CREDIT RISK MANAGEMENT OF NABIL BANK LIMITED

A Project Work Report

By

Amir Bal
T.U. Registered Number 7-2-455-8-2019
Pinnacle College,Lalitpur

Submitted to
The Faculty of Management
Tribhuvan University Kathmandu

In Partial Fulfilment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Lalitpur, Nepal
July, 2024
 DECLARATION

I hereby declare that this project work entitled “CREDIT RISK MANAGEMENT
OF NABIL BANK LIMITED” submitted to the Faculty of Management, Tribhuvan University,
Kathmandu is an original piece of my effort under supervision by Mr. Nirmal Tiwari, faculty
member of Pinnacle College, Lalitpur, submitted in the partial fulfilment of the requirements for
the degree of Bachelor of Business Studies (BBS). This Project work has not been submitted to
any other university or institution for the award of any degree or diploma.

…………
Amir Bal
July, 2024

ii
 SUPERVISOR’S RECOMMENDATIONS
The project work report entitled “CREDIT RISK MANAGEMENT OF NABIL BANK
LIMITED” submitted by Amir Bal of Pinnacle College, Lalitpur 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.

……………….
Nirmal Tiwari
Supervisor
July, 2024

iii
 ENDORSEMENT

We hereby endorse the project work report entitled “A CASE STUDY ON CREDIT RISK
MANAGEMENT OF NABIL BANK LIMITED” submitted by Amir Bal of Pinnacle College,
Lalitpur in partial fulfillment of the requirements for the degree of the Bachelor of Business
Studies (BBS) for external evaluation.

-------------------------- -------------------------------
(Mr. Atma Ram Koirala) (Dr. Rishi Prasad Tiwari)
Chairman of the Research Committee Principal
July, 2024 July, 2024

iv
 ACKNOWLEDGEMENT

This project work entitled “CREDIT RISK MANAGEMENT OF NABIL BANK LIMITED” has
been prepared in a partial fulfillment of Degree under Bachelor’s in Business Studies (BBS)
Tribhuvan University, Nepal. During the preparation of this Term Paper, I got lot of inspiration,
co-operation and guidance from our respected teachers and friends.
First, I would like to express my respectful gratefulness towards my respected adviser Mr. Atma
Ram Koirala, Professor of Pinnacle College for his valuable support and suggestions in the
process of this report. I would like to express my sincere gratitude to college Principal Mr. Dr.
Rishi Prasad Tiwari of Pinnacle College for providing me with the necessary guidelines and
cooperation throughout the research program. I am extremely thankful to everyone who helped
me with my thesis writing.
The completion of this project work would have been considerably difficult without the help,
cooperation and suggestion of my friend Mr. Milan Tamang. I am indebted to him for his kind
support.
Finally, I would like to thank all my respondents and informants for providing me with the
required information in the process of data collection, and those who shared their brotherly
advice and materials.

Amir Bal
July, 2024

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 TABLE OF CONTENTS

Title Page i
Declaration ii
Supervisor’s recommendation iii
Endorsement iv
Acknowledgement v
Table of Contents vi
List of Tables vii
List of figures viii
Abbreviations
ix

CHAPTER I: INTRODUCTION 1
1.1 Background 1
1.2 Organizational Profile 5
1.3 Statement of Problem 7
1.4 Objectives 7
1.5 Rationale 8
1.6 Literature Review 8
1.7 Research Methods 11
1.7.1 Conceptual Framework 11
1.7.2 Research Design 11
1.7.3 Sources of Data 11
1.7.4 Data analysis tools 11
1.8 Limitations 12

CHAPTER II: RESULTS AND ANALYSIS 13

Results 13
Major Findings of the Study 25

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CHAPTER III: SUMMARY AND CONCLUSION 27
Summary 27
Conclusion 27

BIBLIOGRAPHY

vii
 LIST OF TABLES

2.1 Percentage change in Credit Risk 14

2.2 Percentage change in On-Balance Sheet Credit Risk Exposure 17

2.3 Percentage change in Off-Balance Sheet Credit Risk Exposure 18

2.4 Calculation of Total Credit Risk 20

2.5 Capital Adequacy Ratio 22

2.6 Loan Loss Provision Ratio 23

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 List of Figures

2.1 Values of Credit Risk 15

2.2 Percentage Change in Credit Risk 16

2.3 Values of On-Balance Sheet Credit Risk Exposure 17

2.4 Growth Rate of On-Balance Sheet Credit Risk Exposure 18

2.5 Values of Off-Balance Sheet Credit Risk Exposure 19

2.6 Lining Showing Off-Balance Sheet Credit Risk Exposure 20

2.7 Total Credit Risk Compositions 21

2.8 Capital Adequacy Ratios 22

2.9 Values of LLP and Total Loan 24

2.10 Line Showing LLP Ratio 24

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 ABBREVIATION

ABBS - Any Branch Service

SCT - Smart Choice Technology
ATM - Automatic Teller Machine
NRB - Nepal Rastra Bank
CAR - Capital Adequacy Ratio
ADB - Agricultural Development Bank
L.C. - Letter of Credit
NBL - Nepal Bank Limited
CDs - Certificate of Deposits
GNP - Gross National Product
B.B.S. - Bachelor of Business Studies
USD - United States Dollar
NRs - Nepalese Rupees

LLP - Loan Loss Provision

CD - Credit-Deposit

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xi
 CHAPTER I
INTRODUCTION

1.1 Background of the study

Credit risk refers to the probability of loss due to a borrower’s failure to male payments on any
type of debt. Credit risk management is the practice of mitigating losses by understanding the
adequacy of a bank’s capital and loan loss reserve at any given time a process that has long been
a challenge for financial institutions. The global financial crisis and the credit crunch that
followed put credit management into regulatory spotlight. As a result, regulators began to
demand more transparency. They wanted to know that a bank has through knowledge of
customers and their associated credit risk. And new Base III regulations will create an even
bigger regulatory burden for banks. To comply with the more stringent regulatory requirements
and absorb the higher capital costs of credit risk, many banks are overhauling their approaches to
credit risk. But banks who view this as strictly a compliance exercise are being short-sighted.
Better credit risk management also presents an opportunity to greatly improve overall
performance and secure a competitive advantage.

