ANALYSIS OF LIQUIDITY AND PROFITABILITY IN NEPALESE COMMERCIAL

BANKS

A dissertation submitted to the office of the Dean, Faculty of Management in

partial fulfilment of the requirements for the of Master's Degree

By
HARIKRISHNA BK
Exam Roll No : 53800/21
Registration No: 7-2-512-55-2017

Central Department of Management

Faculty of Management, Tribhuvan University
Kirtipur, Kathmandu
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April, 2023
CERTIFICATION OF AUTHORSHIP

I hereby corroborate that I have researched and submitted the final draft of
dissertation entitled "ANALYSIS OF LIQUIDITY AND PROFITABILITY IN
NEPALESE COMMERCIAL BANKS" The work of this dissertation has not been
submitted previously for the purpose of conferral of any degrees nor it has been
proposed and presented as part of requirements for any other academic purposes.

The assistance and cooperation that I have received during this research work has
been acknowledged. In addition, I declare that all information sources and literature
used are cited in the reference section of the dissertation.

HARIKRISHNA BK
Signature: ………………
Date of submission: A
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Report of Research Committee

Mr. HARIKRISHNA BK has defined research proposal entitled "ANALYSIS OF

LIQUIDITY AND PROFITABILITY IN NEPALESE COMMERCIAL
BANKS" successfully. The research committee has registered the dissertation for
further progress. It is recommended to carry out the work as per suggestions and
guidance of supervisor Prof ....... and submit the thesis for evaluation
and Viva voce examination.
Chairperson, Research
Committee Dissertation Proposal
Defended
……………………………
Name: Date:

Proposal Supervisor

Dissertation Submitted
…………………………….
Date:

Dissertation Supervisor

Dissertation Viva voice

………………………………
Date:

Approval Sheet

We have examined the dissertation entitled "ANALYSIS OF LIQUIDITY AND

PROFITABILITY IN NEPALESE COMMERCIAL BANKS" Presented by Ashok
Kumar Tharu for the degree of Master of Business Studies (MBS). We hereby
certify that the dissertation is acceptable for the award of degree.

................................
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Dissertation Supervisor

…………………….

Internal Examiner

…………………..

External Examiner

……………………

Chairperson, Research Committee

……………………

Acting Head of Department, Central

Department of Management, Date:
ACKNOWLEDGEMENTS
First of all, I would like to express my heartfelt gratitude to the Central Department of
Management, Tribhuvan University for providing an opportunity to carry out research
project. This project has been prepared for the partial fulfillment of the requirement
for the degree of Master of Business studies (MBS).This research work is not the
completed by only individual effort but several helpful hands have contributed in the
completion of the report. I express my deep appreciation to everyone who helped me
during this study.

A, Special thanks goes to my honorable Supervisor, Prof Dr. Achyut Gyawali,

Central Department of Management Kirtipur, for his continuous guidance and
motivation undertaking and completing this research work. Without his support and
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advice this topic would have been completely overseen and may not have come to be
in time.

I would like to express cordial gratitude to Prof. Dr. Mahananda chalise (Chairman of
Research Committee) for this timely and continuous guidance throughout the study.
Likewise, I am grateful to Prof. Bhawani Shankar Acharya, the head of Central
Department of Management (CDM). Besides, I owe a debt of gratitude to Lecturer
Bhumi Raj Acharya and Dr. Sunita Bhandari, Central Department of Management,
Tribhuvan University for their constant support, motivation and Providing Valuable
guidance which enable me to complete my thesis And also highly appreciate the
efforts of all teacher and other members of central department of management,
libraries staffs who inspired and provided the needed materials to complete this thesis.

Last but not least, I would like to thank my family members and friends for their
affection and emotional support that has encouraged me to achieve every success
including this research work.

Harikrishna Bk

April, 2023
TABLE OF CONTENTS

Title Page i
Certification of Authorship ii
Report of Research Committee iii
Approval Sheet iv
Acknowledgements v
Table of Contents vi
List of Tables and Figures viii
Abbreviations ix
Abstract x
CHAPTER I : INTRODUCTION 1-7
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1.1 Background of the study 1

1.2 Statement of the Problems 3
1.3 Objective of the study 4
1.4 Research hypothesis 4
1.5 Rationale of the study 5
1.6 Limitations of study 6
1.7 Chapter Plan 6
CHAPTER II : LITERATURE REVIEW 8-23
2.1 Introduction 8
2.2 Theoretical Review 8
2.3 Conceptual Review 9
2.3.1 Concept of Liquidity 9
2.3.2 Concept of Profitability 10
2.3.3 Relationship between Liquidity and Profitability 10
2.4 Empirical Review 11
2.4.1 Summary of Articles and thesis 18
2.5 Research Gap 23
CHAPTER III : RESEARCH METHODOLOGY 24-33
3.1 Introduction 24
3.2 Research Design 24
3.3 Nature and Source of Data 24
3.4 Population, Sample and Sampling Design 25
3.5 Data Collection Instrument and Procedures 25
3.6 Data Processing Procedures and Data Analysis Tools 26
3.6.1 Financial Tools 26
3.6.2 Statistical Tools 27
3.7 Research Framework and Definition of Variables 30
CHAPTER IV : RESULTS AND DISCUSSION 34-53
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4.1 Introduction 34
4.2 Liquidity Ratio 34
4.2.1 Current Ratio 35
4.2.2 Cash Reserve Ratio 36
4.2.3 Cash and Bank Balance to Current Assets Ratio 37
4.2.4 Cash and Bank Balance to Total Deposit Ratio 37
4.3 Profitability Ratio 38
4.3.1 Return on Assets (ROA) 39
4.3.2 Return on Equity (ROE) 40
4.4 Correlations Analysis 41
4.5 Regression Analysis 43
4.5.1 The Multiple Regression of ROA on Liquidity 43
4.5.2 The Multiple Regression of ROE on Liquidity 46
4.6 Major Findings of the Study 49
4.7 Results of Hypothesis Testing 51
4.8 Discussion 52
CHAPTER V : SUMMARY AND CONCLUSION 54-58
5.1 Summary 54
5.2 Conclusion 56
5.3 Implications 57
REFERENCES APPENDICES WEBSITES
LIST OF TABLES AND FIGURES

Table No Title Page No

Figure 3.1 conceptual framework 31

4.1 Current Ratio 35

4.2 Cash reserve ratio 36

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4.3 Cash and Bank Balance to Total Current Assets Ratio 37

4.4 Cash and Bank Balance to Total Deposit Ratio 38

4.5 Return of assets 39

4.6 Return of equity 40

4.7 Correlations matrix between variables 42

4.8 ROA Model Summary 44

4.9 Analysis of Variance (ANOVA) 45

4.10 ROA Coefficient Matirix 45

4.11 ROE Model Summary 47

4.12 Analysis of Variance (ANOVA) 48

4.13 ROE Coefficient Matirix 48

%
ABBREVIATIONS

ó
: Percentage
: Standard Deviation
ADBL : Agricultural Development Bank
ANOVA : Analysis of Variance
CA : Current Assets
CL : Current Liabilities
CRR : Cash Reserve Ratio
TDP : Total Deposit
EBL : Everest Bank Limited
FY : Fiscal Year
i.e. : That is
HBL : Himalyan Bank Limited
NRB : Nepal Rastra Bank
ROA : Return of Assets
ROE : Return of Equity
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S.D : Standard Deviation

SPSS : Statistical Package for Social
Science
ABSTRACT

This study investigates the Analysis of liquidity and profitability in Nepalese banks.
The main objective is to explore and examine the liquidity position, profitability
status, impact and relationship between liquidity and profitability of Nepalese
commercial banks. The study descriptive and analytical research design has been
used. Mostly secondary data have been used from the annual report statements of
commercial banks in Nepal.

Correlation and regression analysis has used to examine the impact and relationship
between liquidity and profitability. The ROA and ROE has use to measure
profitability status and current ratio, cash reserve ratio, cash and bank balance to
current deposit ratio and cash and bank balance to total deposit ratio was used to
measure liquidity position. The study covers four Nepalese commercial banks i.e.
ADBL, Nabil, Everest and Himalyan in Nepal over a period of past five fiscal years
from 2073/74 to 2077/78. The study concluded that the CAR has positive significant
relationship and CASH TO CA, CASH TO TDP and CR has positive but insignificant
relationship with ROA of selected commercial banks. The CASH TO CA, CASH TO
DP and CR has negative and insignificant relationship and CAR has positive but
insignificant relationship with the ROE. Similarly, the CASH TO TDP and CR has
shows negative impact and CASH TO CA and CAR has positively with (ROA and
ROE) of selected commercial banks over the study period . The study recommends that
ADBL bank should control the cost and expenses associated with bank operation to
increase the profit and create new investment opportunities. NABIL Bank has
recommended to increase utilization of assets that drives more profits .

