
King permitted One of these caste Tankadhari to allow trading of money. So
Tankadhari’s are known as Ancient Banker.
 In 16th century King Ratna Malla had started Copper’s , Mahindra Mall had
started Silver’s and last king of Kathmandu Jayprakash Malla had started
Gold’s coin, which were known as Java.
 After the Unification of Nepal Shree Paach Prithivi Narayan Shah
established Koushitosh Khana which used to produce Metallic Coins.
 Nepal’s first institutional Banking, Tejarath Adda incorporated in 1933 by
Prime Minister Ranodip Singh. It’s basic purpose was to provide credit
facilities to the general public at a very concessional rate. Tejarath Adda
provided loan to Government Employee without any collateral which was
settled by deducting from their salary but it Provided Loan to general public
@ 5 % P.A. interest rate on the base of collateral such as Gold, Silver,
Ornaments etc. Tejarath Adda didn’t accept any deposits from anyone.
Because poor Management, Strategy, Tejarath Adda collapsed in 1942 B.S.
Thereafter, Moneylenders, Creditors (Jamindar) etc. covered Nepalese
Financial Market.
 Taksar Bibhag was started issuing currencies Managerially & Scientifically
in 1989. In that period’s currencies exchange system :
Table No. 1.1.1 (b):

Taksar Bibhag’s Currency ExchangeSystem

1 Paisa
4 Paisa 1 Aana
5 Paisa Dhyak
25 Paisa Suka
50 Paisa Mohar
100 Paisa 1 Rupaiyaa
Nepal began new era of Banking after
established Nepal’s first modern Bank ‘Nepal Bank Limited’. It was inaugurated
by King Tribhuvan Bir Bikram Shah Dev on 30 Kartik 1994 B.S. (15 Nov. 1937
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A.D.) under the act ‘ Udhyog Parisad or. Company Act 1993 B.S. , and Nepal
Bank Act 1994 B.S. NBL was established as semi government bank or public
enterprises with the Metallic Coins worth Rs. 10 million authorized capital &
issued capital Rs. 2.5 million which paid up capital was Rs. 842 thousand with 10
shareholders. The Equity 51 % divided by Government and rest was hold by
Publics. Banknotes in Nepal weren’t introduced up until the mid 2000’s B.S.
(1940’s A.D.) It was in the year 2003 B.S. (1945 A.D.) that the earliest banknotes
were issued by the Treasury ‘Sadar Mulukikhana’. These notes were signed by a
‘Khajanchi’, the head of Treasury who was also was a high Hindu Priest. Later, in
the year 2012 B.S. (1955 A.D.) ‘Nepal Rastra Bank Act’ was formulated for a
Managerial Banking System. On the date of 14th Baishakh , 2013 B.S. (26th Apr.
1956 A.D.) Nepal Rastra Bank was established as the Central Bank of Nepal. After
this date, the NRB has been started issuing Nepali currency and eliminated duo
monetary system (Nepali and Indian Currency). In 2014 B.S.(1957 A.D.) Industrial
Development Bank was established to promote the industrialization in Nepal later,
converted to Nepal Industrial Development Corporation Limited (NIDCL) in 2016
B.S. (1959 A.D.). NIDCL was first Development Bank of Nepal later it was
merged with the Agriculture Development Bank.

On 28th Bhadra 2020 (13th Sept. 1963 A.D.) ‘Sahakari Bank’ was established under
the act Sahakari Bank Act 2019 with the authorized capital of Rs. 5 million.
Rastriya Banizya Bank under the full ownership of government was incorporated
on 10th Magh 2022 (23rd Jan. 1966 A.D.) as per Banizya Bank Act 2020. As the
Agriculture is the main and basic occupation of majority citizens of Nepal.
Agriculture Development Bank established on 7th Magh 2024 (21st Jan 1968 A.D.)
with the authorized capital Rs. 10 Million to substitute Sahakari Bank and
operating Agricultural Financing.

In the Decade of 2040’s Nepal declared Free Economy and Privatization Policy.
NRB refresh and update in Financial, Monetary policies. The government
encouraged the foreign Bank for joint venture in Nepal. On 29 th Asar 2041 (12th
July 1984) Nepal Arab Bank Limited established (now Nabil Bank Limited) who
was the joint venture of Dubai Bank Limited, UAE. Nabil Bank is the Nepal’s first
private sector and foreign joint venture Bank. Then some foreign joint venture
Bank established such as Nepal Indosuez Bank (Now Nepal Investment Bank)
joint venture of Banque Indosuez France, Grindlays Bank Limited London (Now
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Standard Chartered Bank Nepal Limited), Himalayan Bank joint venture of Habib
Bank of Pakistan.

Nepal created new milestone after the establishment of first Financial Institution
or. Company and Micro Finance Company, Nepal Housing Development Finance
Company Limited and Purvanchal Gramin Bikas Bank on the date of 19th Shravan
2049 (3rd Aug 1992) and 17th Falgun 2049 (28th Feb 1993) respectively. Lumbini
Bikash Bank was the first private sector’s ownership Bank of the Nation which
was established on 1st Shravan 2055 B.S. (17th July 1998) later it has merged with
Bank of Kathmandu Limited. Then many Banks established Nepal Industrial &
Commercial Bank Now NIC Asia, Machhapuchhre Bank ltd., Kumari Bank ltd.
Etc.

After 2060’s B.S.(2004 A.D.) Nepal applied Universal Banking System after
formation of Bank and Financial Institutional Act 2063 (BAFIA 2063). Which had
included all Banking Acts, so it is called Umbrella Act. After a decade BAFIA has
updated in the year 2073 and renamed BAFIA 2073. After applying Universal
Banking System the Banking Industry becomes more Modern, Systematic, &
Professional.

