DEPOSIT MOBILIZATION OF COMMERCIAL BANK IN NEPAL

(With reference HBL, SBL, NBL & SCBL)

A Proposal

A Dissertation Submitted to the office of the Dean, Faculty of Management

Partial Fulfillment of the Requirement for the Master's Degree

By

Rita Giri

Roll No: 44437/21

T.U. Registration No: 7-2-542-82-2016

Mark International College

Ghorahi Dang

April, 2024
1. Background of the study

Deposit mobilization is an integral part of banking activity. Mobilization of savings

through intensive deposit collection has been regarded as the major task of banking in
India. Acceptance of deposits is the primary function of commercial banks. As such,
deposit mobilization is one of the basic innovations in current banking activity.

Deposit mobilization refers to all the process of attracting and collecting deposit from the
business, individuals and other institutions into a financial institution such as bank union.
This is a most important task for financial institution as a main source of funding for their
financial activities. Deposit mobilization can be achieved through various means such as
offering competitive interest rates, providing convenient banking services and
implementing other effective marketing ideas to attract the deposits.

Most of the financial institutions are use various types of strategies to mobilize deposits,
to different target audiences and their financial needs. It's a crucial aspect of the liquidity
management and plays a significant role in the growth and stability of financial
institutions. It is overview of deposit mobilization. Basically, deposits are regarded as the
efficient working capital that deposit accepting institutions can use to boost their
profitability.

Capital formation is defined as that part of country's current output and imports which is
not exported during the period. It is one of the key elements that increases the size of the
country's production income and employment, improves the balance of payments, and
resolves numerous inflation-related issues. Capital formation is a concept used in national
financial institutions. It means increasing the stock of real capital in the nation. In the
words capital formation involves making of more capital goods.

Commercial bank is the type of financial institutions that carried out all the activities
related to receive, deposit and withdrawal of money for general people. Facility providing
loan for investment infrastructure development, entrepreneur development and other
activities. This type of banks are activities related with only business activities to make a
profit. Commercial banks are the major source of the motivating and providing new ideas
to save the earnings. They provide the loan to the people against the financial and real
assets. Commercial bank has a vital role for economic development.
Commercial banks are the 'A' class financial institution in Nepal which plays the major
role of economic and financial life. Nepal Bank limited is the first commercial bank of
Nepal. It established in 1937 AD with government and private investment. Commercial
bank provides the deposits, loans and mobile banking facilities. Nepal Rastra Bank is the
central bank of Nepal which regulates the commercial bank. Banks are found in urban
and semi-urban locations in the majority of countries.

According to history, the merchant who traded in commodities rather than money was the
one who initially developed the banking system. By looking back at the past, we can
discover that modern bankers have three notable ancestors. They are the goldsmith, the
lender, and the merchant. Although borrowing and lending have existed for nearly as long
as money itself, modern banking first emerged in medieval Italy.

Three significant turning points in the history of banking expansion were the founding of
the Bank of Venice in 1157, the Bank of Genoa in 1148, and the Bank of Casa de San
Giorgio in Genoa in 1148. The Bank of Barcelona was founded in Barcelona in 1401. In
actuality, the formation and operation of modern banks began to pick up speed in the 17th
century. Compared to other nations, Nepal's organized financial system has only recently
begun to develop. Nepal's banking history spans roughly ten years.

The founding of Nepal Bank Ltd. in 1937 A.D. marked the introduction of the banking
system to Nepal; the bank was founded to support government policies aimed at
advancing the nation's commercial and economic operations. Later in 1956, as it became
apparent that another bank was required, the Nepal Rastra Bank was established as the
central bank with the dual purposes of managing and overseeing the operations of
commercial banking as well as performing central banking functions.

