JKBC Journal of Kathmandu BernHardt College
December 2022, Volume _ 4
Comparative Study on Deposit Mobilization of Nepal Bank
Limited and Sanima Bank Limited
Manisha Shrestha & Rameshower Aryal
Kathmandu BernHardt College, Bafal, Kahhmandu
Email: aryal.rameshower@kbc.edu.np
manisa.shrestha20@gmail.com
(Received: September 12, 2022, Revised: November 6, 2022)
Abstract
This study focuses on and compared the deposit mobilization condition of Nepal Bank
Limited (NBL) and Sanima Bank Limited (SBL). Taking sample the two banks as a
sample, this study tries to find the effects of profitability and loan and advance on deposit
mobilization from the secondary data 2011 to 2020. The study's findings indicate that
the return on assets and earnings per share have a significant and positive impact on the
profitability performance of sample banks.
Keywords: Deposit mobilization, Loan and advance, Nepal Bank Limited, Profitability,
Sanima Bank Limited.
1. Introduction
The article describes the deposit mobilization of two commercial banks especially focusing
on Nepal Bank Limited and Sanima Bank Limited. The reason for choosing two banks
as the former is the oldest government commercial bank and the latter is the youngest
private commercial bank in the Nepalese Banking Industries. This study mainly focused
on the deposit mobilization condition of the sample banks and tried to find the effects of
profitability and loan and advance on deposit mobilization taking ‘to identify, examine and
analyze the effect of profitability and loan and advance on total deposit mobilization of
Nepal Bank Limited and Sanima Bank Limited’ as the main objective.
Deposit Mobilization is the collection of cash or funds by a financial Institution from the
public through its current, saving, fixed, recurring accounts, and other specialization. In
the banking sector deposit mobilization is a strategy planned to encourage the customer
to deposit more cash in the bank and this amount, in turn, will be used by the bank to
disburse more loans and generate additional revenue. By mobilizing deposits banks to
ensure continued service to members' needs and build financial strength. Hence deposit
mobilization might be taken as vital for economic development and is key for financial
sustainability (Ayayi & Sene, 2010) as it can contribute to self-sustainability by providing
the microfinance institution with the lower-cost funds.
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Journal of Kathmandu BernHardt College JKBC
December 2022, Volume _ 4
The stability of the banking and financial system, the entire economy is linked like a chain
and if one internode is damaged it would affect all other industries as well. In order to
ensure a congenial atmosphere banks should be able to raise enough amount of deposits.
Therefore, appropriate, timely, and well-planned policy instruments and programs should
be implemented to increase deposit mobilization.
Acceptance of deposits and mobilization productive sector is the crucial function of
Commercial Banks. As such, deposit mobilization is one of the basic innovations in
Nepalese Banking activity. This study will include two different commercial banks in
Nepal i.e. Nepal bank limited and Sanima Bank limited.
These two particular banks are chosen as Nepal Bank Limited is the first commercial
bank of Nepal and is developed under the principle of the joint between government and
the general public while Sanima Bank Limited is the youngest commercial bank of Nepal
owned by Non-Resident Nepalese (NRNs) Businessman.
Banks in Nepal deposits through financial activities and investment, primarily focusing on
commercial banks. The Study investigates the deposit mobilization trends of Nepal Bank
Limited and Sanima Bank Limited with a focus on profitability and loan impacts. The
primary objectives are to assess deposit mobilization and analyze how profitability and
loans influence total deposit mobilization for these mobilization for these banks (Jacob and
Innocent, 2019)
2. Literature Review
There are several theories advanced by different scholars that can be applied to explain
the effect of deposit mobilization strategies on the performance of deposit. This study is
hinged on the two theories; Bank led theory and Diffusion of Innovation theory.
Bank Led Theory: Bank-led model offers a distinct alternative to conventional branch-
based banking in that customer conducts financial transactions at a whole range of retail
agents instead of at bank branches or through bank employees.
The bank led theory is related to the study as it focus on how financial institution like bank
deliver their financial services through a retail agent, where the bank develops financial
products and services but distribute them through a retail agents.