There are various types of Bank working in Modern Banking System in Nepal. It
includes Central, Commercial, Development, Finance, Micro–Finance, Co-
operative, Micro Credit, Infrastructure (proceeding to establishment) etc.
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1.2 Background of the study

Banks are the pillar and backbone of the Every Nation. Financial, Economical,
Monetary, Political, Social and overall system can’t takeover without Banking
system at the present Era. The basic function of Bank is collecting deposit and
granting loan. It involves in Credit creation that related to creation of deposit of
loan. Banks acts as intermediaries channeling saving into investment, lending and
consumption. Bank plays effective, imperative and incredible role in every
economy.
There are many methods to evaluating Bank’s performance Capital Structure,
Capital Adequacy, Working Capital, Dividend Policy, Investment Methods etc. I
have chosen the topic Liquidity Analytics, Which is based on the performances
Nabil Bank Ltd.
In Banking, Finance, Economics, Business or Investment Liquidity is a Market’s
ability to facilitate an assets being sold quickly without having to reduce its price.
Liquidity refers to the degree to which, an assets can be sold as quickly as possible
without significant loss in assets-value. Liquidity is defines as Bank’s capacity to
pay cash in exchange deposit. In a context of Bank Management, Liquidity refers
to the cash flow ability of bank to meet deposit withdrawals, loan commitments
and unexpected expenses without having to liquidate other assets. Liquidity is the
availability of cash in the amount and at the time needed at a restorable cost.
Money or Cash is the most Liquid asset because it can be sold for goods and
services instantly with no loss of value. There is no wait for a suitable buyer of
cash. There is no wait for suitable buyer of the cash. There no trade-off between
speed and value. It can be used immediately to perform Financial, Economical
actions like buying, selling and paying.
According to Oxford Dictionary of Business & Management “The extend to
which an organization’s assets are liquid enabling it to pay its debts when they fall
due and also to move into new investment opportunities.”
According to R.S. Sayers, “Liquidity is the ability to convert assets into cash.”
Liquidity is lifeline of Banks and its funds. Analysis for insuring adequate
Liquidity is an important task. Bank should maintain adequate Liquidity, Excess
Liquidity reduces Bank’s earning and deficit Liquidity exposes a Bank to the
possibility of costly emergence measures to secure needed funds. A Bank can
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categorized by current position analysis, Account Receivable, Inventory analysis
and Account Payable analysis.

Motives of holding liquidity

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To fulfill needs
To secure business
Transaction motive
To get Business opportunities

1.2.1 Importance of Liquidity

Figure No. 1.2.:

Importance of Liquidity
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improve its Liquidity by shortening assets maturities and by lengthening liabilities

maturities.
Liquidity analysis is widely used by Banks and other Financial Institutions to
assess a business entity’s ability to repay. Liquidity analysis measures can be
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1.2.2 Demand and Supply of Liquidity
Figure No. 1.2.2:

Demand & Supply of Liquidity

1.2.3 Nepal Rastra Bank Directives on Liquidity Management

Nepal Rastra Bank is the apex regulator of Bank & Financial Institution in Nepal.
As a regulator, NRB has issued several guidelines and directives specifying
liquidity provision for BFIs in Nepal. NRB has issued following the provision
regarding with the liquidity:

Cash Reserve Ratio (CRR)

CRR is the specified minimum proportion of total deposits liabilities of a Bank,

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which must be held as reserves either in cash or as deposits with the central bank.
CRR is set according to guideline of central bank. The purpose of maintain CRR is
to ensure that BFIs do not run out of cash to meet withdrawls of their deposits.The
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latest Monetary Policy introduced by Nepal Rastra Bank for F/Y 2077/78 has
reduced to CRR @3% from 4% for BFIs.

Statutory Liquidity Ratio (SLR)

Banks have to maintain a stipulated proportion of their deposit liabilities in the

form of liquid assets. SLR is the minimum proportion of deposit liablities that the
banks have to maintain in form of cash, gold, T- Bills or other Central Bank
approved marketable securities. According to Monetary Policy 2077/78 SLR has
to be maintain 10 %, 8% & 7% to Commercial Bank, Development Bank &
Finance Institutions respectively.

Credit to Core Deposit Ratio (CCD Ratio)

Credit to Core Deposit ratio is commenly used statistic for assessing a Bank’s
liquidity. CCD ratio shows that how much a bank has lend out of deposits it has
mobilized. NRB has set the upper ceiling of CCD ratio at 85% for the F/Y
2077/78.

Liquid Assets to Total Deposit Ratio (LATDR)

Liquid Assets include cash in hand, balance to central bank & other banks, money
at call and short notice. The proportion of these assets to total deposit of bank is
called Liquid Assets to Total Deposit Ratio (LATDR). As per NRB monetary
policy Bank and Financial Institutions should maintain LATDR @ 15% for the
F/Y 2077/78.

Nepal Rastra Bank has updated provisions and directives for Bank & Financial
Institutions specially for this F/Y to maintain and overtake Financial Syatem and
overall Economy, which has gone down-ward due to Pendamic of COVID 19.
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1.3 Profile of the Organization

Nepal Arab Bank Limited is the Nation’s first ever private sector’s and foreign
joint venture Bank, founded in 29th Asar 2041 (12th July 1984) under the
Commercial Bank Act 2021 B.S. (1974 A.D.) and Companies Act 2021 B.S. (1964
A.D.) with authorized share capital 30 million. It was a Joint Venture of Dubai
Bank Limited. Later Dubai Bank Limited sold its 50% shares to NB International,
Bangladesh. Then it was renamed as Nabil Bank Limited. Nabil provides full range
of Commercial Banking services though it 119 points of representation. Nabil has
present through over 1500 remit agent throughout the nation. Nabil is serving
ATM services in 185 palaces.

Table No.1.3:

Brief Profile of Nabil Bank Limited

Brief Profile of Nabil Bank Limited, Date 2077-09-29

Type Public
Industry Banking
Traded as NEPSE 131
Area Served Nepal
Paid-Up Capital 10.10 Billion NRS.
Stock Holders Equity 25.86 Billion NRS.
Deposit 193 Billion NRS.
Loan & Advances 156 Billion NRS.
CAR 13.06%
Key People Mr. Anil Keshary Shah ,CEO
Mr. Sujit Pokherel, Finance Manager
Website nabilbank.com
Source: Nabil Bank Limited Annual Report, 2076/77
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Figure No. 1.3:

Shareholder’s Proportion

Shareholders Ownership Of Paid-up Capital

NB International
General Publics
Rastriya Beema Company
NEPSE

Source: Nabil Bank Limited Annual Report, 2076/77

The above figure shows that, the maximum portion of stocks of Nabil Bank Ltd., Is
held by Bangladesh’s holding NB International i.e. 50% of total paid-up capital.
Rest portion of stocks held by General Publics, Rastriya Beema Compeny and
Nepal Stock Exchanges (NEPSE), 40%, 9.67% and 0.33% respectively.
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1.4 Statement of Problem

Liquidity is the status & part of the assets which can be meet the obligation. The
degree of Liquidity depends upon the relationship between cash assets and those
assets which can be quickly turned into Cash & Liquidity awaiting payment.

The study has aimed to find out the following research questions:

 What is the Liquidity position of the Bank?

 Is Bank maintaining sufficient Liquidity positions?
 What are the Liquidity security problems?