Key Words: Current Ratio, Cash Reserve Ratio, Cash and Bank Balance to Current
Assets Ratio, Cash and Bank Balance to Total Deposit Ratio, Return on Assets and
Return on Equity.
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CHAPTER – I
INTRODUCTION

1.1 Background of the Study

The performance of a company is significantly influenced by how its short-term assets

and liabilities are managed on a daily basis. Even businesses with strong long-term
forecasts and strong financial performance cannot stay solvent without effective
liquidity management. Therefore, while increasing shareholder wealth still stands as a
company's primary goal, maintaining the firm's liquidity is also a key goal, and as
such, a company should strike equilibrium between the various interest goals. Profit
growth at the expense of liquidity can cause the company significant issues, so a
compromise between these two business goals must be made. A company won't last
very long if it doesn't care about making a profit, but if it does, it will disregards cash,
it may experience issues with insolvency or bankruptcy. Due to these factors, liquidity
management should be carefully considered as it will eventually impact the firm's
profitability (Adhikari, 2018).
The management of a company's present assets and current liabilities is referred to as
liquidity. It is crucial in determining whether a company can successfully handle its
short-term obligations. Because of how crucial it is, businesses must keep a decent
portion of their assets in the form of cash on hand in order to pay their short-term
debts. A balanced amount of liquidity is required for a firm's efficiency and
profitability. Therefore, in order to guarantee high profitability, businesses must
determine the ideal level of liquidity. There shouldn't be an excessive amount of
liquidity either. Instead, it ought to stay at a manageable amount. Profitability, on the
other hand, describes how much money businesses make after paying for operations
and other costs. Profitability ratios are used to determine the profitability level of
businesses, making it clear where the company sits in terms of profitability. Every
company tries to achieve maximum profitability because it is the ultimate goal of
every business to increase profitability. Since there is a strong correlation between a
firm's profitability and liquidity, the firm must keep an ideal level of liquidity (Ali
Khan & Ali, 2016).
The whole service sector is currently undergoing industrialization and
commercialization. By managing analysis on profitability and liquidity properly,
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business organizations are advancing toward profit maximization. The idea of

liquidity management is one that is getting a lot of attention today, especially given
the present financial climate and the health of the global economy. maintaining a high
amount of liquidity in order to assure security while maximizing profit, and reach the
maximum owner's net worth level possible while also achieving other corporate goals
are just a few of the eye-catching corporate goals. The liquidity is a significant
influencing aspect of a controllable element for making decisions and earning
revenue. Decisions regarding liquidity and profitability, which are important
managerial choices, can have an impact on shareholders' returns, risks, and customer
pleasure (Jeevarajasingam, 2014).

A commercial firm's ability to operate successfully depends on its level of liquidity.

business should ensure that it has enough liquidity to cover its immediate
responsibilities without going overboard. Lack of liquidity leads to poor credit ratings,
which could ultimately lead to the company's liquidation. A extremely high level of
liquidity is likewise undesirable because idle assets produce no income. Studying
liquidity is crucial for both internal and external analysts due to its close link to the
everyday activities of a company (Bhunia, 2012).

The quantity of capital that is accessible for investment is referred to as liquidity in the
financial context. The ability of a bank to keep enough money on hand to cover its
maturing commitments is known as bank liquidity. The business may have trouble
paying its immediate financial obligations if the bank is unable to instantly meet cash
obligations. A high number of liquid assets may have an impact on an organization's
profitability and business operations. As a result, profitability and liquidity are
tradeoffs (Saleem & Rehman, 2011).

A bank is considered profitable when sales exceed costs. In order to operate, banks
must incur expenses, which are the cost of the resources used to do so. Being
profitable is the primary objective of the companies. Businesses cannot long-term
compete in the market without profitability. Therefore, it is crucial to assess previous
profitability, determine current profitability and predict future profitability for the
banks. Although the cash input and withdrawal, which pertain to the company's
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liquidity, are indicated on the cash flow statement, revenue and the income statement,
which speaks about the business's profitability, expenses are disclosed. (Das,
Chowdhury, Rahman, & Dey, 2015).

From the above, every shareholder is interested in a bank's liquidity status. In this
study, we looked at how a bank's profitability is impacted by its liquidity. Profitability
is the revenue a business generates from its activities. Profits are the primary goal of
both businesses and banks. A bank's profit is calculated utilizing the interest rate
difference it charges on lending it extends to customers and interest rates that it offers
to customers. A number of ratios are taken into account when assessing the effect of
liquidity on bank profitability.

1.2 Statement of the Problems

The efficiency of banks in receiving deposits and distributing loans should be high. An
inadequate amount of liquidity can lead to serious financial issues for a bank. So
maintaining the bank's liquidity position will help the company turn a healthy profit.
According to reports, Nepal's commercial banks barely raise any cash for the country's
industrial sectors. The ability of banks to raise money and invest it in successful
companies is lacking. The efficiency of the financial statement analysis and its defects
have an effect on the financial performance of the bank. It shows how inadequately
liquidity management is carried outanking sectors are struggling to maintain their
liquidity situations as a result of their incapacity to settle short-term debts and other
financial commitments. They suffer as a result, which hurts their financial success
(Shrestha & Jha,2020).

The bank should have fast access to immediately expendable money at a reasonable
cost exactly when such funds are required. (Rose, 1999)A commercial bank should
have enough liquidity to mitigate both its asset-side and liability-side liquidity risks.
Both insufficient and excessive liquidity suggest a concern with a commercial bank's
financial soundness. Excess liquidity destroys commercial bank profitability by
lowering the return on assets. Similarly, insufficient liquidity harms a bank's credit
standing, leading to the forced liquidation of assets and harming the bank's reputation.
As a result, commercial banks must strike a balance between profitability and
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liquidity risk. The bank's financial performance suffers from a lack of strength and
efficiency in financial statement analysis. Commercial banks' cash, bank balances, and
cash reserves with the NRB have been fluctuating and dropping, while various
deposits have been increasing; this demonstrates the bank's inefficiency in liquidity
management.
The following research questions have been tried to be answered by this study:

i. What is the status of Liquidity and profitability position of selected

Nepalese commercial banks?
ii. Is there any relationship between the Liquidity and profitability of
selected Nepalese commercial banks?
iii. Is there any effect of liquidity and profitability of selected Nepalese
commercial banks?

1.3 Objectives of the Study

This study's main goal is to compare the liquidity and profitability analyses of the
Adbl, Nabil, Everest, and Himalayan Nepalese banks.
The specific Objectives of the study are as follows:

i. To assess the liquidity position and profitability position of the

selected Nepalese commercial banks.
ii. To examine the relationship between the Liquidity and profitability of
selected Nepalese commercial banks.
iii. To analyze the effect of liquidity and profitability of selected Nepalese
commercial banks.

1.4 Research Hypothesis

Testing of the hypotheses is done while the investigation is being conducted. The
process for testing hypotheses is as follows.

• H1: There is a significant relationship between Current Ratio and ROA.

• H2: There is a significant relationship between Current Ratio and ROE.
• H3: There is a significant relationship between CR Ratio and ROA
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• H4: There is a significant relationship between CR Ratio and ROE.

• H5: There is a significant relationship between Cash & Bank Balance To
Current Assets Ratio and ROA.

• H6: There is a significant relationship between Cash & Bank Balance To

Current Assets Ratio and ROE.

• H7: There is a significant relationship between Cash & Bank Balance To Total
Deposits Ratio and ROA.

• H8: There is a significant relationship between Cash & Bank Balance To Total
Deposits Ratio and ROE.

1.5 Rationale of the study

A key factor in managerial decision-making is the appraisal of the liquidity and

profitability status of Nepal's commercial banks. Every stage of an organization's
operation, promotion, and expansion requires an analysis of its financial performance.
The balance between earning and non-earning assets needs to be right. The goal of
profitability serves as the commercial banks' constant compass. Commercial banks
always make judgments that will increase shareholder value. To protect the banks
from the risk of illiquidity, there should be an efficient mechanism of fund allocation.
Between them, a certain level must be attained. The study considers whether or not
commercial banks are aware of this situation. This study can be used to boost the
subject company's financial performance. This research can aid the concerned
company's financial performance. This study will be useful to academics, students,
instructors, and practitioners in accounting and finance. This research also benefits
shareholders, debtors, depositors, and financial institutions, so they can determine
which banks are the best to work with on an unbiased basis (Budha,2021).

From the perspective of the banks' liquidity management, this study is important. In
view of:
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i. This study will contribute to provide information about financial position

for investor and creditor. ii. This study will contribute to improving investor,
creditor, employee, and customer attitudes and views.
iii. This study will assist in decision-making and the evaluation of
liquidity and performance.
iv. The forecasts for credit and liquidity will be supported by the findings
of this study.
v. This study can serve as a basis for future research.

1.6 Limitations of Study

This study investigates the elements affecting a commercial bank's liquidity condition
and profitability. It's limited in some ways. Resources are scarce, and exploring
research to uncover novel aspects is challenging. The two biggest obstacles are the
dependability of the statistical methods used and a lack of research expertise.
The study depends on the following limitations.

i. The study focuses on the liquidity position and profitability aspect

only.
ii. The study analysis only with the help of financial tools and very few
statistical tools are used.
iii. This study covers the five years of period (2073/74 to 2077/78).
iv. This research focuses on quantitative analysis and ignores qualitative
variables.
v. Given that the study focuses on four banks i.e. ADBL, NABIL,
EVEREST and Himalayan commercial banks in Nepal. The study's
conclusion might or might not apply to other commercial banks.
vi. All of the secondary data collected in this study are used to analyze
and interpret the results.

1.7 Chapter plan

The chapters of this work are divided into five sections, as follows:
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Chapter 1: This chapter provides the study's introduction. It explains the background,
introduction, and statement of problem, research question, Significance of study, and
limitation of study, objective of study.
Chapter 2: This chapter is focused with the literature review which includes review
of theories the previous studies have been briefly discussed of some of the journals
and reports have been reviewed too.
Chapter 3: This chapter describes about the Research methodology of research used
for the study. This chapter covers research design, data sources, data analysis,
population and sampling, and instruments for data analysis.
Chapter 4: This chapter has discussed using figures and financial tools to present and
analyze data. The financial and statistical analysis connected to bank loan
management. The thesis chapter also includes a summary of the study's key findings.
Chapter 5: This chapter explores the study's summary, conclusion, and implications
and concludes with references and appendices.
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CHAPTER II
LITERATURE REVIEW

2.1 Introduction

In any study, the previous study cannot be ignored. On this subject, we can discover
several previous papers, journals, study reports, public books, manuals and thesis. To
determine what other scholars have already done and what remains to be done, as well
as to examine similarities and differences with the study evaluation if needed. There
are numerous publications, reviews and thesis on the issue of commercial bank
liquidity and profitability analyses in Nepal. The following examines the impact of
liquidity on profitability on commercial bank organizational performance. This study
drew resources from a variety of sources that were all closely related to the study's
theme and objectives. Following that is a summary of the literature review.

