LIQUIDITY ANALYSIS OF SANIMA BANK LIMITED

A Project Work Proposal

By
Hom Bahadur Gurung
Symbol No:
T.U Registration No: 7-2-301-295-2020
Dibya Jyoti Multiple Campus
Bardaghat, Chisapani

Submitted To
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Bardaghat, Chisapani

April, 2025
1. Background of the study

Liquidity is crucial in businesslike banking. If the financial institution has high

liquidity, it can no earn the desired profit and if the financial institution has a shortfall
of liquidity, it cannot satisfy its customers. Inadequate liquidity may lead to the collapse
of the financial institution while excess liquidity is detrimental to financial institution’s
profitability. To remove demerits associated with maintaining inadequate and excess
liquidity, financial institutions should maintain an optimum level of liquidity. This
possible only when a financial institution’s liquidity needs is correctly predicted.
Prediction covers in present outflows of liquidity.

A Bank is an organization whose primary functions are to concentrate on the

accumulation of idle money from the General public and advancing loans to
individuals, traders, industries, and business houses for expenditure. Generally, the
bank collects money from those who have a spare of it from their income on which it
pays interest regularly. The money thus accumulated can be invested in different sectors
such as business, foreign trades, agriculture, industry, and social work, for which it
charges certain percentages of interest, which is higher than the interest paid by the
bank to the accumulated funds. Such charges on advancing loans are the major revenue
sources of the bank by which it can bear administration expenses incurred in the process
of operating its activities.

Thus, the bank is a good mediator between depositors and loan takers. To know the
precise and clear meaning of bank, some expert’s definition can be given. Chamber’s
twentieth-century dictionary defines a bank as an “Institution for keeping, lending and
exchanging etc of money.”

According to Crowther “A banker is a dealer in debts. The banker’s business is then to

take the debts of other to people, to offer his own in exchange and thereby to create
money.”

According to World Bank, "Banks are the financial institutions that accept funds in the
form of form of deposit repayable on demand or short notice."

Therefore, a bank is a financial institution that collects deposits and, in turn, provides
loans by creating credit. Today, banking is such a vague term; it does a lot more than
deposits and credit, like remitting money, issuing money guarantees, letters of credit,

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controlling, payment, other agency functions, the monetary activity of the country, etc.,
are also the major functions of the bank. This multiplicity of bank services and functions
has led to a bank being labeled "financial supermarket.

2. Statement of Problems

The statement of problems of the Sanima Bank will be as follows:

• What will be the liquidity position of the Bank?

• What will be status of liquidity management policies for the optimum level of
liquidity

3. Objectives of the Study

Liquidity is crucial in business banking. If the bank has high liquidity, it cannot make
the desired profit, and if the bank has a shortfall of liquidity, it cannot satisfy its
customers. Inadequate liquidity may lead to the collapse of the bank, while excess
liquidity is a determinant of the bank's profitability in order to remove demerits
associated with maintaining inadequate and excess liquidity, the bank should maintain
an optimum level of liquidity. This is possible only when the bank's liquidity needs are
correctly predicted. Liquidity analysis can provide an early warning of a potential
improvement or deterioration in a company's financial situation or performance.
Analysts engage in extensive number-crunching of the financial data in a company's
quarterly financial reports for any such hints. The main objectives behind this research
are as follows:

• To analyze the liquidity position of the Sanima Bank Limited.

• To suggest the liquidity management policies for the optimum level of liquidity.

4. Rationale of the Study

Liquidity is the status and part of the assets which can be used to meet the obligation.
Liquidity can be viewed in term of liquidity stored in the balance sheet and in term of
liquidity available through purchased fund. The degree of liquidity depends upon the
relationship between cash assets plus those assets which can be quickly turned into cash
and liability awaiting payments

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Every research has its own importance because it aims to gain knowledge and add new
literature to the existing field. This study is also helpful to the borrowers and learners
to gain the information regarding the trend of ratio. This study is important for other
parties such as universities, commercial banks, researchers, scholars, students and so
on. Following are the significance of the study:

• This study will provide important information and data to stakeholder and other
related aspects.
• It helps to know about the liquidity condition of Sanima Bank Limited.
• Important to "outsiders" who are mainly the customers, financing agencies,
stock from exchanges etc.
• This research will be important for the forth coming students who need some
information; it will be a reference for them.
• Important to the management bodies of the bank for the evaluation of the
performance of bank. It can be a good asset of library and guideline for other
report writer.