1.5 Objective of the study

The main objective of the study is to analyze the Liquidity Position of Nabil Bank
Limited. The study will suggest the Liquidity need & its Management for the
current year. The other objectives are as follows:

 To examine Liquidity position of Nabil Bank Limited,

 To the analyze of Financial Performance in terms of Cash Reserve, Loan
& Advances and Total Investments.
 To suggest that the amount of the optimum level of Liquidity,

1.6 Rational of the study

Liquidity needs Commercial Bank and Other Financial Institutions because in no
any business run without it. People keep their money in the Banks without
obtaining any security because they are confident that the Bank keep their money
safely and repay on demand or an agreed data, together with interest when
applicable. The study, ponder to find out whether Commercial Bank are alert or not
in this regard. This study has to substantial importance to Investor, Researcher,
Professionals, Executives and Students to meet their personal and organizational
objectives. This study intends to help the National Economy through mobilization
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of idle capital of average Nepalese in productive sector to accelerate the Economic

growth and reduce dependency of foreign assistance and loan.

This report is prepared to analysis the Liquidity position of Nabil Bank Limited.
This report comprises the last 5 years data. This would help to the Bank to observe
the trend of the Liquidity position hold in those periods. The rational of the study
are as follows:

 Nabil Bank Limited may acquire important suggestion as mention in the

study.
 This study will help to examine the Liquidity generated from different
sources.
 The student will get the Banking knowledge.
 This report will be kept as valuable assets in the Library.

1.7 Review of Literature

Concept of Review of Literature is reviewing research studies in the related field of
study, so that all the past relevant studies their conclusion and deficiencies may be
known and further researches can be conducted. Literature Review can also be
finding as a survey, discussion and discourse on the Literature in a given areas of
study, in other words Review of Literature mends the study of relevant topics in
related field of research.

Review of Literature comprises upon the existing literature and research related to
the present study with a view to find out what had already been studied. Literature
review is a process of systematic way of accumulation, analysis and evaluation of
facts or knowledge of selected topic or problem. It provides direction for doing
something new with appropriate variables, and methodology. It is both summary
and explanation of current state of knowledge of intended research questions.

Banks play an important role in an economy of the country. Banks’ performance

has greatly affected by the liquidity position of the banks. . Liquidity is crucial in
the business like banking sector. Banks have to maintain liquidity, if the bank has
high liquidity it cannot gain desired profit and if bank has the shortfall of the
liquidity it cannot satisfy its customers. Inadequate liquidity may lead to collapse
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of the bank while excess liquidity is determinant to banks’ profitability in order to

remove demerit’s associated with maintaining inadequate and excess liquidity,
bank should maintained and optimum level of liquidity. Banks have to maintain
adequate liquidity to smooth running of firm.

Theoretical framework is the structure that can hold or support a theory of a

research study. The theoretical framework is one of the more infamous
components of a dissertation. A good theoretical framework gives a strong
research base and provides support for the rest of the research. This study
conducted to analyze Liquidity position of Nabil Bank Limited. Theoretical
framework helps to conduct good report writing, which includes different ratios
which helps to analyze liquidity position of Nabil Bank Limited.

Liquidity Ratio reflects the short-term obligation of the firm. This ratio shows that
if firm need cash amount in short period without any notice, can firm fulfill its
need or how it manage the need. Commercial banks need liquidity to meet loan
demand and deposit withdrawals. Liquidity is also needed for the purpose of
meeting Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)
requirements prescribed by the central Bank. The following ratios are calculated
under the liquidity ratios.

 Deposits & Its Trends

 Saving Deposit to Total Deposit Ratio
 Fixed deposit to Total Deposit Ratio
 Current Deposit to Total Deposit Ratio
 Cash and Cash Equivalent to Total Deposit Ratio
 Balance with NRB to Total Deposit / Cash Reserve Ratio(CRR)
 Loan to Total Deposit Ratio
 Total Investment to Total Deposit Ratio

1.7.1 Review of Previous Study

Many researchers have conducted various research on related topic in past. There
are some previous works are as follows which are related to present study:
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The World Bank published book titled ‘Excess Liquidity & Monetary Overhangs’.
It was started that there is mostly excess Liquidity on Financial Institutions of the
developing Economies. Similarly, the IMF opines the excess Liquidity is a great
problem for developing Economies and result not from dearth of lending
opportunities or demand for fund but from a number of system and institutions
short coming.

Kumbirai & Webb (2010) investigated the performance of South Africa’s

commercial banking sector for the period 2005- 2009. Financial ratios are
employed to measure the Profitability, Liquidity and Credit quality performance of
five large South African based Commercial Banks. The study found that overall
bank performance increased considerably in the first two years of the analysis. A
significant change in trend is noticed at the onset of the global financial crisis in
2007, reaching its peak during 2008-2009. This resulted in falling profitability, low
liquidity and deteriorating credit quality in the South African Banking sector.

Sthapit & Maharjan (2012) examined the effects of liquidity on profitability. To

address the objective, the article has taken NABIL and SCBN for the period
between 2003/04 and 2010/11. Considering the liquidity management can increase
the Profitability, the study has examined their Liquidity Management of Nabil
Bank Limited and Standard Chartered Bank Nepal as well as profitability positions
using various Financial Tools & Indicators. It was found that and indicators. It was
found that the trend of average Liquidity ratios and Profitability of both banks are
not seems to be fluctuating but average variation in Liquidity ratios as well as
Profitability of SCBN is lower than that of NABIL.

1.7.2 Research Gap

Research Gap is difference between previous researcher done and that the present
research works that is going to conduct. It also refers to the difference seen in
previous research work related to the present topic of the study. A lot of research
work have been conducted on this topic. The some of previous researcher focused
on only study about Profitability by using Liquidity positions, some of previous
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researcher focused on Financial Analysis, Interest Rate Analysis, Ratio Analysis,

Income Analysis, Historical Analysis, Impact of Excess Funds and etc. by studying
Liquidity Proportion. The similar previous studies conduct by different researches
was focus on the Liquidity Analytics and its Mobilizations and on the Socio
Economic issues. This study is about Liquidity Analytics of Nabil Bank Limited.
This study is focused on Liquidity system, Liquidity Facilities, Difficulties to
Application of Liquidity Services used in Banking Sector as well as Nabil Bank.

1.8 Research Methodology

The Method which is using in the research to plan the how the data is collected and
which source the study use for getting data is under the Research Methodology.
Methodology is the research method used to test Hypothesis Methodology is a
systematic way of solving the research problem. It refers to the various sequential
steps to be adopted by a researcher in studying a problem with certain objective.