The possibility that a contractual arrangement is not adhered to means that there is a risk of non-
performance. This has the capacity to hurt the objectives of a firm when what it considered will
happen, in fact, does not. Money can be lost if the customers fail to pay or if the financial
institution in which money is deposited goes bankrupt. Companies with whom the firm has
placed orders may themselves become insolvent and fail to deliver on their promise. Credit risk
can be defined as ‘the potential that a contractual party will fail to meet its obligations in
accordance with agreed term’. Credit risk is also variously referred to as default risk,
performance risk or counterparty risk. These all fundamentally refer to the same thing: the
impact of credit effects on a firm’s transactions. There are three characteristics that define credit
risk:

1. Exposure (to a party that may possibly default or suffer an adverse change in its ability to
perform).
2. The likelihood that this party will default on its obligations (the default probability).
3. The recovery rate (that is, how much can be retrieved if a default takes place).

Note that, the larger the first two elements, the grater the exposure. On the other hand, the
higher the amount that can be recovered, the lower the risk.

Credit is one the many factors that can be used by a firm to influence demand for its products.
According to Horne and Wachowicz (1998), firms can only benefit from credit if the probability

1
generated from increased sales exceeds the added costs of receivables. Myers and Brealey (2023)
define credit as a process whereby possession of goods or services is allowed without spot
payment upon a contractual agreement for later payment. Credit is extended by a creditor, also
known as a lender, to a debtor, also known as a borrower. The movements of financial capital are
normally dependent on either credit or equity transfers. Credit is in turn dependent on the
reputation or creditworthiness of entity which takes responsibility for the funds.

Loans are the largest sources of credit risk to commercial bank. However, other sources of credit
risk exist throughout the activities of a bank, including in the banking book and in the trading
book, and both on the off the balance sheet. Banks are increasingly facing credit risk in various
financial instruments other than loans, including acceptances, interbank transactions, trade
financing, foreign exchange transactions, options etc.

Operating and financial ratios have long been used as tools for determining the condition and the
performance of a firm. Modern early warning models for financial institution gained popularity
hen Sinkely (1975) utilized discriminant analysis for identifying and distinguishing problem
banks from second banks and Altman (1977) examined the saving and loan industry. To
anticipate banks financial deterioration, procedures have been developed to identify banks
approaching financial distress. These procedures, though varying from country-to-country, are
designed to generate financial soundness ratings and are commonly referred to as the CAMEL
ratings system (Gasbarro et al. 2022).

Bank is financial institutions where financial services are broadly offered and performed. So,
bank can be said a financial supermarket. In general sense, bank is a kind of business, which
deals in money by accepting deposits, advancing loan and rendering other financial services. In a
board senses, bank can be defined as the financial intermediary between depositors and
entrepreneurs. ‘Bank’ was originated from the italic language ‘Banco’ means bench or chair.
People do all transaction of money by sitting on the chair, in the Italy. So, this type of business is
been called bank.

1.1.1. The Banking in Nepal

In the case of Nepal, the landlords and goldsmiths were the traditional bankers, much like in
other nations. Shahu Mahajan took full advantage of the Nepalese people by altering the
principal amounts and charging a compound interest rate that was greater than the market rate. A
thorough examination of the history of financial transactions reveals that the money landing
function was in use as early as 780 B.S., predating the eighth century.

The people's debt was used to rebuild the Kathmandu Valley by Gunakamdev, the king of
Kathmandu. During the reign of Ranodip Shin in Kathmandu, the Tank Dhari system was
operational in the fourteenth century, and an office known as Teja Rath Adda was founded. The
government gave government employees loans at 5% interest rate secured by gold, silver, and
other valuables, and then issued salaries to the employees from the office.

2
The aforementioned organizations were unable to meet the needs of the people due to the growth
of the economy in Nepal. Thus, on April 30, 1994, B.S. Nepal Bank was founded as a semi
government commercial bank with 842000 paid capital and 10 million authorized capitals. It has
carried out the trailblazing role in promoting banking practices among the people. In response to
the perceived necessity for a central bank to oversee and manage commercial banks as well as
assist the government in enacting regulatory measures, Nepal Rastra Bank was established on 14
Baishakh, 2013 B.S.

To satisfy the nation's expanding credit requirements. The commercial bank i.e. Rastriya Banijay
bank was establishes in 10h Bhadra 2022 B.S. this bank also provides facility for the economy
welfare of the general public. Nepal is a farming nation that is working to improve its
agricultural system. The Nepal Industrial Development Corporation and the Industry Agriculture
Development Bank were founded in 2024 and 2016 B.S., respectively.

The essential goal of the board of joint venture banks’ entrance in the field of finance and
liberalizing strategy of NRB was to accelerate the development of the country. At present, a great
number of joint venture banks are operating in increasing profit in a competitive market. The
then His Majesty’s Government is actively considering the policy of allowing the foreign joint
venture banks to operate in the Kingdom of Nepal. Local traditional commercial banks operating
in Nepal are encouraged to strengthen their capacity utilizing the efficiency of competitors
capacity of automation, modernization, and efficient customer service. The first joint venture
bank from abroad was established in 2041, with the name Nepal Arab bank Ltd.

As of mid-July 2011 (licensed by NRB), our nation has 31 commercial banks, 87 development
banks, 79 finance companies, and 21 microcredit development banks.

1.1.2. List of Commercial Banks in Nepal

Nepal's financial and economic development is a relatively recent phenomenon. It has undergone
several phases. In 1972, under PM Ranodip Singh, "TEJARATH ADDA" was implemented,
bringing about a reform in the financial and economic sectors. The primary objective of
"TEJARATH ADDA" was to offer loan facilities at confessional rates to the broader population.
But if we go a little longer back, the instalment of banking agency known as "KHUSI KHANA"
could also be considered to have been developed since king Prithivi Narayan Shah.

And then the orientation of first commercial bank of Nepal, Nepal Bank Limited (NBL.) It was
inaugurated in November 1937 and perhaps the over tone for Public Sector Banking started with
this Onset of State Bank of India holding rights to more than half (51%) of government equity.
The second commercial bank, Rastriya Banijay Bank, was established in 1966 and is wholly
owned by the government. At the beginning of 1980, to strengthen the financial system - foreign
banks were allowed as joint ventures up to own maximum equity as partner (maximum 50%) and
Nepal opened them.

3
The first joint venture bank was Nepal Arab Bank Limited, which was founded in 1984 alongside
the joint venture of Arab Bank Emirates. In 1986, Nepal Grind Lays Bank Limited (now known
as Chartered Bank Limited) joined the Nepali financial market through a joint venture with
ANZGrind Lays.