2.2 Theoretical review

Anticipated Income Theory

H.V. Prochanow formulated this idea in 1944 on the basis of US commercial banks'
practice of issuing term loans. This idea states that the bank will prepare the duration
of loan liquidation based on the anticipated revenue of the borrower, regardless of the
form and characteristics of the borrower's business. A term loan has a term that is
more than one year but shorter than five years.

It is provided as a substitute for the mortgage of stock, equipment, and even real estate
(security commitment). While lending this loan, the bank limits the borrower's
financial actions. The bank considers security as well as the borrower's expected
earnings when making a loan. So, rather than delivering a lump sum at the loan's
maturity, a bank loan is repaid in installments using the borrower's future earnings.

Shift Ability Theory

H.G. Moulton proposed this hypothesis in 1915, arguing that if commercial banks
continue to have a significant quantity of assets that can be transferred to other banks
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for cash without serious loss. In the event of a demand, it is unnecessary to rely on
maturities.

This idea states that a resource must be completely shiftable in order to, it must be
directly transferrable without any capital loss when liquidity is required. This is
primarily utilized for short-term market investments such as treasury bills and bills of
exchange, which can be sold directly whenever banks need to raise funds.

However, in typical situations where all banks need liquidity, the shift ability theory
requires all banks to purchase assets that can be transferred to the central bank, which
acts as the lender of last resort.

2.3 Conceptual review

A review of the related literature is the source for the further study. It provides the
strong knowledge about the related topic. The review of related literature involves the
systematic identification, location and analysis of documents containing information
related to the research problem.

2.3.1 Concept of Liquidity

The quantity of capital that is accessible for investment is referred to as liquidity in the
financial context. Most of today's capital is credit rather than actual money. This is
due to the fact that the big financial organizations that handle most investments favor
borrowing money. Since interest rates are low and capital is therefore readily
accessible, high liquidity denotes a large amount of capital. Why are interest rates
such a crucial factor in managing liquidity? Since these rates actually determine how
expensive borrowing is. Because credit is affordable due to low interest rates, firms
and investors are more likely to borrow. More investments seem beneficial because
the return on investment merely needs to be higher than the interest rate. High
liquidity promotes economic growth in this way.
Liquidity can be considered as being available through purchased money as well as
being stored on the balance sheet. The amount of liquidity is determined by the
relationship between cash assets, assets that may be easily transformed into cash, and
the liabilities that are due for payment. In general, different countries around the
world have different definitions of what liquidity is. Because it is well known that as
 10

the monetary sector develops or the use of monetary instruments rises, the definition
of it also expands. Liquidity is the total amount of money in circulation (Bhandari,
2013).

2.3.2 Concept of Profitability

Profit is the cumulative variance between revenues and expenses, usually over the
course of one year. It can't thrive if it doesn't generate enough of it. As a result, the
financial management should constantly assess how profitable the company is. The
profitability ratios are computed to assess the business's operational effectiveness. In
addition to the administration of the business, creditors and owners are also concerned
with its profitability. Creditors desire regular payments of principal and interest. The
needed rate of return is what owners seek on their investment. Only when the
company makes enough money is this feasible (Pandey, 2012).

Profitability is the term used to describe the Bank's net income when revenues outpace
costs. Bank activities produce income, and the cost of the resources utilized to
produce that income is an expense. Being profitable is the primary objective of the
companies Businesses cannot survive in the market for very long without being
profitable. The organization must therefore evaluate past profitability, ascertain
current profitability, and forecast future profitability. Income and expense are
indicated on the income statement, which relates to the profitability of the firm, while
the inflow and outflow of cash are depicted on the cash flow statement, which defines
the company's liquidity (Das, Chowdhury, Rahman, & Dey, 2015).

2.3.3 Relationship between Liquidity and Profitability

Two crucial factors that reveal information about the success of any corporate entity
are profitability and liquidity. Profitability and liquidity should move in tandem with
one another for long-term survival and healthy growth. One of the main goals of any
firm is profitability. Without being profitable, a company cannot continue, and
commercial expansion is challenging. A business needs short-term money to cover its
ongoing operational costs and other demands in order to turn a profit. When this
short-term funding requirement is created through business operations rather than
through external indebtedness, business will be more lucrative. The ability of a
business to satisfy its short-term financial needs is shown by its liquidity, while its
 11

profitability indicates the amount of profit the business has made from its operations
(Ahmad, 2016).

The management of every organization should consider researching and thinking

about the challenges of profitability and liquidity as their top priorities. The ability of
a company to fulfill its immediate obligations is referred to as liquidity. A business
firm's ability to function successfully depends on its level of liquidity. Because of its
direct connection to daily business operations, both internal & external experts should
conduct a study of liquidity. (Bhunia, 2010).

The terms "liquidity" and "profitability" keep coming up in relation to banks. Without
liquidity, profitability is not possible. Additionally, profitability is a prerequisite for
increased liquidity. Each of these is a complement to the other. But these two also
compete against one another. High levels of liquidity prevent a bank from making a
profit. The bank doesn't profit from the liquidity because the majority of it is kept in
reserve there. The money cannot be invested by the bank. Without investment, it is
impossible to hope for profitability (Budha, 2016).

2.4 Empirical review

Singh (2008) had an exploratory investigation of the financial performance of

commercial banks NABIL, NIBL, and HBL. The primary goal of this study is to
identify the financial weaknesses and strengths of three commercial banks: NABIL,
NIBL, and HBL. The study's main focus is on the comparative financial performance
of these institutions from 2060/61 to 2064/65. Based on research methods that involve
the use of quantitative and qualitative models to discover, According to the liquidity
research, NIBL has better overall liquidity than NABIL and HBL.The higher
percentage of return on total deposit of NIBL in contrast to HBL implies that NIBL
uses its entire deposit more successfully in creating profit than HBL. There is perfect
positive correlation between total deposit and total investment of NABIL, NIBL &
The sum of NABIL, NIBL, and HBL's total investments and deposits are perfectly
 12

correlated. There has been a change in the entire deposit, which results in changes in
the total investments of NABIL, 99.7% of NIBL, and 99.6% of HBL.
Akter & Mahmud (2014) investigated relationship between liquidity and profitability
in Bangladesh's banking system. Twelve banks from four different industries were
considered. Determine how much a bank's liquidity can explain its profitability.
Identify the relevance of the 10% significance level for the relationship between bank
profitability and liquidity. Particularly, liquidity and profitability don't have a strong
relationship. The banking industry as a whole has the same pattern. Government
banks had unpredictable liquidity, whereas other sectors were consistent. However,
there were significant variations in profitability in all sectors between these dates. In
Bangladesh, Liquidity and profitability in banks across industries do not significantly
correlate.

Alshatti (2015) carried out a study to investigate the impact of liquidity management
on profitability in Jordanian commercial banks throughout the time period (2005–
2012). Thirteen banks have been chosen to represent Jordanian commercial banks as a
whole. The liquidity indicators are the investment ratio, Quick ratio, capital ratio, net
credit facilities/total assets ratio, and liquid assets ratio, while the profitability proxies
are return on equity (ROE) and return on assets (ROA). The Augmented Dickey Fuller
(ADF) stationary test model was employed to test for a unit root in a time series of the
research variables, followed by regression analysis to evaluate the hypothesis. The
empirical results suggest that an increase in the fast ratio and the investment ratio of
available funds has a good effect on profitability, whereas the capital ratio and the
liquid assets ratio have a negative influence on the profitability of Jordanian
commercial banks.

Khan and Ali (2016) examined profitability and liquidity of commercial banks in
Pakistan are related. The nature and strength of links between dependent and
independent variables are identified using regression and correlation. Secondary data
was used the analysis for years (2008-2014). Using the current ratio, quick ratio, gross
profit margin, and net profit margin. Found that Bank profitability and liquidity have a
significant positive link. No variable shows a negative correlation with any of the
 13

liquidity ratios. Thus, the research found a beneficial association between liquidity
and profitability.
Ibrahim, S. S. (2017) studied how liquidity affected the financial performance of Iraqi
commercial banks. For the current study, five Iraqi banks from the years 2005 to 2013
were examined. Additionally, the key profitability and liquidity ratios of these
institutions' annual reports were examined and computed. For Using variable are Loan
deposit ratio, deposit asset ratio, deposit asset ratio and cash deposit ratio. According
to the study, any rise in the aforementioned liquidity ratios will result in a rise in
return on assets as well. This study suggests that maintaining a balance between
liquidity and profitability may be best for Iraqi banks.

Shrestha (2018) aimed to investigate the liquidity management and profitability of

Nepalese commercial banks. The study's goal is to determine the relationship between
liquidity management and profitability, as well as the influence of liquidity
management on profitability. The data was discovered to span the years 2012-2016 for
commercial banks in Nepal. Pearson correlation analysis are used to investigate the
relationship between liquidity management and profitability. The impacts of liquidity
on profitability are investigated using regression analyses. The liquidity management
variables include the current Reserve Ratio (CRR), Credit Deposit Ratio (CDR), and
profitability, which include return on equity. (ROA). The findings show that liquidity
has no substantial impact on profitability in Nepalese commercial banks.