The prime concern of this study is the Liquidity position of Nabil Bank Limited for
Analyzing the Liquidity Risk. It can measured by its ability to discharge demand of
deposit and loanable fund. The approaches to the research presented in this topic. It
includes the Type of Research, Population and Sample, Types and sources of Data,
Data collection Procedure and Analysis techniques which are as follows:

1.8.1 Research Design

A research design is the arrangement conditions, for the collection and analysis of
data in a manner that to combined relevance to the research propose with the
economy in procedures. Research design is the plan, structure, strategy of
investigation imagines obtaining answer to research question and controlling
various things. The proposed study is mainly based on two types of research design
descriptive and analytical. Descriptive research design describes the general
pattern of Investors, Business Environment, problem regarding the loan
Management. Similarly analytical research design makes a through analysis of
gathered facts and information and critical evaluates as well.
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1.8.2 Data Collection Techniques & Sources

The proposed study will not be Transparent without mention Data collection
techniques & sources. The quality and actual result of research is determined how
far the actual data and information is obtained. There are two types of data,
Primary Data & Secondary Data.

Primary data, which are collected from the questions answer, interview or with
officials or staff. Primary data collected directly from related persons. Primary data
are original in nature.

Secondary data, which are taken from various published and unpublished sources,
such as Articles, Previous Research studies, Books, Magazines etc.

This research is based on secondary data. The require data were collected from
concerned organization. Secondary data were collect from Publication of Nabil
Bank, Nepal Rastra Bank, NEPSE, SEBON, Newspapers, Articles, Journals,
Economics Survey, Unpublished Thesis, Previous Researches, Websites and etc.

1.8.3 Data Analysis Techniques and Tools

This study is based on secondary data. An Arithmetical relationship between two
figures is called ratio. It is the most useful and analytical tools to evaluate in
respect to one variable to other. The data of the report were analyzed by using
Financial Tools & Statistical Tools:

Financial Tools: Financial Tools are the instruments of analyze the collective data
from different sources. It used to examine the strength and weakness of banks.
Here, for our purpose only the liquidity related ratios are calculated.

 Deposits & Its Trends

 Saving Deposit to Total Deposit Ratio
 Fixed deposit to Total Deposit Ratio
 Current Deposit to Total Deposit Ratio
 Cash and Cash Equivalent to Total Deposit Ratio
 Balance with NRB to Total Deposit / Cash Reserve Ratio(CRR)
 Loan to Total Deposit Ratio
 21

 Total Investment to Total Deposit Ratio

1.9 Population & Sample

At present there are 27 commercial banks operating in Nepal after merged of
Janata Bank Nepal with Global IME Bank. For this research all commercial banks
are regarded as population and out of these Nabil Bank Limited has taken as
sample.Financial statements of last five fiscal years from F/Y 2072/73 to 2076/77
have been taken as sample data for Analysis of Liquidity Management. All
commercial are as follows:
 Siddartha Bank Limited
 Nepal Bank Limited
 Rastriya Banijya Bank Limited
 Agriculture Development Bank Limited
 Nabil Bank Limited
 Nepal Investment Bank Limited
 Standard Chartered Bank Nepal Limited
 Himalayan Bank Limited
 Nepal SBI Bank Limited
 Nepal Bangladesh Bank Limited
 Everest Bank Limited
 Bank of Kathmandu Lumbini Bank Limited
 Nepal Credit and Commerce Bank Limited
 Kumari Bank Limited
 Laxmi Bank Limited
 Global IME Bank Limited
 Citizens Bank International Limited
 Prime commercial Bank Limited
 Sunrise Bank Limited
 NMB Bank Nepal Limited
 NIC Asia Bank Limited
 Machhapuchchhre Bank Limited
 Mega Bank Nepal Limited
 Civil Bank Limited
 Century Bank Limited
 Sanima Bank Limited
 Prabhu Bank limited
 22

1.10 Limitation or Exception of the study

Every research has limitation, exception and constraints. This study is conducted
for the partial fulfillment of the requirement for the degree of BACHELOR OF
BUSINESS STUDIES (BBS) and it is only about Liquidity Analytics of Nabil
Bank Limited and can’t be compared with other Banks or Financial Institutions.
This report is held within the following limitations, exceptions and constraints,
which are as follows:

 In this report secondary data has been used

 Due to the lack of the practical education, time volume and budget, new
method may not be developed.
 Data contains mostly on the basis of published annual reports of the bank.
 It includes only 5 years data analysis.
 23

CHAPTER - II

RESULT & FINDING

Annual report presents the Financial Statement of company i.e. Balance Sheet,
Income Statement, Cash Flow Statement, SHE etc. This chapter is devoted to the
Analysis, Presentation and Interpretation of data from different Mechanism by
using Analytical Tools & Techniques. Liquidity Analytics of the Nabil Bank
Limited has been done through following way:

2.1 Presentation, Interpretation & Analysis

This chapter deals with the Presentation, Interpretation and Analysis of data
following the researcher methodology dealt in the chapter. In the course of
analysis, data gathered from the various sources have been inserted in the tabular
form according to 'heir' homogenous nature. The various tables prepared for the
analysis purpose have been shown in annexes. In order to achieve those objectives
necessary analytical tools and techniques have been discussed in unit research
methods. In this unit, Data are analyzed by using Ratio Analysis and present in the
Table, Graphs and Figures. Financial Ratio is the Mathematical relationship
between two Accounting figures. Ratio analysis is one of the most commonly used
techniques in the analysis of liquidity position of the banks. Ratio analysis points
out the problem in any operational areas and provides a basis to recommend
corrective actions. There is variety in ratio calculation. Data contained in financial
statement as the requirement of the types of ratio.