1.1.3.2 Functions of Commercial Banks:

Although commercial bank selected profit maximization as a major objective, to meet these
objectives Commercial banks perform different function under the mandatory rules and
registrations & directives of NRB besides those in Commercial Bank Act 2031(1974) which are:

Primary Functions a) Accepting Deposits

Firstly, Commercial Banks accepting of deposits is their principal function. Deposits from those
who wish to deposit their money currently mainly with commercial banks through various types
of deposits accounts such as:

• Fixed deposit account

• Current deposit account
• Saving deposit account

b) Advancing of Loans:
By providing the necessary loan/credit to various sectors of economy such as industry, trade,
agriculture or business deprived sector etc., commercial banks create facilities for people. The
main goal is to eliminate debt and they offer loans from several different processes not just one
type. Here are a few ways in:

• Overdraft
• Cash credit
• Direct loan with collateral
• Discounting bill of exchange
• Loans of money at call and notice
General Utility Functions:
In addition to all the income earning avenues enumerated above, the Common commercial banks
also perform the following general utility functions.

• Providing letters of credit to customers

• Providing bank draft, travels cheque etc. for transferring of funds from one place to
another

• Purchase or Discounting of Change & Security Foreign exchange and financial foreign
trade, by taking/collecting bill. The verified imported bill is prepared and release along
with all required original shipping documents to the customers.

4
 • Public bodied and corporations underwriting loans to be raised.
• Vaults for the safe custody of securities and other valuables belonging to clients, - State
Postal Savings Bank is a general depositary facility where individuals can lodge their
funds which are placed in current accounts opened by them.
• Telegraphic Transfer remittance of funds

Agency Functions
Apart from the above-mentioned function of commercial banks, it works as an agent and
commission on various services and acts as an agent as well such as:

• Collecting cash on behalf of customers from other banks.

• Receive payment of dividends and interests. • Provide security Brokerage Services
• Financial advisory services.
• Underwrite the government and private securities.

1.2 Organizational Profile

NABIL BANK LIMITED commenced its operation on 12 July 1984 and was the first joint
venture bank in Nepal, Dubai Bank Limited. Dubai (Later acquired by Emirates Bank
International Limited Bank, Dubai) was the first joint venture partner of Nabil. Currently, NB
(international) Ltd. Ireland is the foreign partner.

NABIL Bank Limited had the official name Nepal Arab Bank Limited till 31 st December 2001.
NABIL is the pioneer in introducing innovative products and marketing concepts in the banking
sector of Nepal. Also, the number of outlets in the country is the highest among the joint venture
and private banks operating in Nepal as it paved the way for the establishment of many
commercial banks and financial institutions.

NABIL Bank Limited is the nation’s first private sector bank, commencing its business in July
1984. NABIL was incorporated with the objective of extending international standard modern
banking services to various sectors of society. Pushing its objectives, NABIL provides a full
range of commercial banking services through its 74 points of representation. In addition to this,
NABIL has a presence through over 1500 NABIL Remit agents throughout the nation.

NABIL, as a pioneer in introducing many innovative products and marketing concepts in the
domestic banking sector, represents a milestone in the banking history of Nepal as it started an
era of modern banking with customer satisfaction measured as a focal objective while doing
business. Operations of the bank including day-to-day operations and risk management are
managed by highly qualified and experienced management team. The bank is fully equipped
with modern technology which includes international standard banking software that supports
the E-channels and E-transactions.

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NABIL is moving forward with a Mission to be “1 st Choice Provider of Complete Financial
Solutions” for the all its stakeholders; Customers, Shareholders, Regulators, Communities and
Staff. NABIL is determined in delivering excellence to its stakeholders in an array of avenues,
not just one parameter like profitability or market share. It is reflected in its Brand Promise
“Together Ahead”. The entire NABIL Team embraces a set of Values “C.R.I.S.P”, representing
the fact that NABIL consistently strives to be Customer Focused, Result Oriented, Innovative,
Synergistic and Professional.

Vision, Mission, Values and Ethics

“Our vision is to be the most preferred provider of financial services in Nepal” – Nabil Bank
Mission Statement:
As the top bank in Nepal, we will provide top-notch service by combining cutting-edge
technology with innovative management and a team of knowledgeable, devoted employees to
achieve solid financial health and long-term value addition for all of our stakeholders. We are
dedicated to completing this task while upholding the greatest standards of corporate governance,
professional integrity, ethics, and legal compliance.

Core Values and Ethical Principles:

Our core values outline our true selves, our beliefs, and the standards by which we promise to
conduct business for the benefit of our clients and the communities we serve. Essentially, we
think that the only way to succeed is to uphold our basic beliefs and ideals:

• Customer Focus: At Nabil, providing excellent customer service is our top priority. Our
customers are our main focus and inspiration. Our goal is to become our client’s trusted
partners and win their trust.
• Quality: We firmly feel that providing our clients with a high-quality service experience
is essential, and we are dedicated to meeting this goal.
• Honesty & Integrity: We build enduring relationships of trust and confidence by
upholding the greatest standards of integrity for our clients. We give our clients fair,
honest, and respectful treatment.
• Belief in our people: We understand that our workforce is both our greatest asset and our
greatest competitive advantage. We value and appreciate each employee's worth and
dignity when they dedicate their careers to the advancement of the Bank.
• Teamwork: We firmly think that committed and driven teams are capable of achieving
amazing things. Our motivation comes from a performance culture that bases incentives
and recognition on an individual's accomplishment and track record.
• Good Corporate Governance: Public trust and confidence in any firm, especially a
banking organization, must be established and maintained through the implementation of

6
 effective corporate governance practices. Nabil is dedicated to upholding best standards
that lead to sound corporate governance.
• Corporate Social Responsibility: We believe that acting responsibly toward the
environment and society is crucial for us as responsible business citizens. We have
always been committed to acting morally and making a positive impact on the
community, the people we live for, and society as a whole—all of which we are an
essential part of.

Strategies and Future Plans of the Nabil Bank

• To create a convenient-oriented culture of customer service and customer care oriented.
• To enlarge the market share through the step-by-step form of development.
• It already has a developed MSI, efficient operation pattern, advanced delivery system,
and high service standards with the aid of a rapidly expandable system and applicable
technologies.
• To offer the target market and customers new and exceptional goods and services.
• It will continue to produce goods and services that do not overburden my finances.
• To have a range high-quality asset generating substantial long-term yields and constantly
increase the value of equity for shareholders.
• To search for new income and profit manufacturing possibilities.

1.3 Statement of Problem

Nabil Bank faces challenges in effectively managing credit risk, leading to concerns over loan
quality, default rates and overall portfolio performance. Key issues include inadequate risk
assessment frameworks, limited data analysis capabilities for predictive modelling, and
inefficiencies in monitoring borrower behavior. These challenges hinder the bank’s ability to
proactively identify and mitigate credit risks, potentially exposing it to higher levels of non-
performing loans and financial losses. Addressing these issues is crucial for Nabil Bank to
enhance its credit risk management framework, improve its decision-making process, and
sustainably grow its lending portfolio while safeguarding asset quality.