Akhter (2018) examined the effects of profitability and liquidity on the operational
effectiveness of Bangladesh's scheduled commercial banks between 2011 and 2016.
The study employed secondary data from 30 Bangladeshi scheduled commercial
banks. To produce a reliable result, the quantitative research used a panel data method
and a variety of models, including the Feasible Generalized Least Square Model,
Panel Correlated Standard Error Model, Fixed Effect Regression model with Cluster
Standard Errors, and Drisc/Kraay Standard Errors models. The study finds that, using
the Fixed Effect Regression Model and the Panel Correlated Standard Error estimator,
respectively, liquidity and profitability together account for approximately 66.23%
and 98.85% of the bank's operational efficiency. The analysis comes to the conclusion
that the bank should use client deposits and borrowings to create a high-quality loan
 14

portfolio after maintaining a minimal level of liquidity in order to assure profits for its
shareholders.
Ghurtskaia & Lemonjava (2018) identified patterns in the liquidity ratio and
profitability ratio of banks. Liquidity ratio, net interest margin, return on equity, and
return on assets were reviewed based on statistical financial data published by
National Bank of Georgia, and trend findings were displayed. Additionally, regression
analysis and correlation coefficient analysis were utilized to look at the link between
the four above-mentioned variables. The findings indicated a positive correlation
between the banks' profitability and their liquidity ratio.

Adhikari (2018) studied the thesis titled "Liquidity and Profitability of Selected
Nepalese Commercial Banks" With reference to the NABIL and Nepal SBI Bank
Limited Comparative Study. The purpose of this research is to investigate Nepalese
commercial banks' liquidity management and profitability. Analyze the profitability
ratios of the sample banks, such as return on shareholders' equity, total assets, and
deposit, to evaluate the cash reserve ratio maintained by the banks and to examine the
relationship between net profit and total deposit and net profit and investment. The
major conclusions are that SBI bank's liquidity status is stronger than Nabil's. Nabil
Bank outperforms in all sectors, and its profitability ratio is high .The growth rate,
liquidity status, and risk ratios are all below average. Compared to the capital risk
ratio of Nabil Bank, SBI has a good liquidity position and a low risk.

Subedi (2018) had carried out a study on Nepal's Commercial Banks' Profitability and
Liquidity. This study's primary goal is to compare the analyses of the liquidity and
profitability of the chosen commercial banks. The following provides examples of the
findings. Since EBL's current ratio is higher than those of CBIL, NBL, RBB, and
SBL, Based on the cash & bank balance to total deposit ratio, The criterion set by
NRB for cash reserve ratio has been successfully met by the average cash reserve ratio
of CBIL, EBL, NBL, RBB, and SBL for the entire fiscal year. The sample banks' cash
and bank balance to current assets ratios vary, with NBL having a larger ratio and SBL
having a lower one. RBB has a higher profitability position than CBIL, EBL, NBL,
and SBL.
 15

Mishra (2019) examined the relationship between liquidity and profitability of

Nepalese commercial banks. The secondary data used in this study was taken from the
annual reports of Nepalese commercial banks and the NRB for the ten fiscal years
between 2007/08 and 2017/19. The relationship between liquidity and profitability
was examined using correlation and regression analysis. This article's conclusions are
based on research done on the chosen banks. Thus, The results show that ADBL and
NABIL are well-positioned in terms of profitability and liquidity. The financial sector
can thus use the findings.
Sah & Lertjanyakit (2019) analyzed impact of liquidity management on the financial
performance of Nepalese commercial banks. The study found that LR has a
substantial positive relationship with market value of financial performance while
CRR has a large negative correlation with it. financial performance and capital
adequacy ratio are significantly inversely related; the latter is significantly inversely
correlated with the former.

Pokharel & Pokharel (2019) investigated influence of liquidity on profitability in

Nepalese commercial banks. Randomly selected were 5 commercial banks as a
sample from of 28 commercial banks. Data was used 2010-11 to 2016-17 AD. While
The IGSCA and CRR have a positive correlation with ROA, while the CRR and
CBBISD have a negative correlation with ROA. It has also been noted that, with the
exception of IGSCA and ROA, there is a considerable association between liquidity
ratios and profitability.

Akber & Dev (2020) explored the impact of liquidity on commercial bank’s
profitability in the banking sector of Bangladesh. This research sampled 10
commercial banks that are listed on the Dhaka Stock Exchange in order to produce
reliable results. Data collection took place between 2012 and 2019. The loan to
deposit ratio, deposits to assets ratio, loan to asset ratio, and cash deposit ratio were
four of the liquidity indicators used in the study. Another metric to examine the effect
on profitability is return on equity (ROE) and return on asset (ROA). According to the
study's findings, Bangladesh's commercial banks' profitability is not statistically
significantly impacted by liquidity.
 16

Paul, Bhowmik & Famanna (2020) investigated the impact of banks' liquidity on their
profitability; in the short-term and during normal business operations (10 years). A
statistical sample of forty (40) Bangladeshi commercial banks is subjected to a
quantitative study. With 206 bank years of data collected to take into account all
Bangladeshi commercial banks, secondary data is utilized to analyze the performance
of the last ten years (2009-2018) of the annual report of the commercial banks in
Bangladesh. Thus, it can be said that, generally speaking, the profitability in
Bangladesh's commercial banking sector is significantly impacted by the influence of
liquidity.

Khati (2020) attempted relationships between the liquidity and profitability of

commercial banks in Nepal. Ten of the 27 commercial banks that are participated and
Data collection covers between 2013 to 2019 And secondary data used to annual
reports of commercial banks, as well as Bank Supervision Reports released by Nepal
Rastra Bank. Found that the asset quality (AQ) has negative but significant with
Return on assets (ROA) and positive from return on equity(ROE), according to
Hausman test and subsequent fixed effects approach. The cash deposit ratio (CADR)
shows a positive with Return on assets (ROA) and Return on equity (ROE). However,
analysis shows that the credit-deposit (CDR) has a favorable but insignificant
connection with (ROA) and an unfavorable but minor connection with (ROE).

Shrestha & Jha (2020) explored Liquidity's Effect on the Profitability of a Foreign
Joint Venture Commercial Bank in Nepal. For the current study, a sample of 27

Nepalese commercial banks was chosen and examined during the years 2014–15 and
2018–19 AD. Correlation and regression analysis were used and numerous statistical
and financial methods. As result, banks' liquidity ratios are below the mandated
standard, and the LADR has a substantial impact on the ROA. The NRBTDR/CRR
has a negligible impact on ROE on the other two sample banks, while it has a weakly
significant impact on ROA of all sample banks. HBL and EBL. ROA are significantly
impacted by CACL, however NBB. ROA is not much impacted by CACL.
Additionally, CACL has a sizable impact on ROE for each of the three banks. While
NBB has a modest substantial impact on both the profitability index and ROA and
ROE of HBL and EBL, CHTDR significantly affects both. CATA significantly affects
 17

HBL, EBL, and NBB ROA. Similar to this, CATA significantly affects ROE while
EBL and NBB only have somewhat beneficial effects. The LADR significantly affects
the ROE and ROA of the HBL, EBL, and NBB. The conclusions of this work,
however, are supported by research done on the chosen banks.
Hakuduwal (2021) investigated the impact of bank specific factors on profitability of
Nepalese commercial banks. In contrast to return on assets, which is viewed as a
dependent variable, total assets, total deposits, total loans & advances, and total equity
are all viewed as independent variables.The study employs the pooled least squares
approach. The study uses panel data spanning seven years, from 2012 to 2018. The
regression result, F-test, and t-test are utilized to analyze 112 observations from
sixteen commercial banks. The study found that the profitability of Nepalese
commercial banks is significantly positively impacted by total assets and total loans
and advances.
Budha (2021) analyzed connects with Nepalese commercial banks' liquidity and
profitability. Major goals assess the financial health, level of profitability, and
connection between these factors of Nepalese commercial banks. A descriptive
research approach has been used to achieve this purpose. Secondary information was
gathered and used from the annual financial statements of selected banks. Data taken
from the companies' annual reports and financial statements for the pertinent time
served as the basis for the analysis. using correlation and regression analysis. To
assess the level of profitability, the ROA, ROE, and net profit margin were employed.
The study examines five Nepalese commercial banks from the 2015–16 fiscal years
through the 2019–20 fiscal year, including ADBL, Nabil, NIC Asia, Mega, and
Siddhartha. According to the study's findings, the CR has a substantial negative
association with ROE of particular commercial banks and a large positive link with
ROA and NPM. The CBBTDR has a small but considerable negative association with
the ROE and NPM and a small but large positive link with the ROA. Similar to this,
over the study period, the CBBCDR exhibits a negative and substantial association
with the ROA, ROE, and NPM of selected commercial banks.
2.4.1 Summary of articles and theses
Author Topic Objectives of Finding of Research
Research
Alshatti (2015) the effect of the To conduct the Results show that a positive
effect of the increase in the
 18

liquidity effect of the quick ratio and the investment

management on liquidity ratio of the available funds on
the profitability, while there is
profitability in management on a negative effect of the capital
the Jordanian
profitability in the ratio and the liquid assets ratio
commercial on the profitability of the
banks. Jordanian Jordanian commercial banks.
commercial banks
during the time
period (2005–
2012).
Khan and Ali Impact of investigating the The study has found that there
(2016)
Liquidity on relationship as significant positive

Profitability of between liquidity relationship between liquidity

Commercial and profitability with profitability of the banks.