This study is based on Liquidity so in this chapter Liquidity Ratios are used to
Analyzing Data. Liquidity analysis is the one of the major tool to analyze liquidity
position of the Banks through Liquidity Ratio. Liquidity ratios are used to judge
ability of Bank to meet its short term liabilities in short period. Liquidity Ratio
measurement of speed Bank’s assets can be converted into cash to meet deposit,
withdrawal and current obligations.
 24

Deposits & It’s Trends

Table No. 2.1.1:
Last 5 Years Deposits Variations (Amount in Rs.)
Fiscal Saving Deposits Current Deposits Fixed Deposits Total
Year
2076/77 Rs.5688536871 Rs.18235155943 Rs.78605040937 Rs.190806469972
0
2075/76 Rs.4987191689 Rs.17986690530 Rs.64955748348 Rs.162953999572
5
2074/75 Rs.4414248139 Rs.17325806590 Rs.45020131298 Rs.134810669677
4
2073/74 Rs.4813063800 Rs.18472349149 Rs.24044677446 Rs.117436362752
3
2072/73 Rs.5039948002 Rs.17898060266 Rs.8868607580 Rs.109288114845
6
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.1:

Last 5 Years Total Amount of Deposits
 25

Last 5 Years Total Amount of Deposits (In Billions)

190
162
134
109 117

2072/73
2073/74
2074/75
2075/76
2076/77

Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.2:

Last 5 Years Total Amount of Deposits

200
180
160
Amount Rs. in Billions

140
120
100
80 Total Deposits
60
40
20
0
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Years

Source: Annual Reports, Nabil Bank Limited

 26

Above the figures 2.1.1 & 2.1.2 shows that total amount of Deposits collected by
Nabil Bank Limited last 5 years in NRS Currency. The Bar-Diagram’s pillars and
Time Line Chart’s Curve are up- warding which indicates that, the ability of Bank
to collecting deposit has been increasing year to year. The Total deposit collected
in fiscal year 2072/73 is Rs. 109 Billion and fiscal year 2073/74, 2074/75, 2075/76
& 2076/77 are Rs.117 Billion, Rs.134 Billon, Rs.162 Billion & Rs.190 Billion
respectively.

Figure No. 2.1.3:

Last 5 Years Deposit Variation

Last 5 Years Deposits (In Billions)

80

70

60

50 Current Deposits
Saving Deposits
40 Fixed Deposits

30

20

10

0
2072/73 2073/74 2074/75 2075/76 2076/77
 27

Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.4:

Last 5 Years Variations
Deposit Summery last 5 years
90
80
70
Amount in Billions

60
Current Deposits
50
40 Saving Deposits
30 Fixed Deposits
20
10
0
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Years

Source: Annual Reports, Nabil Bank Limited

In the Table no. 2.1.1, Figure no. 2.1.3 & 2.1.4, we see that the Deposit Variation
of Bank for last five fiscal years. In fiscal year 2072/73 the Bank collected 109
Billion Rupee total deposit which has included Rs .17.89 Billion CD, Rs. 50.39
Billion SD & Rs.8.86 Billion FD. Fiscal year 2073/74 the Total deposits of Bank
increased to 117 Billion rupee which has included Rs.18.47 Billion CD, Rs.48.13
Billion SD & Rs.24.04 Billion FD. Next year the Bank collected 134 Billion Rupee
from total deposit which has included Rs.17.32 Billion CD, Rs.44.14 Billion SD &
Rs.45.02 Billion FD. In fiscal year 2075/76 CD Rs.17.98 Billion, SD Rs.49.87
Billion & FD Rs.64.95 Billion and the total deposits collected 162 Billion Rupee.
In the last fiscal year Bank collected Rs.190 Billion which has included CD
Rs.18.23 Billion, SD Rs.56.88 Billion & FD Rs.78.60 Billion. Above the Deposit
trend shows that the Total Deposits of Bank has been increasing. The Fixed
Deposits has been increased rapidly last 5 years duration where as The Current and
Fixed deposits has been also fluctuating but not like Fixed Deposits. Saving and
Current deposits have been increasing since last 3 fiscal years. The deposit
collecting of Nabil is going up-ward state.
 28

This study is about Liquidity Analytics. For analyzing liquidity we have to use
Financial Ratio specially, Liquidity Ratios. So the given ratios will be used to
Analysis of Liquidity:

 Deposits & Its Trends

 Saving Deposit to Total Deposit Ratio
 Fixed deposit to Total Deposit Ratio
 Current Deposit to Total Deposit Ratio
 Cash and Cash Equivalent to Total Deposit Ratio
 Loan & Advances to Total Deposit Ratio
 Balance with NRB to Total Deposit / Cash Reserve Ratio(CRR)
 Total Investment to Total Deposit Ratio

Table No. 2.1.2:

Saving Deposit to Total Deposit Ratio

Fiscal Year Saving Deposit Total Deposit Ratio

2076/77 Rs.56885368710 Rs.190806469972 0.2981
2075/76 Rs.49871916895 Rs.162953999572 0.3060
2074/75 Rs.44142481394 Rs.134810669677 0.3274
2073/74 Rs.48130638003 Rs.117436362752 0.4098
2072/73 Rs.50399480026 Rs.109288114845 0.4611
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.5:

Saving Deposit to Total Deposit Ratio

 29

0.5
0.45
0.4
0.35
0.3
STD Ratio

0.25
Saving to Total Deposit Ra-
0.2
tio
0.15
0.1
0.05
0
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Year

Source: Annual Reports, Nabil Bank Limited

The above Table and Time Line Chart shows that the Saving to Total Deposit
Ratio of Nabil Bank Limited. The STD Ratio of f/y 2072/73 is 0.4611 and next 4
f/ys STD Ratios are 0.4098, 0.3274, 0.3060 & 0.2981 respectively. From the given
Table and Time Line Chart, ratio is fluctuating down ward state which indicates
that the increment ratio of saving deposit has not been meeting with increment
ratio of total deposits.

Table No. 2.1.3:

Fixed Deposit to Total Deposit Ratio

Fiscal Year Fixed Deposit Total Deposit Ratio

2076/77 Rs.78605040937 Rs.190806469972 0.4136
2075/76 Rs.64955748348 Rs.162953999572 0.3986
2074/75 Rs.45020131298 Rs.134810669677 0.3339
2073/74 Rs.24044677446 Rs.117436362752 0.2048
2072/73 Rs.8868607580 Rs.109288114845 0.0811
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.6:

Fixed Deposit to Total Deposit Ratio

 30

0.45

0.4

0.35

0.3
FTD Ratio

0.25

0.2
Fixed to Total Deposit Ratio
0.15

0.1

0.05

0
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Years

Source: Annual Reports, Nabil Bank Limited

The above Table and Time Line Chart shows that the Fixed to Total Deposit Ratio
of Nabil Bank Limited. The FTD Ratio of f/y 2072/73 is 0.0811 and next 4 f/ys
STD Ratios are 0.2048, 0.3339, 0.3986 & 0.4136 respectively. From the given
Table and Time Line Chart, ratio is fluctuating up- ward state which indicates that
the fixed deposit has been increasing with the total deposits.