1.4 Objective of the Study

The basic objective of this research is to make an analysis of the credit risk management of
NABIL Bank Limited by using financial and statistical tools and to recommend suitable
suggestions for improvement of those banks to the management team owner. Credit risk
management helps to examine the efficiency and performance of an organization. Specific
objectives of the study;

1. To examine the credit risk management of NABIL.

2. To examine the trend of NABIL loans and net profit.

7
 3. To examine the status of the CD ratio of NABIL.

1.5 Rationale of the Study

The study will create a foundation in this important subject upon which related studies or in-
depth analysis can be undertaken. This study will also help government policymakers to pursue
reforms that will influence the growth of the banking sector and in this regard, economic growth
is likely to be stimulated.

The study will highlight the impact of credit risk management on the financial performance of
commercial banks in Nepal which the financial institutions and bank’s manager can use of the
early identification of the riskiness of their institutions and also help in formulating their risk
management techniques. To other stockholders in the economy, it will also highlight the key
factors that industry players should analyze when assessing the riskiness of their institutions.

1.6 Review of Literature

Review of literature means reviewing research studies ort other relevant proposition in the
related area of the study so that all the past studies their conclusions deficiency may be know and
further research can be conducted. The purpose of a literature review is to convey what
knowledge and ideas have been established on a topic in the past and what are their strengths and
weakness. A researcher should study books, journals, research reports, government publications
and reports of financial and marketing activities to get information which are related to the topic
under study.

Conceptual Framework
Credit risk is simply defined as the potential that the borrower or counterparty will fail to meet its
obligations in accordance with agreed terms. The goal of credit risk management is to maximize
a bank’s risk adjusted rate of return by maintain credit risk. Credit management strongly
recommends analysis and management the credit risks. Credit risk is defined as the possibility
that a borrower will fail to meet its obligations in accordance with the agreed terms and
conditions credit risk is not restricted to lending activities only but includes off-balance sheet and
inter-bank explores. The goal of the credit risk management is to maximize a bank’s risk adjusted
rate of return by maintaining the credit risk exposure within acceptable parameters. The credit
policy of a firm provides the framework to determine whether or not to extend credit and how
much credit to extend. The credit policy decision of a bank has to broad dimensions; credit
standards and credit analysis.

Review of Related Studies

In the preparations of this report, previous annual report book of bank, articles, previous related
material, website of NABIL bank to be considered. The review and the extract from previous
thesis are presented in this section.

8
Maxwell 1974, Opines that the interest rate fixing authorities cause adverse effects on income
distributing. The interest rate is beneficial especially for the small savers. According to him
interest affects the saving and mobilization. A high interest rate diverts the resources from
unproductive tangible assets into financial claims. For Nepalese people and Nepalese
undeveloped money and capital market interest rate can be taken as an important weapon in
mobilizing the interest resources, here interest rate plays as a market clearing device. Higher
interest rate pushed people to some money and it allows people to invest into opportunities. Low
interest rate attracts the small borrowers.

Carl Felsenfeld 2004 outlined the patterns of international Banking regulations and the sources of
governing law. He reviewed the present practices and evolving changes in the field of control
systems and regulatory environment. The book dealt a wide area of regulatory aspects of
Banking in the United States, regulations of international banking, international bank services
and international monetary exchange. The work attempted in depth analysis of all aspects of
Bank Regulation and Supervision.

As per G. Dalai, D. Rutherberg, M. Sarnat and B.Z. Schreiber (2001) risk is intrinsic to banking.
However, the management of risk has gained prominence in view of the growing sophistication
of banking operations, derivatives trading, securities underwriting and corporate advisory
business etc. Risks have also increased on account of the on-line electronic banking, provision of
bill presentation and payment services etc. The major risks faced by financial institutions are of
course credit risk, interest rate risk, foreign exchange risk and liquidity risk.

S.K. Bagchi (2010), observed that in the world of finance more specifically in Banking, Credit
Risk is the most predominant risk in Banking and occupies roughly 90-05 per cent of risk
segment. The remaining fraction is on account of Market Risk, Operation Risk etc. HE feels that
so much of concern on operational risk is misplaced. As per him, it may be just one to two per
cent of Bank’s risk. For this small fraction, instituting the Risk Management apparatus, Banks
seem to be giving equal priority to these three Risks viz., Credit Risk, Operational Risk and
Market Risk. They may prove counter-productive.

Kioko (2008) did a study credit risk management techniques of unsecured loan of commercial
banks in Keny and revealed that banks used a combination of credit risk management methods
for unsecured loans.

Macaulay (1988), conducted a survey in the United States and found credit risk management is
best practice in bank and above 90% of the bank in country have adopted the best practice.
Inadequate credit policies are still the main source of serious problem in the banking industry as
result effective credit risk management policy must be to maximize a bank’s risk adjusted rate of
return by maintaining credit exposure within acceptable limits. Moreover, banks need to manage
credit risk in the entire portfolio as well as the risk in individual credits transactions.

9
Rasid and Rahman (2009), investigated management accounting and risk management practices
in financial institutions in Malaysia using mail surveys. These were sent to 106 financial under
Malaysian Central Bank, consisting of commercial banks, Islamic banks, merchant/investment
banks, discount houses, development houses, development financial institutions and insurance
companies. The questionnaires were mailed to the Chief Financial Officer or the most senior
position in finance department. The study employed eight variables consisting of job designation,
length of time holding current position, types of services, number of employees, annual revenue,
annual total assets, firm’s age, and ownership structure. The study found that size was not related
to the extent of ERM development and concluded that financial institutions tend to adopt ERM
because of the requirements set by regulators.

Research done by Manab et. Al., (2010) focused on the drives and the success of Enterprise-
Wide Risk Management (EWRM) implementation with corporate governance compliance and
value creation in for profit companies in Malaysia. The study selected 132 listed companies in
the service sector an only 85 companies agreed to participate. The study chose two types of
company, namely financial companies and non-financial companies. 11 EWRM drivers were
employed in the study: corporate governance, mandate from BOD, shareholder value,
technology, improved decision making, improved communication, globalization, competitive
pressure, stakeholder pressure, good business practice, and catastrophic event. The study found
five main drivers which contribute to the success of EWRM for financial and non-financial
companies. These were corporate governance, mandate from BOD, shareholder value, improved
decision making and good business practices.