Banks in of commercial None of the variable shows

negative relation with all the
Pakistan: An banks in Pakistan
ratios of liquidity. Hence that
Analysis on
research indicated that
Banking Sector
liquidity has positive
in Pakistan
relationship with profitability.
Ibrahim, (2017) The Impacts of To examine the The study observes that any
Liquidity on influence of increase in liquidity ratios as
Profitability in liquidity on the above mentioned will lead
Banking Sectors profitability of return on asset to increase as
Iraqi commercial
of Iraq: A Case banks. Five banks well. Depending on this study
of Iraqi based in Iraq it could be better for Iraqi
Commercial banks to keep a balance
Banks. between liquidity and
profitability.
Shrestha (2018) The Liquidity To identify the The study found that liquidity
does not have its significant
Management relationship
 19

and Profitability between the impact on profitability in

of Commercial Liquidity Nepalese commercial banks.
Banks in Nepal. management and

profitability and
its impact on
profitability.
Adhikari (2018) Liquidity and To examine the The study found that liquidity
Profitability of liquidity position of Nabil is comparatively

Selected management & lower than SBI bank and Nabil

Commercial profitability of bank is better in every sector and
profitability ratio is good.
Banks of Nepal Nepalese
commercial However, liquidity position and
banks. growth rate is not satisfactory and
it has average risk ratio. In the
case of SBI it has its good
liquidity position as well as
minimum risk in comparison
Nabil bank reference to capital
risk ratio.
Subedi (2018) Analysis of To analyze the The liquidity position of EBL
Liquidity and comparative study is better than that of other
Profitability of of the liquidity sample banks, as the current
Commercial and profitability ratio of EBL is higher CBIL,
Banks of Nepal. analysis of the NBL, RBB and SBL. The
selected average cash reserve ratio of
commercial banks CBIL, EBL, NBL, RBB and
SBL has remained successful
to meet the standard set by
NRB for cash reserve ratio in
all fiscal year. The profitability
position of RBB is better than
that of CBIL, EBL, NBL and
SBL.

Ghurtskaia & A Study of To find out As the results showed

Lemonjava (2018)
 20

Relationship relationship relationship between liquidity

between between bank ratio and banks profitability is
Liquidity and profitability and positively correlated. Besides,
Profitability in liquidity of coefficient of determination is
Georgian Georgian banks valid for net interest margin
Banking Sector. form 1998-2017 and liquidity in regression

year. analyses, whereas in other

cases coefficient was not valid.
Mishra (2019) Relationship To examine the The results show that ADBL
between relationship and NABIL have good
liquidity between liquidity liquidity position and
and and profitability profitability position.

profitability of of Nepalese Therefore, the results are valid

Nepalese for banking sector.
commercial
commercial banks.
banks.
Sah & Lertjanyakit liquidity on To analyze of the The study finds that LR has
(2019), management the impact of liquidity significant positive
financial of management on relationship with market value
performance the financial
of financial performance,
Nepalese performance of
commercial Nepalese whereas CRR has significant
banks. commercial negative relationship with
banks.
market value of financial
performance. CDR and LR
has significant negative
relationship with book value of
financial performance,
whereas capital adequacy ratio
has positive significant
relationship with book value of
financial performance.
 21

Pokharel&Pokharel Impact of To examine the The study concluded that

(2019) bank’s liquidity ratios have
liquidity on the impact of liquidity
profitability in on profitability on below the prescribed standard

the Nepalese the basis of total CRR is extremely heavy than

assets. prescribed by monetary policy
commercial
2016/17. It also has reported
banks.
that there is significant
relationship between liquidity
with profitability except
between IGSCA and ROA.

Akber&Dev (2020) Influence of To examine the The outcome of this paper

Liquidity on impact of liquidity states that the impact of
of
Profitability liquidity on commercial bank’s
in on commercial
profitability in Bangladesh is
Commercial bank’s not statistically significant.
Bank’s profitability in
Bangladesh. Bangladesh.

Khati (2020) Impact of To analyze the The study reveals that

Liquidity on relationship creditdeposit (CDR) has
of
Profitability between the positive but insignificant
Nepalese liquidity and the relationship with ROA and has
Commercial profitability of negative and
Banks. commercial banks
insignificant relationship with
in Nepal.
return on equity (ROE)

Paul, Bhowmik & Impact of investigate the A finding of this research is

Famanna (2020) Liquidity on effect of banks' that the impact of liquidity has
liquidity on its a significant effect on the
Profitability: A profitability of profitability in the commercial
Study on the commercial banks banking sector of Bangladesh.
in Bangladesh.
Commercial
Banks in
Bangladesh.
 22

Shrestha & Jha Impact of To explore the Research concluded that

(2020) bank’s liquidity ratios have
Liquidity on Impact of Liquidity
below the prescribed standard
on Profitability in
Profitability of and negative impact ROE of
Foreign Joint NBB and have the positive
Joint Venture
Venture impact on other two . CACL
Commercial
Commercial Bank in
Banks in Nepal Nepal: with

(With Reference reference to HBL, has significant effect on ROA

to EBL, HBL and EBL & NBB of HBL and EBL whereas
NBB there is no significant impact
on ROA due to CACL in NBB.
Further, CACL has
significant impact on ROE on all
three banks. CHTDR has
significant effect on ROA and
ROE of HBL and EBL whereas
NBB has weak
significant impact on both the
profitability index.
 23

Budha (2021) Relationship To explore and The study concluded that the CR
between liquidity examine thehas positive significant
and liquidity position, relationship with ROA and NPM
profitability of profitability status and negative significant
Nepalese and relationship relationship with ROE of
commercial banks.
between liquidity selected commercial banks. The
and profitability CBBTDR has negative

of Nepaleseand insignificant relationship

commercial banks. with the ROE and NPM and also
has positive and
insignificant relationship with
ROA. Similarly, the CBBCDR
has shows negative and
significant relationship with
ROA, ROE and NPM of
selected commercial banks.

Source: Review of literature

2.5 Research gap

There is a gap between the current study and previous research on the profitability and
liquidity of Nepalese banks. The prior investigations by Mishra(2019), Adhikari
(2018) and Budha (2021) examined the connection between a commercial bank in
Nepal's profitability and liquidity. Out of 27 commercial banks, a sample of 2 and 5
banks were used in the study. The research focused on the last 10 and 5 years. The
results of the prior study mostly showed high profitability and liquidity positions.

Similar to this research, Khan and Ali (2016) and Pokharel & Pokharel (2019) looked
at the effects of commercial banks' profitability and liquidity. The study used five
years of data up until 2016/17. Which liquidity and profitability tools are used most
frequently, which ones are not, and why? This information was not revealed in the
prior research. The literature review of many publications, journals, and theses
demonstrates that profitability and liquidity have a favorable effect on organizational
performance. Profitability and liquidity contribute to commercial banks' improved
 24

organizational performance. The study's previous variables are essentially same. The
previous researchers' suggestions and recommendations to enhance and improve
financial decisions have been extremely helpful to the relevant banks. All of the
earlier research and studies were centered on the commercial banks' credit and
liquidity. There are numerous studies and research projects underway in the micro
area of financial instruments, but none have examined the liquidity and profitability of
the ADBL, NABIL, EVEREST, and HIMALAYAN Nepalese banks. First, the
information from 2073/74 to 2077/78 are covered, which is different from past
research and the present investigations. The previous study only examined the
financial and statistical data of Nepal's commercial banks. The previous researcher
merely described the established relationship between liquidity and profitability; it did
not demonstrate how profitability affected the level of liquidity that was maintained.
In order to draw the right conclusions, the bigger study's objective is to investigate the
connection between profitability and liquidity using statistical and financial
techniques. This study demonstrates link between profitability and liquidity in
commercial bank performance.

CHAPTER III

RESEARCH METHODOLOGY

3.1 Introduction

This chapter discusses the methodology used to conduct the study. It covers the
research design, Population and sample, data sources, data collection techniques, and
research framework. The methodologies and procedures used during the entire
investigation are described under research methodology. It refers to the many steps
that a researcher must take in order. To achieve the purpose, this study essentially
contributes to the conclusion of the real liquidity profitability situation of Adbl, Nabil,
Everest, and Himalayan, commercial banks in Nepal. The research approach outlined
in this chapter is used in this investigation.
 25

3.2 Research Design

This study's primary goal is to examine the Nepalese commercial banks Adbl, Nabil,
Everest, and Himalayan's liquidity and profitability. To make the data useful and
assess the profitability of the two banks, some financial and statistical procedures are
used. Both a descriptive and a casual research design have been utilized to fulfill the
study's goals. The descriptive research design has been used to gather sufficient data
and find out the truth. For this research investigation, mainly secondary data were
utilized. The information is gathered from a variety of yearly reports, internet from
relevant banks. As a result, this topic has created by gathering data from multiple
sources, tabulating it and then using various accounting, financial, and statistical tools
to assess it. Ratios for profitability and liquidity are among the financial tools. Similar
to this statistical methods include regression analysis, coefficient of variation,
standard deviation and arithmetic mean. The purpose of this study is to compare and
determine the link between two or more variables.

3.3 Sources of Data

This investigation is based on secondary data. The data for this study was gathered
from annual published reports of selected Nepalese commercial banks such as Adbl,
Nabil, Everest, and Himalayan. The statistics are collected over a five-year period
(2073/74 to 2077/78). Secondary sources for data and information include annual
yearly reports, past related thesis and associated reports and government entities and
other published and unpublished reports and documents from diverse sources. This
study's independent variable is liquidity, and the dependent variable is profitability.