Table No. 2.1.4:

Current Deposit to Total Deposit Ratio

Fiscal Year Current Deposits Total Deposit Ratio

2076/77 Rs.18235155943 Rs.190806469972 0.0959
2075/76 Rs.17986690530 Rs.162953999572 0.1103
2074/75 Rs.17325806590 Rs.134810669677 0.1285
2073/74 Rs.18472349149 Rs.117436362752 0.1572
2072/73 Rs.17898060266 Rs.109288114845 0.1637
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.7:

Current Deposit to Total Deposit Ratio

 31

0.18
0.16
0.14
0.12
CTD Ratio

0.1
0.08 Current to Total Deposit
Ratio
0.06
0.04
0.02
0
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Years

Source: Annual Reports, Nabil Bank Limited

In the table no. 2.1.4 & figure no. 2.1.6 shows that portion of current deposit to
total deposit. The CTD ratio of the bank in f/y 2072/73 is 0.1637. Next 4 fiscal
year the CTD Ratio has been fluctuating down-ward every year. CTD ratio of f/ys
2073/74, 2074/75, 2075/76 & 2076/77 are 0.1572, 0.1285, 0.1103 & 0.0959
respectively. We can see that in the Time Line Chart CTD Ratio is going
downward sloping, which means the Current Deposit is reducing year to year in
comparison with Total Deposit.

Table No. 2.1.5:

Cash and Cash Equivalent to Total Deposit Ratio

Fiscal Years Cash & Cash Total Deposit Ratio

Equivalent
2076/77 Rs.4799629907 Rs.190806469972 0.0251
2075/76 Rs.10670329148 Rs.162953999572 0.0654
2074/75 Rs.7952350362 Rs.134810669677 0.0589
2073/74 Rs.7167160590 Rs.117436362752 0.0610
2072/73 Rs.5853231487 Rs.109288114845 0.0535
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.8:

 32

Cash and Cash Equivalent to Total Deposit Ratio

Cash & Cash Equivalent to Total Deposit Ratio

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2072/73 2073/74 2074/75 2075/76 2076/77

Source: Annual Reports, Nabil Bank Limited

From the above table and time line chart, the CETD ratio is fluctuating. In fiscal
year 2072/73, the Bank has total Liquidity for total deposit ratio of 0.0535 times.
And in f/y 2073/74, 2074/75, 2075/76 & 2076/77 the bank has liquidity for the
total deposit in ratio of 0.0610, 0.0589, 0.0654 & 0.0251 respectively.

Table No. 2.1.6:

Cash Reserve Ratio (CRR)/Due from NRB to Total Deposit

Fiscal Years Due from NRB Total Deposits Ratio

2076/77 Rs.20021021228 Rs.190806469972 0.1053
2075/76 Rs.8001190627 Rs.162953999572 0.0491
2074/75 Rs.7372284966 Rs.134810669677 0.0546
2073/74 Rs.5924569969 Rs.117436362752 0.0504
2072/73 Rs.5231334341 Rs.109288114845 0.0478
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.9:

 33

Cash Reserve Ratio (CRR)/Due from NRB to Total Deposit

Cash Reserve Ratio

0.12

0.1

0.08
Column1
0.06

0.04

0.02

0
2072/73 2073/74 2074/75 2075/76 2076/77

Source: Annual Reports, Nabil Bank Limited

Presented table and time line chart shows that the Cash Reserve Ratio of Nabil
Bank. CRR indicates that amount which reserved at NRB by the Nabil Bank. In the
fiscal year 2072/73 the CRR was 0.0478 ratio of total deposit. Next two year it has
increased to0.0504 & 0.0546. In the f/y 2075/76 CRR decreased to 0.0491 then in
year 2076/77 it increased rapidly. In the f/y 2076/77 the Bank maintained CRR
0.1053. CRR is determined by Central Bank’s Monetary Policy. According to
Monetary policy 2076/77 and NRB directives, CRR had to be 4%.

Table No. 2.1.7:

Loan & Advances to Total Deposit Ratio

Fiscal Years Loan & Advances Total Deposits Ratio

2076/77 Rs.153890438529 Rs.190806469972 0.8065
2075/76 Rs.133558735545 Rs.162953999572 0.8196
2074/75 Rs.113625154951 Rs.134810669677 0.8428
2073/74 Rs.92471341323 Rs.117436362752 0.7874
2072/73 Rs.78211146468 Rs.109288114845 0.7156
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.10:

 34

Loan & Advances to Total Deposit Ratio

Loan & Advances to Total Deposit Ratio

0.9

0.85
LTTD Ratios

0.8
Column1
0.75

0.7

0.65
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Years

Source: Annual Reports, Nabil Bank Limited

Primary Function of the Bank is accept deposit and lending that deposit. Above the
table and time line chart shows that how much loan & advances provided in
comparison with deposits. LTTD ratio is calculated to find how successfully Bank
utilize total deposit on Loan & Advances. The LTTD Ratio of the Bank in f/y
2072/73 is 0.7156 which means bank utilize 71.56% deposit on loan & advances.
LTTD Ratio of f/yrs 2073/74, 2074/75, 2075/76 & 2076/77 are 0.7874, 0.8428,
0.8196 & 0.8065 respectively.

Table No. 2.1.8:

Total Investment to Total Deposit Ratio

Fiscal Years Total Investments Total Deposits Ratio

2076/77 Rs.187690054180 Rs.190806469972 0.9836
2075/76 Rs.159028026899 Rs.162953999572 0.9759
2074/75 Rs.132139456471 Rs.134810669677 0.9801
2073/74 Rs.107907475174 Rs.117436362752 0.9188
2072/73 Rs.99794162068 Rs.109288114845 0.9131
Source: Annual Reports, Nabil Bank Limited

Figure No. 2.1.11:

 35

Total Investment to Total Deposit Ratio

Total Investment to Total deposit Ratio

1
0.98
0.96
TITTD Ratio

0.94
Column1
0.92
0.9
0.88
0.86
2072/73 2073/74 2074/75 2075/76 2076/77
Fiscal Years

Source: Annual Reports, Nabil Bank Limited

Total Investment to Total Deposit (TITTD) Ratio includes how properly firms
deposit has been invested on Securities, Properties, Subsidiary & Associate
Companies or etc. In F/Y 2072/73 the ratio is 0.9131, which means Bank has
invested 91.31% in comparison with total deposit. TITTD Ratio maintained
0.9188, 0.9801, 0.9759 & 0.9836 in f/yrs 2073/74, 2074/75, 2075/76 & 2076/77
respectively.