Daud et. Al., (2010) investigated the relationship between quality of Chief Risk Officer (CRO)
and Enterprise Risk Management (ERM) in Malaysia. The study focused on the level of
Enterprise Risk Management adoption within Malaysian companies and the quality of Chief
Risk Officer in Implementation of Enterprise Risk Management. The questionnaires were sent to
500 companies through main from seven types if industry such as Technology, Industrial
Product, Consumer Product, Plantation, Trade and Services and Construction. Among these, only
89 respondents participated in the study. The study focused on four levels of adoption of
Enterprise Risk Management: complete ERM in place; partial ERM in place; planning to
implement in ERM; and investigating to adopt ERM. The results of the study showed that only
43% of various companies have complete ERM program while 57% were considered as partial.
The study also found that the quality of CRO and ERM were significant indicating that CRO is
an important factor for companies to adopt ERM.

A study by Yusuwan et. Al., (2008), focused on the risk management practices on construction
project companies specifically in Klang Valley, Malaysia. The study was undertaken to identify
the level of awareness of risk management, to examine the policy undertaken when dealing with
risks in a construction project, and to identify the problems and challenges for the
implementation of risk management. The study employed questionnaire survey and interviews.

10
Their respondents were 27 companies from public and private sectors that are operated in Klang
Valley. The study found that in terms of level of awareness and perception of risk management,
44.4% had heard occasionally, 29.6% had heard and attended training, 14.9% had practiced risk
management and 11.1% has never heard about risk management at all.

1.7 Research Methods

This part of proposal not only shows which methods are used but it will show why they are used
in the research. This part of the proposal incorporates the following topic:

1.7.1 Research Design

This research problem will be studied through the use of causal research design. In research
design, the emphasis is on specific objectives about the effects of change of one variable on
another variable and it involves an experiment where an independent variable is change or
manipulated to see how it will affect of dependent variable. Research design will useful in this
study since it enabled the researcher to examine the impact on the dependent variable from
variations in the dependent’s variables.

1.7.2 Population and Sample

In Nepal, there are 111 banks and Financial Institutions are currently operating. Among them,
only some selected institutions are taken as samples. However, the study will select only NABIL
out of 111 banks and Financial Institutions.

1.7.3 Sources of Data

For the preparation of this report, different kinds of books will be followed. In this report, all the
data collected will be secondary in nature. Almost all the data will be collected from published
annual reports, brochures etc.

1.7.4 Method of Data Analysis

The main purpose of analyzing the data is to change the raw data into understandable
presentation. Various statistical and financial tools will be uses the data will be processing,
tabulation and graphing to analyze and objective of the study.

1.7.5 Data Analysis Tools

Diagrammatic representation of data

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  Bar diagram
 Graphs

Tabulation presentation

Financial tools

 Measure of Central Tendency

 Measure of Dispersion

1.8 Limitations of the Study

The limitations of this research are as follows:

1. It is only based on secondary data of the bank.

2. Only simple statistical tools have been used to present and analyzed the data.
3. Whatever the calculation and conclusion are made with analysis of five years data
only.

12
 CHAPTER II

RESULTS AND ANALYSIS

2.1 Presentation and Analysis

In this chapter the data and information’s regarding the credit risk management of the NABIL
Bank Limited are tabulated and graphically presented to make the study more informative and
the report to be useful for the user. The raw data are collected from different sources and with
better presentation as some ratio and trend values, the credit risk position of the bank analyzed.
Data presentation is the interpretation of the study and data analysis summarizes the collected
data. Analysis is not complete without interpretation and interpretation cannot proceed without
analysis. In this course of analysis, data has been gathered from various sources and has been
analyzed by using financial and statistical tools. The results of the computation have been
summarized with appropriate tables. The samples of computation of each model have been
included in annexes. This chapter includes presentation of data and analysis of that data to reach
at a conclusion.
Data Presentation
Credit risk has of sub-issue including concentration risk and settlement risk. Concentration risk
arises when there are large number of exposures to parties that share similar characteristics.
Settlement risk arises when a clearing agent or third-party processes transaction for other parties.
Indeed, financial institutions have recognized the importance of measuring credit concentration
risk in addition to the credit risk of individual loans. That is, they examine not only individual
risks but also the total credit risk characteristics at the portfolio level. Under this topic, the
various variables in their absolute value are measured. Unlike ratio analysis, different variable is
measured individually. The volume of variable and its variability are measured. The value of
individual variables enables to measure the gross contribution of the bank in the respective years.
Though the ratio analysis solely describes the ratio between the two variables, it does not tell
about the absolute value of those variables. Therefore, in this chapter, some of the important
individual variables in their absolute value of mean and standard deviation are examined.
Analysis of Data
Credit risk is most simply defined as the potential that a bank borrow or counterparty will fail to
meet its obligations in accordance with agreed terms. The goal of credit risk management is to
maximize a bank’s risk-adjusted rate of return by maintaining credit risk exposure within
acceptable parameters. Banks need to manage the credit risk inherent in entire portfolio s well as
the risk in individual credits or transactions. Banks should also consider the relationship between
credit risk and other risks. The effective management of credit risk is a critical component of a

13
comprehensive approach to risk management and essential to the long-term success of any
banking organization.
Since exposure to credit risk continues to be the leading source of problems in banks world-wide,
banks and their supervisors should be able to draw useful lessons from past experiences. Banks
should now have a keen awareness of the need to identify, measure, monitor and control credit
risk as well as to determine that they hold adequate capital against these risks and that they are
adequately compensated for risk incurred. The Basel Committee issuing this document in order
to encourage banking supervisors globally to promote sound practices for maintain credit risk.
Although the principles contained in this paper ae most clearly applicable o the business of
lending, they should be applied to all activities where credit risk is present. Credit risk related
ratios measure the capability of the company to meet its credit risk is present. Credit risk related
ratios measure the capability of the company to meet its credit risk management position and
performance. From an investor’s stand point predicting the future is what credit risk analysis is
all about, while from the management’s stand point, credit risk analysis is useful both as aways
to anticipate future conditions and more important as a starting point for planning action well
influence the future course of events. For the purpose of analysis of the credit risk of any
company, different credit risk related ratio can be calculated and evaluated. Some of the
commonly used credit risk related ratios are calculated and interpreted as follows:

 Percentage change in value of credit risk (RWA)

 On Balance Sheet Exposure
 Off balance Sheet Exposure
 Capital Adequacy ratio (Tier-I and Tier-II Ratio)
 Loan Loss Provision (LLP) Ratio etc.