This can be a way of mobilizing deposits commercial banks use as a new model to increase
financial inclusion and facilitate the transaction especially in the areas where the bank is not
present. This model facilitates the banks to raise its deposits and lead to financial performance.
Diffusion of Innovations Theory: Diffusion of innovations is a theory that seeks to explain
how, why, and at what rate new ideas and technology spread through cultures. Rogers
(2014), argues that diffusion is the process by which an innovation is communicated
through certain channels over time among the participants in a social system.
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JKBC Journal of Kathmandu BernHardt College
December 2022, Volume _ 4
This theory is related to the study as it presents the process of newness and implementation
of innovation. Deposits mobilization is a new model of approaching savers through
marketing and financial inclusion and come up with new techniques which were not been
used by traditional banking, it is perceived and communicated through channels and the
social system facilitates its adoption. In mobilization of deposits new innovation has to be
applied and make convincing the savers to make deposits.
Pokharel (2015) studied on deposit mobilization of commercial banks of Nepal, with
reference to NABIL and Himalayan Bank Limited. The findings of the studied were that
the liquidity position of NABIL was very strong while Himalayan Bank Limited have
strong capacity to meet the short-term obligations.
Kadariya (2017) studied on deposit mobilization of commercial banking in Nepal Researcher
had taken two samples of Banks Viz; NABIL Bank Limited and Nepal Bank Limited. The
major finding of the study was that NABIL has more consistency and uniformity in case
of profitability. Nepal Bank Limited has slightly higher spread rate than NABIL. Loan and
advances of both banks are in increasing trend.
KC (2018) analyzed deposit mobilization of Agriculture Development Bank Limited. The
studied found that the net profit to total loan and advances ratio for the bank is satisfactory
i.e. to generate the profit.
Oroket al (2018) analyzed on inflation and deposit mobilization in deposit money banks
the Nigerian Perspective. Authors concluded that all variables used in the construct were
stationary at 1st difference, and at least one co-integrating equations exited in the model.
Again, it was concluded empirically, that inflation has negative impact on the deposit
mobilization of the Nigerian banks.
Kassu and Menen (2020) Deposits are the primary source of funds for a bank, which
facilitates the uses of funds of loans and investments. The results explained that Banks
Liquidity has a positive insignificant effect, credit risk and exchange rate have positive
and statistically significant and inflation has significant negative influences on commercial
bank deposit mobilization
Conceptual Framework: Guided by the objective and research questions and based on
the literature reviews researcher constructed a diagrammatic representation of the study
variable as.
Performance as outcomes, end results and achievements (negative or positive) arising out of
organizational activities. It is essential to measure strategic practices in terms of outcomes.
These outcomes vary along a continuum of categories such as: financial measures such as
return on asset, return on equity, turnover, and profitability to name few.
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Journal of Kathmandu BernHardt College JKBC
December 2022, Volume _ 4
Variables Relationship
Independent Variables
Net Assets (X1)
Dependent Variable
Return on Asset (X2)
Profitability (Y)
Loans Volume (X3)
Change on Deposit Interest (X4)
3. Research Methodology
In this study, data are collected from the secondary sources. Collected data are firstpresented
systematically in tabular forms and then analyzed by applying different financial and
statistical tools to achieve the research objectives The different calculated results obtained
through financial, accounting, and statistical tools are tabulated under different headings.
Figures and Tables are presented to analyze and interpret the finding of the study. The
study employed both descriptive and analytical statistics to analyze the collected data; this
process also involved manual working and computer program SPSS 25.0.
4. Results and Analysis
Figure 1 The main aim to choose this research is to analyze and compare the deposit
mobilization of Nepal Bank Limited and Sanima Bank Limited. Basically Mean, Standard
Deviation, Coefficient of Variance and Multiple linear regression model have been applied
to analyze the data.
Amount in the Millions
15000
10000
5000
0
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Deposit Collec�on Growth of NBL and SBL NBL
Deposit Collec�on Growth of NBL and SBL SBL
Figure 1: Deposit Collection of NBL and SBL
Source: Annual report of NBL and SBL from 2010 to 2020.