2.2 Finding
In this Field Work Project Report, we study about Liquidity Position of Nabil
Bank Limited. We found the Financial Position of Nabil. The finding of study
derived from Liquidity Analytics of Nabil Bank Limited. The compressive
summery of the major finding of this study is presented below:

 Total Deposits has been increasing year to year. Saving and Current
Deposits has been growing normally but Fixed Deposit has been growing
rapidly.
 36

 The highest Saving to Total Deposit Ratio (STD Ratio) & Current to Total
Deposit Ratio(CTD) 0.4611 & 0.1637 in the f/y 2072/73 and the lowest
STD Ratio & CTD Ratio 0.2911 & 0.0959 in the f/y 2076/77.
 The Highest Fixed to Total Deposit Ratio is 0.4136 in the f/y 2076/77 and
the lowest FTD Ratio is 0.0811 in the f/y 2072/73.
 Cash and Cash Equivalent Ratio has been fluctuating. Since, Last year the
cash balance reduced to Rs.5.88 Billion. The highest and lowest cash to total
deposit ratio is 0.0654 & 0.0251 in the f/y 2075/76 & 2076/77.
 Cash Reserve Ratio has been increasing every year which means bank keep
their deposit at the Nepal Rastra Bank which is possible from growing
deposits. The highest CRR is 0.1053 in f/s 2076/77 & lowest CRR is 0.0473
in f/y 2072/73.
 The Bank used their collected deposit more than 80% on lending purpose
since 3 yrs. and more than 70% since 5 yrs. The highest Loan to Deposit
ratio is 0.8428 in f/y 2074/75 and lowest LTD Ratio is 0.7156 in f/y
2072/73.
 Bank has been increasing Investment every year with the deposits. The
highest Total investment to Total deposit ratio is 0.9836 in f/y 2076/77 and
lowest TITTD ratio is 0.9131 in f/y 2073/73.
 37

CHAPTER – III

SUMMERY & CONCLUSION

This chapter presents a summery, conclusion & discussion of findings and this
chapter dedicated to provide conclusions after analyzing the Liquidity position of
Nabil Bank Limited. After summarizing and concluding the research
recommendations are suggested for the effective Liquidity Management.

3.1 Summery & Discussion

The primary goal of the developing country like Nepal is to develop economy
rapidly and to promote the welfare of the people and nation. So, very recently,
Nepal has adopted the path of economic liberalization for the sake of the economic
growth of the nation. The development process of a country involves the proper
mobilization and deployment of available resources. Financial institutions assist in
the economic development of the country and are considered as the catalyst.
Commercial banks are the major financial institutions that occupy quite an
important place in the framework in the economy development sectors as well as in
saving and investment sectors. Commercial banks are the suppliers of finance for
trade and industry and play a vital role in the economic and financial life of the
country. After the implementation of the open market policy, joint venture
commercial banks are opened as private banks. The liberal trade and investment
policies have facilitated joint venture banks to invest in Nepal. Joint venture bank
has been helpful in transferring foreign investment and advanced technology from
one country to another. The establishment of joint venture banks gave a new
horizon to the financial sector of the country. Commercial bank is income oriented,
thus proper financial decision-making is more important in banking transaction for
its efficiency and profitability. Most of the financial decisions of a bank are
concerned with Liquidity.

Majority of the Nepalese Citizen depend on Agriculture. Nepalese Economy is

dominated by Bank and Financial Institutions.80% of stock market covered by
BFIs. Ten of the thousands educated manpower is directly employed by BFIs
 38

which is the most in any one sector of public company. Nepal’s Banking Industry
is more modern, transparent, professional, developed, glamorous & attractive than
other sector in the Nation. Banking is the first choice of Management, Business,
Economics, Finance, Commerce, Chartered Accountancy, & other related fields
graduates.

Liquidity analysis is basically deals with two conflicting goals Liquidity &
Profitability. This research is conducted liquidity analysis of Nabil Bank. Liquidity
analysis is one of the major tools to analyze financial performance of the banks
that’s why this study chooses this topic. This study is taking as sample of Nabil
Bank’s over 5 year’s period i.e. 2072/73 to 2076/77. The liquidity ratio measures
the ability of a firm to meet its short-term obligations and select the short-term
financial solvency of a firm. On the basis of data analysis and presentation, the
researcher extracted some major findings which included in chapter 2. This study
is based upon the objective to evaluate the liquidity analysis of Nabil Bank
Limited. To fulfill research objective the study is divided into three chapters. In the
first chapter Introduction which includes Meaning, Concept & History of Banking;
Concept about Liquidity; Profile of Nabil; Statement of problem; objectives of
study. In the Literature Review has included different thesis, policies about
liquidity analysis. Research Methodology shows that the about research design,
data used, research techniques & tools. In this study secondary data has used to
analyze & evaluate liquidity. Second chapter includes the presentation,
interpretation & analyze of the data by using different financial tools which
measures liquidity. In this chapter summery & conclusion included. The major
findings have been extracted from the analysis of secondary data, and the
conclusion has been made on the basis of major findings.

3.2 Conclusion
Liquidity is regarded as the lifeblood and nerve of a any Bank or any business
concern and is essential to accommodate the smooth operations. Establishment of
commercial banks have continued in response to the economic liberalization
policies of the government. Nowadays, under the new policy banks have to
increase their paid up capital so that many banks are going to merger and
 39

acquisition. So, now in Nepal there are twenty seven Commercial Banks, twenty
Development Banks & Twenty Two Financial Companies competing with each
other in their business. These commercial Institutions are mainly concentrated
themselves on deposit collection and mobilization, provide banking services for
customer satisfaction, financing foreign in different project and areas. The
researcher has analyzed the data by using financial tools, which measures liquidity
of banks. Maintaining Liquidity is the crux of the problem as it is strongly related
to the tradeoff between risk and return. It is difficult to point out as to how much
Liquidity need by a Bank. In this study, the secondary data has been taken from
Independent Auditors Report which is included in NFRS approved annual reports
of the Nabil Bank. The following major conclusions have been drawn:

 The proportion of Fixed Deposit is high in the total deposit liability since the
last three fiscal years, which indicates that the Nabil Bank’s ability to
collecting fixed deposit has been increasing every year. The Nabil’s
customers are attracting with the fixed deposits schemes due to fat interest
rate, goodwill, legacy, marketing policies etc.
 Saving Deposits & Current Deposits are going up-ward year to year but not
like fixed deposits. Saving to Total Deposit ratio and Current to Total
deposit ratio are going down-ward, which show that the Saving and Current
deposits are not increasing in comparison with increment of total deposits.
 The Cash Balance of the bank has been fluctuating every year. In fiscal year
2076/77 the cash balance reduced by Rs.5.27 Billion from Rs.10.06 Billion.
 Bank Utilize their deposits to lending activities according to CCD ratio.
Nabil Bank provided loan & advances 80.65% of total deposits in f/y
2076/77.
 Nabil Bank’s CRR is not stable in 5 years period. Generally, NRB updates
CRR provisions in every fiscal year. Bank maintain CRR according to
monetary policy. In f/y 2076/76 Nabil maintained CRR10.53%.
 Bank is increasing Investing ability every year and the bank has satisfactory
result. In f/y 2072/73 Nabil’s Total Investments was 91.34% with total
deposit whereas, in f/y 2076/77 it has increased to 98.36%.