1. Percentage Change in Value of Credit Risk

The credit risk component as measured by total risk weighted assets of the bank is the actual
measure of its risk associated with bank credit. During the study period of five years recently
ended, the percentage change in the value of total RWA can be summarized in following table
no. 2.1
Percentage change in credit risk = Current year RWA – Previous year RWA * 100
Previous year RWA
Table no. 2.1 Percentage Change in Credit Risk

Fiscal Years Current Year Value Previous Years Value Rate of

(Rs. In Millions) (Rs. In Millions) change
2018/19 162953.55 143877.4 13.25
2019/20 192207.83 162953.55 18.27
2020/21 245172.30 192207.83 27.55

14
 2021/22 406621.16 245172.30 65.85
2022/23 423686.49 406621.16 4.19
Average 25.82
(Source: Financial Statements of Nabil Bank Limited)

450000

400000

350000

300000

250000

200000

150000

100000

50000

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

Current Year Value (Rs. In Millions) Previous Year Value (Rs. In Millions)

Figure 2.1 Values of Credit Risk of Nabil Bank Limited

Fromm above table 2.1 and figure 2.1, it can be observed that the overall credit risk values of the
bank are continuously in increasing trend. In all five years of the study period from 2018/19 to
2022/23, the value of the credit risk measured by total risk weighted assets is raising year by
year. The deposit collection as well as the loan and advance from the bank, to targeted customers
and institution are also rapidly increasing in recent years and hence the credit risk also resulted
into rising direction.

Total credit risk is the combined form of on balance sheet and off-balance sheet risk exposure.
With passes of time, both on as well as off-balance sheet exposure are continuously rising and
the result is rapidly increase in total credit risk of NABIL BANK LIMITED. The credit risk is
directly associated with loan and advance given by the bank. With higher distribution of loan and
advance, the chance of loan recovery also changes in the same direction. It is the main reason for
the increase in credit risk of the banking sector.

15
 Rate of Change (%)
70

60

50

40

30

20

10

0
208/19 2019/20 2020/21 2021/22 2022/23

Figure 2.2 Trend Line of Percentage Change in Credit Risk of Nabil Bank Ltd.
In above trend line it seems that, the percentage change in credit risk from one year to another is
in fluctuating ratio. There is highest percentage growth rate during the year 2021/22 having
percentage change in value of 65.85% and lowest increase in credit risk was during the year
2022/23 and the average growth rate of 4.19% in recently ended five years of the study period. In
all years of the study there observed an increase in credit risk as compared to previous year’s
corresponding value, but the rate of change does not have any particular trend of increasing or
decreasing. It is almost in decreasing trend except during 2020/21, at which the ratio sharply
claimed as shown in above trend line as well as in the table.

For success or un-success of any bank and financial institutions, it is directly dependent upon
how fast the loan and advance is being increased. It is main business of the banks to collect
money from different sectors and then to distribute those funds as loan and advance. It has been
observed that, as the value of loan increases, the credit risk also increases. The risk of default or
non-recovery of loan and advance; hence credit risk is the function of loan and advance
distributed by the concerned bank and the financial institutions.

2. On- Balance Sheet Exposure

The overall credit risk is mainly composed of on balance sheet exposure, which includes those
assets, reflected in balance sheet of the bank. The details regarding balance sheet exposure of the
credit risk and its rate of change can be summarized using following table no. 2.2.

16
Table No. 2.2 Percentage Change in On-balance Sheet Credit Risk Exposure

Fiscal Years Current Year Value Previous Years Value Rate of

(Rs. in Millions) (Rs. in Millions) change
2018/19 2,01,138.1 1,69,076.1 18.96
2019/20 2,37,680.03 2,01,138.1 18.16
2020/21 2,91,066.22 2,37,680.03 22.46
2021/22 4,19,818.1 2,91,066.22 44.23
2022/23 4,80,595.67 4,19,818.1 14.47
Average 23.65

(Source: Financial Statements of NABIL Bank Limited)

500000

450000

400000

350000

300000

250000

200000

150000

100000

50000

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

Current Year Value (Rs. In Millions) Previous Year Value (Rs. in Millions)2

Figure 2.3 Trend Values of On-Balance Sheet Credit Risk of NABIL Bank Ltd

The above figure and table show that, on balance sheet credit risk is rapidly increasing every year
throughout the study period. In total credit risk, the proportion of on balance sheet exposure is
highest and it is the major factor influencing the overall risk of the bank. The rate of change can
be summarized using the following trend line.

17
 Percentage Growth Rate
50
45 44.23
40
35
30
25
22.46
20 18.96 18.16
15 14.47
10
5
0 0 0 0 0 0
2018/19 2019/20 2020/21 2021/22 2022/23

Rate of Change (%)

Figure 2.4 Trend Line of Growth Rate of On-Balance Sheet Credit Risk Exposure.

From above figure no. 2.4 regarding trend line of the balance sheet exposures, the percentage
growth rate is highest during the year 2021/22 whereas the rate is lowest during 2022/23. The
highest percentage change value was 44.23% and the lowest value was 14.47%. In all years of
the study there observed an increase in credit risk as compared to previous year’s corresponding
value, but rate of change does not have any particular trend of increasing or decreasing.

3. Off-balance Sheet Credit Risk Exposure

The second component of the credit risk is off-balance sheet exposure, which are not
included in the balance sheet but reflected separately. These risks are also important to
analyze and control for the efficient conduction of the banking business and to generate
expected returns. The details regarding off-balance sheet exposure can be as summarized
below in Table No. 2.3 along with the percentage change.

Table No. 2.3 Percentage Change in Off-Balance Sheet Credit Risk Exposure

Fiscal Year Current year Value (Rs. in Previous Year Value Rate of change
Millions) (Rs. in Millions)
2018/19 8,924 7,119 25.35
2019/20 10,886 8,924 21.98
2020/21 15,060 10,886 38.34
2021/22 17,341 15,060 15.14
2022/23 18,067 17,341 4.18

18
 Average 21.006

(Source: Financial Statements of NABIL Bank Limited)

The credit risk analysis is not complete without the combined examination of on balance
sheet as well as off0balance sheet risk exposures. The off-balance sheet exposure of
NABIL Bank is regularly being increased in five years study periods as listed in above
table, which was highest during 2022/23 whereas lowest on 2018/19, indicating regularly
increasing trend for the bank. The trend values cam be presented below in bar diagram.

20000

18000

16000

14000

12000

10000

8000

6000

4000

2000

0
2028/19 2019/20 2020/21 2021/22

Current Year Value (Rs. In Millions) Previous Year Value (Rs. In Millions)

Figure 2.5 Trend Values of Off-Balance Sheet Credit Risk Exposure

From above figure 2.5, it can be observed that off-balance sheet risk exposure is
continuously increasing. In the recent year 2022/23, observed the least or slight increase
in value; otherwise, there is an adequate rise in off-balance sheet risk exposure.
Regarding the performance of NABIL Bank, it can reduce off-balance sheet risk exposure
in current years. It is a good indicator of the risk management aspect of the bank,
especially credit risk management. The trend line off percentage change in off-balance
sheet risk exposure can be summarized as follows:

19
 45

40

35

30

25

20

15

10

0
Category 1 2019/20 2020/21 2021/22 2022/23

Rate of change(%)

Figure 2.6 Trend Line showing Off-balance Sheet Risk Exposure

From above figure no. 2.6, it is clear that the off-balance sheet risk exposure is almost in
the decreasing trend, except during the fiscal year 2020/21 amounting to 38.34% change
whereas the lowest one is during 2022/23 amounting to 4.18% representing a sharp fall in
off-balance sheet risk exposure. The average percentage change found to be 21.006% in
the five-year study periods.