3.4 Population and Sample

Population refers to the observations or units that are within the scope of the
investigation. And a sample is a representative subset of the population that possesses
all of the traits found in the population. In the current situation, 26 commercial banks
are active in Nepal. The target market consists of every listed commercial bank in the
nation. Among all the commercial banks four commercial banks are selected as a
sample by reputation and work more than 10 years of bank. The samples have been
 26

follow descriptive and causal research design selections. The one government bank
and others joint private commercial banks to achieve the objectives set out by
analyzing the data.

3.5 Data Collection Instrument and Procedures

Data collecting is regarded as an essential component of research. Collected annual
report, likes the financial statements for relevant years of selected banks. Furthermore,
magazines, publications, journals and articles, as well as legitimate websites of the
sampling banks and NRB, have been consulted for information. Direct usage of actual
data does not aid in trustworthy analysis. As a result, To prepare them for analysis,
they have been considered rechecked, reevaluated, updated, and tabulated. The
meaning of data obtained in this way is little unless it is sorted and displayed
methodically. For analysis, they need to be made simpler. The necessary details were
collated and put into helpful tables. With unnecessary information deleted, just the
information necessary for the study have been supplied in an easily understandable
tabular format. The process of drawing conclusions from given data using various
financial and statistical methods. Excel and SPSS were used to calculate statistical
values such as mean, standard deviation, coefficient of variance, correlation, and so
on.
3.6 Data Processing Procedures and Data Analysis Tools
One of the most important aspects of research is data analysis. To achieve the goal, the
data is evaluated using financial, accounting, and statistical tools. The information
was gathered from a variety of sources, and financial and statistical methods were
employed to make the analysis more effective, convenient, dependable, and
legitimate. Due to time and resource constraints, data analysis is performed based on
the pattern of data available. This study use simple causal and statistical methods
( correlation coefficient using Karl Person, regression, arithmetic mean and standard
deviation), Similarly, financial analysis has made use of accounting procedures such
as ratio analysis. The tools used in this investigation have been presented.

3.6.1 Financial Tools

In this study, the financial performance of a commercial bank is examined along with
its strengths and flaws. The following financial ratios will be examined as part of the
liquidity and financial situation examination of four commercial banks.
 27

A) Liquidity Ratios

Liquidity ratios assess a company's capacity to meet short-term obligations with

current and liquid assets. It is used to assess the firm's short-term financial strength
and solvency. The assets of a bank can be transformed into cash to cover withdrawals
of deposits and other immediate commitments. The liquidity of a bank should be
checked to make sure neither it is excessively high nor low. Both liquidity conditions
are unfavorable to banks.

B) Profitability Ratios
Profitability ratio is a crucial indicator of operational effectiveness. Based on goals of
commercial banks is to be profitable enough to achieve a range of goals such as
obtaining achieving a desired cash position, fulfilling interest obligations, avoiding
unforeseen circumstances, discovering untapped possibilities for investment, and
supporting growing branches and so on. In fact, the profitability ratio is the best
indicator of a bank's total efficiency.
3.6.2 Statistical Tools
Measurements or equipment used in statistical analysis are gathered from a variety of
references. There are different statistical methods available in statistics for analyzing
data of various types. The following are the key statistical tools: to be calculated for
this study:

a) Arithmetic Mean (A.M.)

When calculating the arithmetic mean, dividing the sum of all observation numbers by
the whole number of observations is multiplied. In actuality, it is a value that, as is
customary for all the values in the group, is presented as representing the entirety of
the group among which that is a member.

  x

MeanX  n
 28

Where, x = Arithmetic

mean

n = Number of Observations in a sample

b) Standard Deviation
Another indicator of investment risk is the standard deviation (σ). It represents an
absolute deviation measure. The stock's degree of risk decreases with decreasing
standard deviation. Alternatively, a low standard deviation denotes a high level of
observational consistency as well as series homogeneity, and vice versa. The standard
deviation can be calculated using the following formula:

 ( X  X )2
σ  n

Where,

σ = Standard Deviation
X = Number in X-series

X = Mean
n = Number of Observations in a sample
c) Coefficient of Variation
The coefficient variation (CV) is another relevant risk measure. The risk per unit of
return is calculated by dividing the standard deviation by the expected return. When
the predicted returns on two alternatives are not the same, it provides a more valid
basis for comparison.

The coefficient of variation is calculated when analyzing two distributions' levels of

variability. Less C.V. distributions are thought to be less variable or more consistent. A
more variable or less uniform distribution has a higher C.V. It is calculated as follows.


CV = x 100%
X

Where,

CV = Coefficient of Variation
 29

ó
X = Mean
= Standard Deviation
d) Correlation Coefficient Analysis and Hypothesis testing
The association between two or more variables is identified and interpreted in this
analysis. A change in one variable is considered to be correlated when it is
accompanied by a change in another one. If an increase (reduction) in one variable is
related with a decrease (increase) in the value of another variable, the connection will
be negative. However, the correlation coefficient is usually between +1 and -1, Karl
Pearson's.

This tools is used for measuring the intensity or the magnitude of linear relationship

between two variable X and Y is usually denoted by ‘r’ can be obtained as:

N XY  ( X)(Y) R=
N X  ( X)2
2
NY 2  (Y)2

Where,
R : Correlation between X and Y
n : Number of observations in series X and Y

∑X : Sum of observations in series X

∑Y : Sum of observations in series Y

∑X2 : Sum of square observations in series X

∑Y2 : Sum of squared observations in series Y

∑XY : Sum of product of observations in series X and Y

e) Regression Analysis

Regression analysis is a statistical approach used to determine the degree of

association between a dependent and independent variable. It consists of two
variables: dependent and independent variables. It establishes the type and strength of
the relationship between two variables. As a result, regression is the estimation of
unknown values or the prediction of one variable based on the known values of other
 30

variables. The regression line of dependent variable (Y) on independent variable (X)
is given by:

Y = a + bX……………………………. (I)

Where, a = Constant b =

regression coefficient

f) Multiple Regression Analysis

A logical extension of simple linear regression analysis is multiple regression analysis.

To estimate the unknown values of a dependent variable, two or more independent
variables are employed instead of a single independent variable. The underlying
premise in the analysis, however, stays the same. Multiple regression is a statistical
tool that estimates the value of a dependent variable based on the known values of two
( more) independent variables. It appears as,

Ŷ= a1 + b1X1+ b2X2+ b3X3+ ei.

Where,

Ŷ = Dependent variables
X1, X2, X3 = Independent variables
a1 = Constant
b1, b2, b3 = Regression Coefficients
ei = Error term

3.7 Research Framework and Definition of Variables

A conceptual framework is an analytical tool that comes in a variety of forms and
circumstances. It was used to draw conceptual distinctions and arrange concepts. A
strong conceptual framework captures something actual in an easy-to-remember and
apply manner. Profitability is the dependent variable, whereas liquidity is independent
variable.
Liquidity Profitability
 31

independent variable dependent variable

 CR ratio
 ROA

 CRR

 Cash & Bank Balance  ROE

to CA ratio

 Cash & bank balance to

TD ratio

Figure 3.1: conceptual framework

Sources: Subedi (2018)

Definition of Variables

a) Current Ratio

The relationship between current assets and current liabilities is determined by the
current ratio. Current assets are those that can be quickly transformed into cash,
usually less than a year. Current liabilities are debts that must be paid within a short
period of time, usually less than a year. Previous research, such as Adhikari (2018)
and Subedi (2018), used CR as an independent variable. It appears as,

Current Assets
Current Ratio =
Current Liabilities

b) Cash Reserve Ratio

Each bank must carry out its operations in accordance with the guidelines established
by Nepal Rastra Bank. (NRB). According to NRB regulations, the Cash Reserve Ratio
(CRR) is now set at 4% standard, and it indicates whether or not banks have complied
 32

with NRB criteria. Cash Reserve Ratio has been used as an independent variable in
earlier research like Subedi (2018).

c) Cash and Bank Balance to Current Assets Ratio

The ratio of cash and bank balance to current assets shows how liquid a company is
based on its cash and bank balance. Calculating ratio involves dividing the current
assets by cash & bank balance.. Previous research, such as Adhikari (2018), Subedi
(2018), and Budha (2021), used Cash and Bank Balance to Current Assets Ratio as
independent variables. It is calculate as:

Cash and Bank Balance

Cash and bank balance to current assets ratio =
Current Assets

d) Cash and Bank Balance to Total Deposit Ratio

The cash and bank balance to total deposits ratio evaluates a bank's ability to meet
unexpected demand from depositors, which includes current account holders, saving
depositors, call depositors, and other depositors. Calculating ratio involves dividing
the cash & bank balance by the total amount of deposits. Previous research, such as
Adhikari (2018) and Subedi (2018), used Cash and Bank Balance to Total Deposit
Ratio as independent variables. It is written as,

Cash and Bank Balance

Cash and bank balance to total deposits ratio =
Total Deposit

d) Return on Total Assets (ROA)

Return on total assets illustrates how assets contribute to net profit. In other words, the
return on total assets ratio is a measure of a company's earning capacity and overall
operational efficiency. This ratio assists management in determining the aspects that
influence the firm's overall performance. ROA has been used as a dependent variable
by Adhikari (2018), Shrestha (2018), Subedi (2018), Budha(2021), Pokharel and
 33

Pokhrel (2019). It is calculated as follows: ROA is calculated as follows;

Net Profit After Tax
Return on Total Assets =
Total Assets

e) Return on Equity (ROE)

Return on equity compares a company's profitability to the equity shareholders' equity.