 40

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Nabil Bank Limited, Annual Reports for F/Y 2072/73 to 2076/77

Nepal Rastra Bank (2073), BAFIA 2073

Nepal Rastra Bank (2077), Monetary Policy for the F/Y 2077/78
Nepal Rastra Bank (2077), Unified Directives 2077

Yogendra Regmi (2076), Modern Banking System of Nepal

The World Bank , Excess Liquidity & Monetary Overhangs

International Monetary Fund -IMF (1985), Excess Liquidity

Kumbirai, M., & Webb, R. (2010). A Financial Ratio Analysis of Commercial Bank
Performance in Soutrh Africa. Rhodes University, Department of Economics and Finance.
Grahmstown: Rhodes University.

Sthapit, A., & Maharjan, G. (2012). Impact of Liquidity Management on Profitability: A

Comparative Study between Nabil Bank LTD and Standard Charactered Bank LTD. Lumbini
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Oxford University Press (2016), Oxford Dictionary Of Business and Management

Prof. Rajan Bd. Poudel; Prof. Keshar J. Baral; Prof. Padam R. Joshi; Rishi R. Gautam; Surya B
Rana Phd (2019), Commercial Bank Management

Dr. Diwakar Bashistha; Kulesh Panthi;Binod Kafle (2020), Private Bank Examination
Prepration Book

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APPENDICES
Annex – I

Nabil Bank Limited

Consolidated Statement of Financial Position

As At 31st Asar 2077 (15th July, 2020)

Particulars 2077 Asar 31 2076 Asar 31

Assets
Cash & Cash Equivalent 4,79,96,29,907 10,67,03,29,148
Due from NRB 20,02,10,31,281 8,00,11,96,207
Placement with BFIs 10,23,05,79,463 11,07,87,28,915
Derivative Financial Instruments 10,85,95,97,549 8,53,90,57,559
Other Trading Assets - -
Loan & Advances to BFIs 5,83,63,67,996 6,05,84,92,754
Loan & Advances to Customers 1,48,05,40,70,533 1,27,50,02,42,971
Investment Securities 33,63,33,96,986 25,30,30,72,689
Current Tax Assets 26,07,95,998 13,75,18,681
Investment on Subsidiaries 7,80,00,000 7,80,00,000
Investment on Associates 8,00,00,000 8,00,00,000
Investment Property 82,18,665 82,18,665
Property & Equipment 1,31,81,14,485 1,05,17,92,074
Goodwill & Other Intangible Assets 7,17,49,815 4,14,00,858
Deferred Tax Assets - -
Other Assets 24,28,47,68,902 2,59,07,70,943
Total Assets 2,37,68,00,29,570 2,01,13,88,21,464
Liabilities
Due to Bank & BFIs 2,22,88,61,182 1,41,90,42,125
Due to NRB 5,32,85,628 8,84,74,781
Derivative Financial Instrument 10,76,42,02,582 8,33,50,72,510
Deposits from Customers 1,90,80,64,69,972 1,62,95,39,99,572
Borrowings - -
Current Tax Liabilities - -
Provisions - -
Deferred Tax Liabilities 1,43,88,30,024 85,15,36,738
Other Liabilities 4,49,68,47,544 4,30,20,83,345
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Debt Securities Issued 2,03,58,74,071 -

Subordinated Liabilities - -
Total Liabilities 2,11,82,43,71,003 1,77,95,02,09,071

Equity
Share Capital 10,09,74,97,400 9,01,18,45,400
Share Premium 74,000 74,000
Retained Earning 3,57,64,22,833 3,73,53,33,814
Reserves 1,21,81,66,434 10,44,13,59,179
Total Equity Attributable to Equity Holders 25,85,56,58,567 23,18,86,12,393
Non Controlling Interest - -
Total Equity 25,85,56,58,567 23,18,86,12,393
Total Liabilities & Equity 2,37,68,00,29,570 2,01,13,88,21,464
Contingent Liabilities and Commitments 73,27,40,17,666 58,64,41,36,338
Net Assets Value per share 256.06 257.31

Annex – II
Participation of Total Deposit Liability

Fiscal Saving Current Fixed Deposits Total

Year Deposits Deposits
2076/7 Rs.5688536871 Rs.1823515594 Rs.7860504093 Rs.1,90,80,64,69,97
7 0 3 7 2
2075/7 Rs.4987191689 Rs.1798669053 Rs.6495574834 Rs.1,62,95,39,99,57
6 5 0 8 2
2074/7 Rs.4414248139 Rs.1732580659 Rs.4502013129 Rs.1,34,81,06,69,67
5 4 0 8 7
2073/7 Rs.4813063800 Rs.1847234914 Rs.2404467744 Rs.1,17,43,63,62,75
4 3 9 6 2
2072/7 Rs.5039948002 Rs.1789806026 Rs.886860758 Rs.1,09,28,81,14,84
3 6 6 0 5

Annex – III

Ratios:
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 Saving to Total Deposit (STD) Ratio = Saving Deposit ÷ Total Deposit

 Fixed to Total Deposit (FTD) Ratio = Fixed Deposit ÷ Total Deposit
 Current to Total Deposit (CTD) Ratio = Current Deposit ÷ Total Deposit
Cash & Equivalent To Total Deposit (CETD) Ratio = Cash & Equivalent ÷
Total Deposit
 Cash Reserve Ratio (CRR) = Due to NRB ÷ Total Deposit
 Loan to Total Deposit (LTTD) Ratio = Total Loan & Advances ÷ Total
Deposit
 Total Investment to Total Deposit (TITTD) = Total Investment ÷ Total
Deposit

Total Investment = Loan & Advances + Investment on Securities +

Investment on Subsidiary Companies + Investment on Associate
Companies + Investment Properties
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Annex – IV
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Annex – V
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Annex – VI
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Annex – VII

***