4. Composition of Total Credit risk

As explained above, the overall credit risk is the composition of the on and off-balance
sheet risk exposures. The details calculation of the total credit risk of NABIL Bank
Limited in the past five years can be summarized through the following table no. 2.4 and
in figure no. 2.7.

Table No. 2.4 Calculation of Total Credit Risk

Fiscal Years On Balance Sheet Off-Balance Sheet Total Credit Risk

Exposure (Rs. In Exposure (Rs. In (Rs. In Millions)
Millions) Millions)
2028/19 1,60,970.03 8,924 1,69,894.03
2019/20 1,85,410.15 10,886 1,96,296.15
2020/21 2,37,596.044 15,060 2,52,656.044

20
 2021/22 4,00,599.11 16,341 4,16,940.11
2022/23 4,80,595.67 18,067 4,98,662.67
Average 3,06,889.80

(Source: Financial Statements of NABIL Bank Limited

Total Credit Risk

600000

500000

400000

300000

200000

100000

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

On Balance Sheet Exposure (Rs. in Millions) Off-Balance Sheet Exposure (Rs. in Millions)
Total Credit Risk (Rs. in Millions)

Figure 2.7 Total Credit Risk Composition of NABIL Bank Limited

With rise in total credit risk, both on balance sheet as well as the off-balance sheet risk exposure
are rising but the rate of rising in on balance sheet is almost similar to total risk, whereas the off-
balance sheet risk exposure is gradually increasing with almost constant values as shown in the
above figure 2.7.

5. Capital Adequacy Ratio

Capital of the commercial bank should be adequate as required by Nepal Rastra Bank, which is
minimum of 10% of total risk weighted exposure and the Core Capital Ratio (Tier I) ratio should
be at least of 6%. It is the regulating directives issued by the Nepal Rastra Bank, the details for
NABIL Bank in the past five years period can be summarized below:

Core Capital (Tier-I Capital) Ratio = Core Capital of the Bank * 100
Total Risk-Weighted Assets

Supplementary Capital (Tier-II Capital) Ratio= Supplementary Capital of the Bank * 100
Total Risk-Weighted Assets

21
Total Capital Ratio= Tier-I capital + Tier-II Capital * 100
Total Risk Weighted Assets

These are the capital adequacy norms and it is the duty of bank to maintain 6% core capital ratio,
10% total capital ratio and certain composition of supplementary capital ratio in order to achieve
the target.

Table No. 2.5 Capital Adequacy Ratio

Fiscal Tier-I Tier-II Total Credit Tier-I Tier-II Total
Years Capital Capital risk (Rs. in Ratio Ratio capital
(Rs. in (Rs. in Millions) Ratio
Millions) Millions)
2018/19 19367.92 1877.55 1,69,894.03 11.40 1.10 12.5
2019/20 20944.8 4169.67 1,96,296.15 10.67 2.4 13.07
2020/21 26958.4 5288.85 2,52,656.044 10.67 2.09 12.76
2021/22 44904.45 9652.4 4,16,940.11 10.77 2.32 13.09
2022/23 50,963.32 11,568.97 4,98,662.67 10.22 2.32 12.54
Average 10.75 2.046 12.79
(Source: Financial Statement of NABIL Bank Limited.)

Percentage Ratio
14

12

10

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

Tier-I Ratio Tier-II Ratio Total Capital Ratio

Figure 2.8 Capital Adequacy Ratios of NABIL Bank Limited

22
Capital adequacy measure is a compulsory obligation for every bank and financial institution.
Regarding NABIL Bank Limited, its core capital ratio is greater than 8% in all five years study
periods. It has adequate capital as required by Nepal Rastra Banks directives. By maintaining
sufficient capital, NABIL Bank is operating its business in Nepal as the leading bank of the
nation. Credit risk management of this bank is in comfortable position as it has sufficient capital
to fulfill the requirement of risk weighted assets.

6. Loan Loss Provision (LLP) Ratio

Loan loss provision ratio is calculated by dividing total of loan loss provision by total loan for
every concerned year.

Loan Loss Provision Ratio = Total Loan Loss Provision * 100

Total Loan

Table No. 2.6 Loan Loss Provision Ratio of Nabil Bank Limited

Fiscal Years Loan Loss Provision Total Loan (Rs. in Ratio (%)
(Rs. in Millions) Millions)
2018/19 405.17 1,77,930.21 0.23
2019/20 856.76 2,11,824.37 0.41
2020/21 827.52 2,57,208.11 0.32
2021/22 1,118.82 3,66,836.36 0.31
2022/23 1226.26 4,26,870.06 0.28
Average 0.31

(Source: Financial Statement of NABIL Bank Limited)

23
 Figure
2.9
450000 Trend
400000 Values
350000
of LLP
Amounts in Millions

and
300000
Total
250000
Loan
200000 of
150000 Nabil
100000 Bank
Column1
50000

0 Loan Loss Provision (Rs. in Millions)

2028/19 2019/20 2020/21 2021/22 2022/23
Axis Title

Limited

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

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

Ratio (%)

Figure 2.10 Trend Line Showing Loan Loss Provision Ratio of Nabil bank Limited

Above table no. 6 shows that the bank has highest and lowest loan loss provisions in the fiscal
year 2019/20 and 2018/19 respectively. The loan loss ratio was highest during the fiscal year
2019/20 and it was least during the year 2018/19. The corresponding highest and lowest ratios

24
are 0.41% in 2019/20 and 0.23% in 2018/19 with the average ratio of 0.31% in current five years
of the study period.

The decreasing trend of loan loss provision ratio implies the better financial performance of the
concerned financial institutions. It is the objectives of every financial institution to minimize this
ratio as much as possible. Regarding the performance of Nabil, it is highly satisfactory as per
sharply decreasing trend on the loan loss provision ratio in recent years of the study period. This
bank is found to become able to minimize the amount of loan loss provision in combination with
increasing trend in loan disbursement. These to inversely directed values helped this to minimize
the loan loss provision ratio up to minimum level. Only distribution of greater amounts of loan
loss provision is not the success for every bank. It must be able to collect loan and interest on
timely basis and minimize any loss as measured by loan loss provision. The credit risk analysis
should significantly cover this area in order to provide the actual position of loans for every
financial institution. In this report major concern has been given to analyze this factor.