In order to provide banking services to both rural and urban areas, Rastriya Banijya Bank
was established in 1966 AD after it became apparent that another bank was needed. In
1980 A.D., Nepal began to liberalize its economy and encouraged foreign banks to set up
shop there. When joint venture banks were introduced in 1984, the financial landscape
transformed. Commercial banks have started popping up all over the place. Since then, a
number of financial institutions have emerged to support the nation's financial
development. These include the Nepal Stock Exchange, JVBs, Employee Provident Fund,
National Insurance Corporation, Credit Guarantee Corporation, Development Banks,
Finance Companies, Co - operative Banks.
Prior to the 1980s, there were just two commercial banks: Rastriya Banijya Bank and
Nepal Bank Ltd. The three commercial banks that existed in the 1980s were all founded
as JVBs. In a similar vein, six commercial banks from the previous decade started
operating as JVBs. The private sector in Nepal built the last six banks. As a result, several
banks' names are also altered. Nabil Bank Ltd. is the new name of Nepal Arab Bank Ltd.
In a similar vein, Standard Chartered Bank Nepal Ltd. and Nepal Investment Bank Ltd.
are the new names of Nepal Grindlays Bank Ltd., Nepal Indosuez Bank Ltd., and Nepal
Bank of Ceylon Ltd.

2. Problem Statement

Nepal is an underdeveloped nation, and the country's fundamental requirement is for

quick economic development. It is impossible for a country to develop properly in a short
amount of time by using its current means; infrastructure must be built first. Only after
the first five-year plan was implemented in 1956 A.D. did Nepal's development process
begin.

In actuality, capital is essential to a nation's economic progress. However, capital is scarce

in Nepal. Capital can be accumulated from a variety of internal and external sources.
Loans, grants, and assistance fall under the category of external sources. Internal sources:
the most common in our nation are public companies, taxation, capital accumulation, and
public debt.

It is no longer debatable whether deposit mobilization is necessary for a nation's

economic success. Yet, resource mobilization is a serious issue that we are currently
experiencing. In Nepal, there are twenty commercial banks that are widely regarded as
essential financial institutions for generating domestic resources. Given the frequency of
these circumstances, the study has attempted to address the issues listed below.

 How do advances, loans, and deposits relate to one another?

 How successful is commercial banks' deposit mobilization?
 To what extent do interest rates on deposits positively correlate with commercial
banks' deposit collection efforts?

3. Objective of the Study

Examining the relationship between the total deposit amount and the total credit amount
extended by commercial banks has been the study's goal.

The following are the study's primary goals:

 To examine the connection between advances and loans and deposits.

 To assess the effectiveness of commercial banks' deposit mobilization.
 To examine the correlation between interest rates and the credit extended by
commercial banks.
 To observe how a loan's interest rate affects the credit that commercial banks extend.

4. Rationale of the Study

The nation's development and economic standards are greatly dependent on banks and
other financial organizations. Incomplete and unequal financial facilities impede
economic progress. Particularly, commercial banks offer a variety of financial and
technological services to those engaged in business.

Like research in any discipline, there are a number of important variables that are
unavoidable and contribute to the study's importance. Because it focuses on the deposit
and credit positions of commercial banks, which aid in revealing the financial status of
banks, this study contributes significantly to the body of research on commercial banks.
The study's implications are:

 Vital to understand how the bank is making use of its deposits.

 Important for policy makers and helpful for academics, professionals in the field, and
students, especially those involved in commerce, accounting, and financial
institutions, in developing plans and policies based on bank performance.
 Vital for the management team of particular banks to assess their bank's performance
and compare it to other banks.
5. Limitation of study

This study was developed under tight deadlines in order to partially fulfill the
requirements for an M.B.S. master's degree, which will reduce the study's adequacy. On
the other hand, despite some constraints, researchers strive to make their reports more
realistic, precise, and complete. The following points highlight these limitations.
 The dependability of the information that is now accessible determines how accurate
the conclusion will be.
 The availability of different resources also serves as a constraint.
 The focus of this study is on how commercial banks gather and use deposits.

6. Review of Literature
The literature on deposit mobilization is reviewed in this chapter, it is conceptual
structure, etc., including various expert viewpoints, assumptions, books, and journals as
well as the key findings of earlier research in the relevant field, all in a precise manner to
help the study achieve its goal.