5. Literature Review
Liquidity is also defined as the position or capability of a financial institution to meet
the current obligations of customers, such as payment of cheques. For payment of
demand drafts, disbursement of approved loans, etc., the financial institution needs to
maintain some reasonable level of liquidity to fulfill different commitments, such as
providing money to depositors when they demand, administrative expenses, for
maintaining the cash bank's capacity to pay cash in exchange of deposits.

6. Research Methodology
6.1. Types of Research
Financial tools will be used to ensure the relationship between variables in terms of
ratio, percentage, and times. Here for this research works both analytical and descriptive
research design is applied.

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6.2. Population and Sample
At present, 20 commercial banks are operating in Nepal. Among them, one commercial
bank, Sanima Bank Limited, has been selected as a sample for the present study.
Similarly. financial statements of banks for five fiscal years from 2020/21 to 2024/25
taken as samples for the same purpose.
6.3. Types of data
The researcher uses the secondary data for this study. The secondary data were
collected from the different sources. Secondary sources consist of annual reports of the
bunk’s published and unpublished bulletins, reports of the banks, previous studies, and
banking and financial statistics reports of Rastra Bank, etc.

6.4 Data Collecting Procedures

Due to confidentiality maintained by the bank, secondary sources, especially the report
and website of the concerned bank, are taken as the main source of depiction in the
purpose of the study. The annual reports of the concerned banks were obtained from
the office and their websites. NRB publications, such as Banking and Finan Economic
Reports.

6.5. Method of Data Analysis

Analysis may be categorized as descriptive analysis and inferential and predetermined
objective of the research; certain tools are used which are as follows:
• Current Ratio
• Cash to Current Assets Ratio
• Cash to Current Liabilities Ratio and
• Cash and Bank Balance to Total Deposit Ratio

7. Limitations of the Study

The main focus of the study will be to evaluate the liquidity analysis of Sanima Bank
Limited. the area of the study of this bank is a little vast, so there are certain limitations
of this study. This study is subject to the following limitations.

• The study will cover the data for only five years, from 2020/2021 to 2024/2025.

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 • Since this study deals, mostly with of Sanima Bank Limited, the conclusion
derived from the study may or may not be applicable to other similar bank or
financial institutions.
• The study will be based on the facts collected from the annual report of the Bank
and market conditions.

8. Organization of the Study

The present study is organized into three chapters. They are listed below:

Chapter-I

The first chapter will include background, the profile of the organization, objectives, rationale,
review of literature, research methodology, limitations, and organization of the study.

Chapter II

The second chapter will include data presentation tools, data analysis tools, and results and
findings.

Chapter III

The third chapter will include a summary and conclusion.

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 BIBLIOGRAPHY

Basel Committee on Banking Supervision. (2019). Liquidity Risk Management and

Supervisory Challenges. Bank for International Settlements (BIS).

Crowther, G. (1976). An Outline of Money. Thomas Nelson and Sons Ltd.

Gurung, H. B. (2025). Liquidity Analysis of Sanima Bank Limited (Unpublished BBS

Project). Tribhuvan University.

Investopedia. (2024). Liquidity Ratio Definition and Types.

https://www.investopedia.com

Mishkin, F. S. (2016). The Economics of Money, Banking, and Financial Markets (11th
ed.). Pearson Education.

Nepal Rastra Bank (NRB). (2023). Banking and Financial Statistics Report. NRB
Publications.

Pandey, I. M. (2015). Financial Management (11th ed.). Vikas Publishing House.

Rose, P. S., & Hudgins, S. C. (2013). Bank Management and Financial Services (9th
ed.). McGraw-Hill.

Sanima Bank Limited. (2020–2025). Annual Reports. Sanima Bank Limited.

Sanima Bank Limited. (2025). Official Website. https://www.sanimabank.com

Saunders, A., & Cornett, M. M. (2018). Financial Institutions Management: A Risk

Management Approach (10th ed.). McGraw-Hill Education.

World Bank. (2022). Global Financial Development Report. World Bank Publications.