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JKBC Journal of Kathmandu BernHardt College
December 2022, Volume _ 4
From the analysis of data, revealed that the deposit collection of both NBL and SBL are in
increasing trend. Comparing two banks, it can be concluded that NBL is more successful than
SBL in deposit collection, since the average deposit collection of NBL (Rs.86735millions)
is higher than that of SBL (Rs.58678 millions). Also, the deposit collection trend of NBL
is more uniform than that of SBL, since the C.V. on deposit collection of NBL (31.68%) is
lower than that of SBL (41.87%).
Figure 2 shows the result of financial surplus to assets ratio or return on assets of Nepal
Bank Limited and Sanima Bank Limited. From the ten years analysis i.e., fiscal year
2010/11 to 2019/20 return on assets is greater for SBL which is 1.47% than NBL which is
1.46% among the two sample banks.
Return on Assets (%)
4
3
2
1
0
2010/011 2011/012 2012/013 2013/014 2014/015 2015/016 2016/017 2017/018 2018/019 2019/020
Year
NBL SBL
Figure 2: Return on Assets of NBL and SBL
Source: Annual report of NBL and SBL from 2010 to 2020.
From the data, shows that SBL has riskier that is higher CV 25.08% than NBL i.e., 24.04%.
From this result it can be concluded that NBL is more inconsistent than SBL in terms of
return on assets because the average ROA during the ten years is higher for SBL with lower
standard deviation which denote consistency.
Figure 3, shows that EPS of NBL and SBL, of last ten years period. Where, the EPS is
better of NBL than SBL. Similarly, the EPS simply shows the profitability of the firm
on a per share basis. Hence, The EPS value indicates the profitability of the common
shareholders’ investment.
Earning per Share
100
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NBL SBL
Figure 3: Earning Per Share
Source: Annual report of NBL and SBL from 2010 to 2020.
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Journal of Kathmandu BernHardt College JKBC
December 2022, Volume _ 4
Figure 4 depicts the mobilization of total deposit in loan and advances. The average total
loan and advance to total deposits ratio of NBL are higher than SBL. In average comparison,
NBL Bank has utilized its total deposits better in consecutive years. Likewise, the mean
ratio of NBL and SBL are 67.628% and 64.44% respectively.
200
Ratio
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NBL SBL
Figure 4 : Loan and Advance to Total Deposit Ratio
Source: Annual report of NBL and SBL from 2010 to 2020.
The data shows coefficient variation analysis, SBL is more consistent with lower CV i.e.,
15.15% than NBL i.e., 16.45%. Here private sector bank i.e. SBL have a consistent performance
than government bank i.e., NBL. NBL has been strong to mobilize its total deposit as loan and
advances. Higher loan and advance to total deposit ratio show higher risk and higher turnover.
So, NBL has invested their deposit more in loan and advance to earn higher profit.
Figure 5 shows that the commercial banks must mobilize its deposit fund by investing
in different securities issued by government and other financial, non-financial sectors.
This ratio measures the extent to which the banks are capable to mobilize their deposits
on investment in various securities. In these scenarios, in comparison with mean value,
NBL has higher than SBL. Similarly NBL debt have seen approximately equal percent and
slightly lower in ten years period but NBL seen lower in ten years period. The risky point
of views, NBL bank seen more risky for invest than other the SBL seen more uniforms on
debt to compare NBL bank in ten years period. It is clear that the investment policy of SBL
is in better position in comparisons to NBL bank.
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Ratio
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NBL SBL
Figure 5: Total Debt to Total Assets Ratio
Source: Annual report of NBL and SBL from 2010 to 2020.
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JKBC Journal of Kathmandu BernHardt College
December 2022, Volume _ 4
Datea shows that the descriptive statistics depicts that, the ROA has obtained mean ratio
1.17300% over the study period. This variable has minimum value of 1.78% and maximum
one at 2.17% and it has ranged in 0.39%. However, in term of standard deviation is 0.759840
percent during the ten years period. On the other hand, EPS has obtained mean 28.26600%
where it has minimum value get 31.58%, maximum value at 61.82% and it has ranged
in 30.24% as well as in terms of S.D. of EPS registered 5.358904% percent respectively.