2.2 Major Findings

Using different credit risk-related ratios; the overall performance of NABIL Bank Limited is
satisfactory and is in increasing trend. Its credit risk measures as measured by credit risk change
ratio, loan loss provision, capital adequacy ratio, etc, are being improved as compared to
previous years. The overall credit risk position of the bank is also satisfactory but due to the tight
policy of NRB, the financial indicators seem quite weak, but it seems that the future is bright for
this bank and its investors. It is positive to observe that, this bank can make fulfilment of capital
as required from NRB, although there are many banks which are still unable to maintain capital
adequacy.

From the loan and advance disbursement and collection point of view, this bank is very strong in
today’s competitive financial market. Among 20 existing commercial banks, NABIL Bank is one
of the leading banks and investors are attracted towards its share for investment nowadays. The
ability of this bank's management to generate sufficient surplus from financial business and
adequate interest spread is a positive factor for the success of this bank in future periods.

Almost maximum of the credit risk-related indicators of this bank are satisfactory and in the
improvement stage and most of the loans and advances are good for the current period as
compared to the past few years. The major concern of this bank is to be towards application of
the loan in profitable areas and the bank's management is to include such schemes which will
attract customers towards the bank as today’s banking market is very competitive.

During the five-year study period regarding credit risk of NABIL Bank Ltd., the overall
performance of the bank is satisfactory. This bank can maintain sufficient capital required for

25
investment as well as to operate day to day activities of the company. The major findings of the
study on credit risk management of NABIL Bank Limited can be summarized as follows:
 NABIL Bank Limited is able maintain sufficient capital within this fiscal year as required by Nepal
Rastra Bank to maintain 8 Arba capital for “A” categories commercial banks operating within the
country.
 Loan and Advance of NABIL Bank Limited is in continuo, as well as off-balance sheet credit risk
exposure, us increasing trend throughout the study period.
 Credit Risk as measured by total risk-weighted assets is also in an increasing stage from one year
to another during this five-year study period.
 Both on-balance sheet, as well as off-balance sheet credit risk exposure, are on a rising
trend. On a balance sheet, risk-exposure is shapely increasing as compared to the off-
balance sheet.

26
 CHAPTER III
SUMMARY AND CONCLUSION

3.1 Summary
The role of the bank has paramount significance role in the economic development of the
country. Along with government participation, there should be equal participation from private
and public sectors to perform development activities. Credit risk analysis is the process of
identifying the strengths and weaknesses of the bank by establishing the relationship between the
items on the balance sheet and the profit and loss account.

The present study mainly aims to examine the loan and advance position of NABIL Bank
Limited. Its specific objectives are to know the ability of the bank to meet its current obligations
and to evaluate the financial data collected from financial statements namely balance sheets and
profit and loss accounts. Throughout the study, altogether seven ratios have been computed and
analyzed. The objective of the study is to know the actual position of NABIL Bank of the last
five years especially focused on loan and advance-related issues. As mentioned earlier in the
report loan and advances play a vital role in developing confidence in a competitive market
environment and to make demand and closing its door to loan and advance-related data
presented and analyzed in Chapter 2 shows that have maintained sufficient loan and advance
disbursements to meet its short term and long-term loan provided to the targeted customers.

3.2 Conclusion
The bank income statement shows that operations can be expected to be profitable. Its profitable
operation of its attributed to serval factors; one is the real increase in deposit volume and the
other is seen as a number of other branches increasing every year. The loan and advance
evaluation of the bank shows the addition of other branches in the main cities of our country is
highly profitable. It earned profit from the date of its establishment considering the demand and
supply quality aspects and financial evaluation the is a good shape to increase other new
branches. The dividend paid and ratios show that the bank’s loan and advance disbursement and
their collection position is much better.

The following are the financial indicators for the year 2022/23 which show the strengths and
weaknesses of Nabil Bank Limited:

The NABIL Bank can operate its financial activities smoothly and effectively. As this report has
concluded NABIL Bank seem to have a large quantity of resources with skilled manpower,
technology and qualitative performance but this is not sufficient for a bank to support a country
for its overall economic development unless there is well established financial institution to

27
mobilize capital. Thus, banks should keep on lending their credit in different sectors of the
economy.

The following are some recommendations that NABIL Bank should follow or take care of:

 Customer care is truly a sustainable competitive advantage in the world of non-resting

competition. An institution that lacks proper customer care finds it difficult to stand
firmly in the business. So, the institution should extend its facilities and services to
the customers.
 NABIL Bank can use the latest technology to motivate employees, provide better
services and also emphasis to controls also interest and marketing activities.
 The bank should maintain mare cash balance to pay the current liabilities in time.
 Cash retention in the bank is essential for the bank; it should be considered that too
much idle funds in a bank is not beneficial for the bank. Thus, such funds should be
invested in profitable opportunities.
 The bank should capture the market not only in urban but also in rural areas and
should launch new project.

28
 BIBLIOGRAPHY

Bhattacharya, Hrishikes (1998), Banking Strategy, Credit Appraisal and Lending

Decision-A Risk-Return Framework (1st ed.). Delhi: Oxford University Press.

Brigham & Houston (2004), Fundamental of finance Management (10th ed.). Singapore:

Thomson Asia Pvt. Ltd.

Cross, H.D. (1963). Management policies for Commercial Bank (2nd ed.). Prentice Hall

Ind., N.J: Englewood Cliffs.

Greenworld, Bruce and Joseph, Stiglitz (1990). Information, fiancé and Markets: The

Architecture of Allocative Mechanism. Cambridge: Natioanl bureau of Economics

Research

Nepal Rastra Bank (2058). Nepal Rastra Bank Regulations. Baluwatar, Nepal

Shape, William F, Alexander, Gordon J., Jeffrey V. (2000). Investment (5th ed.). Prentice Hall

Of India Pvt.Ltd.

Thomas, Shakespare (1996). Financial Markets and Institutions (International edition) U.S.A.

Timilsina, Yogendra (2053 B.S). Banking Business in Nepal (3rd ed.) Kathamandu: Ratna

Putsak Bhandar

Publications, Journals and reports

Annual Report- NABIL Bank 2018-2022

Principle of Book operation (1972 U.S.A.). Principle on Operation of Bank and Financial
Institutions Regulations Department.

http://www.nepalstock.com

http://www.worldbank.org

http://www.nabilbank.com

29