ROE assesses the profitability of a corporation in terms of return to equity
shareholders. The firm's equity capital is referred to as the owners' investment.
Common stock, paid-in capital, and retained earnings are all included. A higher return
on equity ratio is advantageous to the owner. ROA has been used as a dependent
variable by Adhikari (2018), Shrestha (2018), Subedi (2018), Budha(2021), Pokharel
and Pokhrel (2019). It is calculated as follows:

Net Profit After Tax

Return on Equity =
Shareholder 's Equity

rofitability and liquidity in commercial bank performance.

CHAPTER – IV RESULTS AND DISCUSSION

4.1 Introduction
This chapter presents the results and discussions about the objectives of the study. The
main objective of this study is to observe and analyze the relationship between
liquidity and profitability position of ADBL, NABIL, EBL and HBL banks. Financial
statements from the year 2073/74 with year 2077/78 have been utilized to help
calculate the outcomes of the research. Data are given in tabular form and examined
using well established financial ratio techniques. Regression analysis, average mean,
standard deviation, coefficient of variation, and other statistical techniques have all
been used to further evaluate the information. Ratio of Liquidity to deal with loan
demand and deposit withdrawals, commercial banks require liquidity. Liquidity is also
required in order to meet the NRB's cash reserve ratio (CRR) criteria. Banking
institutions need to make sure that neither they nor their customers are experiencing a
 34

liquidity crunch. Inability to fulfill this obligation will damage your credit and cause
creditors to lose faith in you. Cash-to-bank balance and current deposit ratio used to
assess the bank's ability to fulfill its immediate obligations. The bank must adhere to
specific liquidity and profitability requirements because a balance between liquidity
and profitability should constantly be maintained.

FINANCIAL ANALYSIS

We attempt to study and assess the primary financial items relating to Adbl, NABIL,
Ebl, and HBL bank's investment management and money mobilization. The following
financial ratios will be examined as part of the liquidity and financial situation
examination of four commercial banks. The following are the key financial ratios to
be calculated for this study:

4.2 Liquidity Ratio

Liquidity ratios assess a company's capacity to meet short-term obligations with
current and liquid assets. It is used to assess the firm's short-term financial strength
and solvency. It is the speed at which the assets of a bank can be transformed into cash
to cover withdrawals of deposits and other immediate commitments. Liquidity is also
required in order to meet the NRB's cash reserve ratio (CRR) criteria. The liquidity of
a bank should be checked to make sure neither it is excessively high nor low. Both
liquidity conditions are unfavorable to banks. The liquidity ratio evaluates and
interprets the following ratios:

4.2.1 Current Ratio

The current ratio measures a bank's capacity to meet its current obligations. This is a
broad indicator of financial institutions' liquidity position. The widely acknowledged
current ratio norm is 2:1, but the exact standard varies on circumstances in the case of
banks and seasonal business ratios such as 1:1.

Table 4.1 Current Ratio (times)

Year ADBL NABIL EVEREST HIMALYAN
2077/78 1.22 1.16 1.09 1.13
2076/77 1.18 1.15 1.09 1.13
 35

2075/76 1.2 1.14 1.1 1.13

2074/75 1.2 1.16 1.11 1.14
2073/74 1.2 1.16 1.11 1.12
Mean 1.2 1.154 1.1 1.13
Sd 0.014 0.009 0.01 0.007
Cv 0.012 0.008 0.0091 0.0062
Sources : Annexure 1

The Table 4.1 presents the current ratio of ADBL, NABIL, EBL and HBL banks
during 2073/74 to 2077/78. CR of ADBL is in stable trends with 1.2 times in year
2073/74 to 2075/76 and other years are in changing trends. The current ratio of ADBL
has revolved between 1.18 times in year 2076/77 to 1.22 times in year 2077/78. The
current ratio of NABIL also changing trends and 1.14 times in year 2075/76 to 1.16
times in year 2077/78. Similarly, the CR of EBL is also in changing trends and ranged
from 1.09 times in the fiscal year 2076/77 to 1.11 times in the fiscal year 2074/75.
Likewise, the ratio of HBL is in changing trends and ranged from 1.12 times in the
fiscal year 2073/74 to 1.14 times in the fiscal year 2074/75. The average current ratio
of ADBL, NABIL, EBL and HBL are 1.2 times, 1.15 times, 1.1 times, 1.13 times
respectively.
4.2.2 Cash reserve ratio
Each bank must carry out its operations in accordance with the guidelines established
by Nepal Rastra Bank. (NRB). According to NRB regulations, the Cash Reserve Ratio
(CRR) is now set at 4% standard, and it indicates whether or not banks have complied
with NRB criteria.

Table 4.2 Cash reserve ratio (%)

Year ADBL NABIL EVEREST HIMALYAN
2077/78 36.21 3.66 18.15 26.51
2076/77 33.98 11.2 14.43 31.39
2075/76 27.2 4.78 18.56 26.25
2074/75 29.15 10.05 17.75 23.05
2073/74 31.18 10.02 16.52 26.64
Mean 31.544 7.942 17.082 26.768
 36

Sd 3.62 3.45 1.67 2.98

Cv 0.11 0.43 0.097 0.11
Sources : Annexure 1

The Table 4.2 depicted the cash reserve ratio of ADBL, NABIL, EBL and HBL banks
during the fiscal year 2073/74 to 2077/78. The table showed that the cash reserve ratio
maintained by ADBL is in changing trend for during the study period, 27.2% in the
year 2075/76 from 36.21% in the year 2077/78. Likewise, the cash reserve ratio of
NABIL is in fluctuating trends 3.66% in year 2077/78 from 11.2% in the year
2076/77. So on the ratio of EVEREST is also in changing trends and ranged from
14.43% in year 2076/77 to 18.56% in year 2075/76. The cash reserve ratio of
HIMALYAN is also in changing trends and ranged from 23.05% in year 2074/75 to
31.39% in year 2076/77. The mean cash reserve ratio are 31.544%, 7.92%, 17.082%,
and 26.06% respectively. The analysis depicted that ADBL, NABIL, EBL and HBL
bank has remained successful to meet the standard set by NRB for cash reserve ratio
in all fiscal year. It means that liquidity position of ADBL is more satisfactory than
that of NABIL, EBL and HIMALYAN bank among the private banks the liquidity
position and HBL bank is also more satisfactory than that other private bank EBL and

NABIL.

4.2.3 Cash and Bank Balance to Current Assets Ratio

The ratio of cash and bank balance to current assets shows how liquid a company is
based on its cash and bank balance. Higher ratios indicate that businesses are better
able to satisfy customers' daily cash needs. However, high ratios are not as preferred
by businesses because they have to manage their cash and bank balance to current
asset ratio in a way that prevents them from receiving interest on their deposits and
maybe experiencing liquidity issues.

Table 4.3 :Cash and Bank Balance to Total Current Asset Ratio(%)
Year ADBL NABIL EVEREST HIMALYAN
2077/78 4.92 2.55 4.42 6.9
2076/77 4.86 2.05 5.72 10.87
 37

2075/76 7.8 5.41 4.67 6.18

2074/75 8.62 5.04 7.1 7.58
2073/74 9.8 5.07 2.64 8.32
Mean 7.2 4.024 4.91 7.97
Sd 2.23 1.59 1.65 1.81
Cv 0.31 0.40 0.34 0.23
Sources : Annexure 1

The Table 4.3 shows the cash & bank balance to current assets ratio of ADBL,

NABIL, EBL and HBL BANKS during the study period 2073/74 to 2077/78. The
cash &bank balance with respect to the current assets of ADBL has changing trend.
During the study period it is lowest 4.92% for the year 2077/78 and the highest 9.8%
in the year 2073/74. Similarly, the ratio of NABIL is in changing trends 2.05% in year
2076/77 from 5.41% in year 2075/76. So on the cash & bank balance to current assets
ratio of EVEREST also in changing trends 2.64% in year 2073/74 from 7.1% in year
2074/75. Likewise, the cash &bank balance to current assets ratio of HBL is in
changing trends 6.9% in year 2077/78 from 10.87% in year 2076/77. The mean cash
& bank balance to current assets ratio of ADBL, NABIL, EBL and HBL are 7.2%,
4.03%, 4.91% and 7.97% respectively.
4.2.4 Cash and Bank Balance to Total Deposit Ratio

To maintain its solvency and fulfill its short-term responsibilities, the banking sector
also needs adequate liquidity. Therefore, the bank should have sufficient cash and
bank balance relative to the overall deposit.

Table 4.4: Cash and Bank Balance to Total Deposit Ratio(%)

Year ADBL NABIL EVEREST HIMALYAN
2077/78 6.5 3.26 5.72 8.24
2076/77 5.91 2.52 7.22 12.84
2075/76 9.67 6.55 5.99 7.25
2074/75 10.77 5.9 8.71 8.82
2073/74 12.31 6.1 3.22 9.6
Mean 9.032 4.866 6.172 9.35
Sd 2.75 1.84 2.03 2.13
Cv 0.30 0.38 0.33 0.23
 38

Sources: Annexure 1

Table 4.4 depicts the banks' cash &bank balances in relation to the total deposits they
received during the study period of 2073–1974 to 2077–1978. The ratio of ADBL's
cash & bank balance to total deposits is changing, ranging from 12.31% in 2073/74 to
6.5% in 2077/78. In order to achieve the cash requirement, ADBL has on average
held 9.03% of the total deposit as cash & bank balance. Similar to this, the ratio of

NABIL is in a trend of change, decreasing from 6.55% in 2075–2076 to 2.52% in

2076–2077. The ratio of EVEREST' cash & bank balance to total deposits is also
shifting, falling to 3.22% in 2073–2074 from 8.71% in 2074–2075. Likewise, the ratio
of HIMALYAN is also in changing trends 7.25% in year 2075/76 from 12.84% in year
2076/77. ADBL, NABIL, EBL, and HBL banks' respective mean cash & bank
balances to total deposits are 9.032%, 4.86%, 6.17%, and 9.35.