The variable of Loan and Advance to Total Deposit ratio has obtained mean 80.291% with
minimum value of 61.68% and maximum value at 83.95%, ranged in 22.27% and in terms
of S.D. registered 5.4100% percent over the study period.
Annex 7 shows that the relationships among the study variables depicted in the model have
tested using correlation with ROA and EPS separately, which is presented in the table.
The results show that ROA has negatively correlated with EPS (0.402), because sample
banks heavy accumulated profit and optimal capital prescribed. The corresponding P value
is 0.249; it is more than significance level i.e.0.05. Statistically, there is no significance
relationship between ROA and EPS respectively.
Moreover, the relationship of LA/TD with ROA is found 0.430 which is negatively
correlated with ROA. The negative coefficient estimates of the correlation implied that
there are indirect relationship of loan and advance to total deposit ratio. Similarly, LA/
TD has statistically significance relationship with ROA and Size of banks has positive
relationship with ROA and statistically has significance relationship with ROA. Finally,
ROA has negatively correlated (0.670) with total debt to total assets. Similarly, the
corresponding P value is 0.034; it is more than significance level i.e. 0.05. Statistically,
there is no significance relationship between ROA and TD/TA ratio respectively.
Analysis through Multiple Linear Regression Model : In this research multiple regression
shows the relationship between dependent variable which is deposit mobilization and its
independent variables which are profitability, Net assets, ROA, Loan volume and change
in deposit interest. This research is assigned for analysis of these variables. Thus, the
multiple regression equation of Y on X1, X2, X3, X4 & X5 is an equation for estimating a
dependent variable Y, from five independent variables X1, X2, X3 X4 & X5.
The multiple linear regression equation used in this study is given by:
Y= bo+ b1 X1+ b2 X2+ b3X3+ b4X4 +b5X5+et.
Where,
Y= Deposit Mobilization
X1= Profitability
X2=Net Assets
X3= Return on asset
X4 = Loan Volume
X5 = Change of deposits Interests
et= error term
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Journal of Kathmandu BernHardt College JKBC
December 2022, Volume _ 4
The regression model revealed that return on assets has positive impact on the regression
coefficient of Earning per share (EPS), the regression coefficient of Fixed Assets to Total
Assets ratio (FA/TA), the coefficient of loan and advance to total deposit ratio (LA/TD)
but negative impact on Number of branches and Total Debt to total assets ratio. There is
positive impact of EPS on fixed assets to total assets ratio but negative impact on loan and
advance to total deposit ratio (LA/TD), Number of banks branches and total debt to total
assets of sample banks respectively. Similarly, the selected sample banks seen stable and
sample banks are adequately capitalized and profitable and remained in a sound position. The
findings of this study indicate that the return on assets and Earning per share have significant
and positive impact on profitability performance of sample banks. This is evidenced by the
significant result on tangibility and liquidity. In the previous study has published their most
of the results were significant. But in this research some results were insignificant. The main
causes are our liquidity situation, covid-19 influence, instability on economic sector etc.
5. Conclusion
This research has study the deposit mobilization of two commercial bank i.e. Nepal Bank
Limited and Sanima Bank Limited, which explains that net assets, return on asset, loan
volume and change in deposit interest have relationship with profitability of Banks. From
the liquidity management perspective selected banks could manage liquidity as per NRB
directive. Selected banks should lunch very aggressive marketing campaign to attract more
deposit and mobilize or utilize this fund in very productive sector. Hire some competitive
human resource and face the challenge of competition. It has to improve the brand value in
the heart of people. Some other points to improve the performance of commercial banks:
Increase; proper service, deposit, quality of assets and invest in government securities as
well as deprived and priority sectors. Enhance Liberal lending policy and sound credit
allocation policy as well as innovative approach of marketing. Focus on rural banking and
national development by branch expansion in appropriate location. Invest in human resource
development to be the global competitor and focus on employee motivation, maintenance
and utilization. Improve in ground level service efficiency and working environment.
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