Financial institutions that take deposits from other people and institutions are known as
commercial banks. Commercial banks provide the various technical and administrative
services to all the businesses. Commercial banks are generally involved in the opening
and maintenance of current account. It helps the mobilize savings through the banking
network.

Commercial banks are defined as those banks that offer both short- and long-term loans
when essential for trade and commerce under the Commercial Banks Act of 1947. They
take public deposits, offer loans in a variety of forms, buy bills and mark them down for
exchange, and exchange foreign currencies for promissory notes.

7. Research Methodology
"Research methodology refers to the various sequential steps to be adopted by a research
in studying a problem with certain objectives in view". The systematic, scientific process
of gathering, evaluating, and interpreting qualitative or quantitative data in order to
address research issues is known as research methodology. Basically it shows the various
processes adopted by the researchers during the research period.

A scientific paper's study methodology section explains the various methodological

decisions made, such as the techniques for gathering and analyzing data, and the rationale
behind them. It helps to know the various types of research problem in the systematic
way. The explanations will be helpful to other kinds of researchers who might wish to
replicate your findings.
Ensuring the validity and dependability of study findings is facilitated by an effective
research process. Analysis of the deposit mobilization strategy used by the four
commercial banks i.e. Himalayan Bank Ltd., Siddhartha Bank Ltd., Nabil Bank Ltd., and
Standard Charter Bank Ltd. is the main goal of this study project.

7.1 Research Design

Research design is the framework of techniques and methods. The research design
determines the research questions and objectives for the study. The major purpose of the
research design is that it allows the researcher to proceed in the right direction without
deviating from the works.

7.2 Population and Sample and Sampling Design

The list of commercial banks that makes up the study's population is shown below:

1. NIC Asia Bank Ltd.

2. Prabhu Bank Ltd.

3. Global IME bank Ltd.

4. Prime Commercial Bank Ltd.

5. Nepal Bank Ltd.

6. Machhapuchchhre Bank Ltd.

7. Sanima Bank Ltd.

8. Rastriya Banijya Bank Ltd.

9. Standard Chartered Bank Ltd.

10. Citizens Bank International Ltd.

11. Nabil bank Ltd.

12. Kumari Bank Ltd.

13. Siddhartha Bank ltd.

 14. Laxmi Sunrise bank Ltd.

15. Himalayan Bank Ltd.

16. Agriculture Development Bank ltd.

17. Nepal Investment Mega Bank Ltd.

18. Nepal SBI Bank Ltd.

19. NMB Bank Ltd.

20. Everest Bank Ltd.

Among all the banks above, only four banks are taken as a sample for comparative
study.

1. Himalayan Bank Ltd.

2. Siddhartha Bank Ltd.

3. Nabil Bank Ltd.

4. Standard Chartered Bank Ltd.

7.3 Nature and Source of data and instrument of Data Collection

Data is the collection of various information gathered by research and analysis. This
study is mainly focus on secondary data. Secondary data can be obtain from many
resources like magazines, journals, housing, GPS, internet search and libraries,
newspaper, electoral statistics. Secondary data provides the baseline for primary
research. Secondary data can save the precious time that would otherwise be spent
collecting data.

7.4 Data Analysis Tools

Data analysis is the processes of systematically applying logical techniques. Data

analysis tools make the analysis reliable and effective. Here two types of tools have been
used to achieve the certain goals.

1. Financial Tools

2. Statistical Tool

7.4.1 Financial Tools

Financial tools basically help to identify the financial strengths and weaknesses of the
firm by properly establishing relationship between the items of the balance sheet and the
profit and loss account.

7.4.2 Statistical Tools

In this study, some important statistical tools have been used to present and analyze the
data for achieving the objectives. Such as coefficient of correlation between different
variables has been used, which are presented below:

o Mean
o Karl Pearson's of Coefficient of Correlation Analysis (r)
o Coefficient of Variation (C.V.)
o Standard Deviation (S.D.)
o Probable Error (P.E.)
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