4.3 Profitability Ratios

Profitability ratios can be used to assess the overall efficiency of financial

organizations' operations. Profitability ratios are calculated and evaluated in this
context in terms of the relationship between net profit and assets. A higher ratio
indicates that the bank is more efficient.

Under this topic, the profitability ratios listed below are considered.

4.3.1 Return of assets (ROA)

Return on assets serves as a justification for how many total assets contribute to net
profit. Divide net profit by all of the firm's assets to get return on assets, Greater
efficiency in the use of all assets is implied by better total return on assets, and
inversely.

Table 4.5: Return of assets

Year ADBL NABIL EVEREST HIMALYAN
2077/78 1.59 1.71 0.89 1.68
2076/77 1.86 1.58 1.42 1.79
2075/76 2.77 2.11 1.94 2.21
 39

2074/75 2.71 2.61 1.97 1.67

2073/74 2.15 2.69 1.72 2.19
Mean 2.216 2.14 1.588 1.908
Sd 0.52 0.51 0.45 0.27
Cv 0.23 0.24 0.28 0.14
Sources : Annexure 1

Table 4.5 shows the Return on assets ratio of ADBL in the year 2073/74, year
2074/75, FY 2075/76, year 2076/77, and year 2077/78 are 2.15%, 2.71%, 2.77%,
1.86%, and 1.59% respectively. In average return on assets of ADBL is 2.22%,
standard deviation is 0.52 and coefficient of variation is 23%.

Return on assets ratio of Nabil Bank Limited in the year 2073/74, year 2074/75, year
2075/76, FY 2076/77, and year 2077/78 are 2.69%, 2.61%, 2.11%, 1.58%, and 1.71%
respectively. Its mean has 2.14%, SD has 0.51 and CV is 24%.
Return on assets ratio of Everest Bank Limited in the year 2073/74, year 2074/75,
year 2075/76, year 2076/77, and year 2077/78 are 1.72%, 1.97%, 1.94%, 1.42%, and
0.89% respectively. Its mean has 1.59%, SD has 0.45 and CV is 28%. The return on
assets ratio of Himalyan Bank Limited in the year 2073/74, year 2074/75, year
2075/76, year 2076/77 and Year 2077/78 are 2.19%, 1.67%, 2.21%, 1.79% & 1.68%
respectively. Its SD is 0.27, CV is 14%, and its mean ROA is 1.90%.
Using return on assets (ROA) the mean ROA of ADBL is highest i.e. 2.22% which
clearly indicated that ADBL is more successful and the lowest is of Everest Bank
Limited i.e. 1.58% which clearly indicated that EVEREST is less successful in
generating profit from the investment in total assets among the sample banks. The
higher return on assets the better it is doing in operation and vice-versa.

4.3.2 Return of equity(ROE)

ROE is a measure of how efficiently a business used its owners' resources. Net profit
is divided by net worth to calculate it. The amount to which a company's social
responsibility to its shareholders has been fulfilled can be seen in the net profit-
toequity ratio. As a result, this ratio is of great interest to both current and potential
shareholders, as well as management, who are both deeply concerned.
 40

Table 4.6 Return on Equity

Year ADBL NABIL EVEREST HIMALYAN
2077/78 11.2 15.19 8.56 14.89
2076/77 11.7 13.61 13.5 15.4
2075/76 14.78 17.76 17.33 18.34
2074/75 13 20.94 16 14.17
2073/74 11.77 22.41 16.04 21.58
Mean 12.49 17.982 14.286 16.876
Sd 1.44 3.72 3.49 3.07
Cv 0.12 0.21 0.24 0.18
Sources : Annexure 1

Table 4.6 shows how effectively the banks are able to profit by utilizing the
shareholders' property. Return On Equity of ADBL in the Year 2073/74, Year
2074/75, Year 2075/76, Year 2076/77 and Year 2077/78 are 11.77%, 13%, 14.78%,
11.7%, and 11.2% respectively. ADBL average ROE was 12.49%, implying that
ADBL was able to earn Rs. 12.49 in earnings from operations from the raising of Rs.
100 in shareholder stock. ADBL has a standard deviation of 1.44 and a coefficient of
variation of 12%.

The return on equity ratio of Nabil Bank Limited in the Year 2073/74, Year 2074/75,
Year 2075/76, Year 2076/77 and Year 2077/78 are 22.41%, 20.94%, 17.76%, 13.61%
and 15.19% respectively. Its average return on equity is 17.98%, standard deviation is
3.72 and coefficient of variation is 21%.

The return on equity ratio of Everest Bank Limited in the Year 2073/74, Year 2074/75,
Year 2075/76, Year 2076/77 and Year 2077/78 are 16.04%, 16%, 17.33%, 13.5%, and
8.56% respectively. In average the return on equity of Everest Bank Limited is
14.29%, standard deviation is 3.49 and coefficient of variation is 24%.

The return on equity ratio of Himalyan Bank Limited in the Year 2073/74, Year
2074/75, Year 2075/76, Year 2076/77, and Year 2077/78 are 21.58%, 14.17%,
18.34%, 15.4%, and 14.89% respectively. Its SD is 3.07, CV is 18%, and its mean
return on equity is 16.88%.
 41

Using Return On Equity (ROE) determined that Nabil Bank Limited has the greatest
mean ROE 17.98%. Which clearly indicated that the shareholders of NABIL
remained more satisfied and shareholders among the sample banks as NABIL
generate more percentage of return from shareholders’ equity than ADBL, EBL and
HIMALYAN BANKS.

4.4 Correlations Analysis

Correlation is a popular statistical tool that depicts how strongly two variables are
related to one another. It also provides information about the degree and direction of
the relationship between two variables. The correlation coefficient is used to calculate
it. The correlation coefficient spans between -1 and +1. Positive correlation occurs
when one variable shifts in the same direction as another. When one variable
increases, the other variable decreases in the same direction. The goal of correlation in
research is to discover the empirical relationship between independent and dependent
variables.

Table 4.7 correlations matrix between variables

CA/CL CASH CASH CR ROA ROE
TO CA TO TDP RATIO
CA/CL Pearson 1
correlation

Sig.(2-tailed)

CASH Pearson 0.184 1

TO CA correlation

Sig.(2-tailed) 0.437

CASH Pearson 0.217 .995** 1

TO TDP correlation
Sig.(2-tailed) 0.358 0.00

CR Pearson 0.394 .602** .619** 1

RATIO correlation
Sig.(2-tailed) 0.085 0.005 0.004
 42

ROA Pearson .496* 0.341 0.329 0.034 1

correlation

Sig.(2-tailed) 0.026 0.141 0.156 0.886

ROE Pearson -0.183 0.012 -0.050 -0.393 .599** 1

correlation

Sig.(2-tailed) 0.441 0.961 0.833 0.087

Source: Calculate from SPSS Software

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

Tables 4.7 indicate relationship between the variables used in the research to
determine the dependent on independent variables. The correlation coefficient of ROA
with CA/CL is 0.496 which indicate positive relationship and statistically significant
and CASH TO CA, CASH TO TDP, CASH RESERVE RATIO are 0.341, 0.329 and
0.034 respectively, which indicates there are positive relationships and statistically not
significant at 5% significant level of 2- tailed test. In addition, the
correlation coefficient of ROE with CA/CL, CASH TO DP, CASH RESERVE RATIO
are -0.183, -0.050, -0.393 respectively, which indicates there are negative relationship,
there are not statistically significant and ROE with CASH TO CA is 0.012 , which
indicate positive relationship and this is not statistically significant at 1% significant
level of 2- tailed test.

4.5 Regression Analysis

Statistically, regression is a technique for establishing an approximate functional link

by creating a connection between the variables. The effectiveness of an association
between two variables (basic regression) or several variables regression can be
determined using this technique. The relationship between two variables is strong
enough to derive the estimation equation. As a result, determine the estimation
equation that best describes the connection.
 43

4.5.1 The Multiple Regressions of ROA on Liquidity

The regressing ROA on liquidity variables (current ratio, cash & bank balance to TD
ratio, CRR ratio, and cash & bank balance to CA ratio) on the liquidity condition of
selected banks has been studied. This regression module's equation is as follows:

ROA= a1+b1CR+ b2CBBCAR + b3CBBTDR + b4CRR………………………… (i)

Where,

ROA = Return on Assets

CR = Current Ratio
CBBTDR = Cash and bank balance to total deposit ratio
CBBCAR = Cash and bank balance to current Assets ratio
CRR = Cash Reserve Rario a1 = Constant
b1, b2,b3,b4 = Regression Coefficient

Table 4.8: ROA Model Summary

Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .721a .520 .392 .37477
a. Predictors: (Constant), CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH
TO TDP
Source: Calculate from SPSS Software

The table no 4.8 describes the model summary of the regression analysis between the
independent variables (CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH TO
TDP) and dependent variable ROA . The column R shows the multiple correlation
coefficient value is 0.721, it indicates the good level of prediction. R square column
present R square value , also called coefficient of determination, which tells us what
percent of variability in the dependent variable accepted for by the regression on the
independent variable. In above table R square is 0.520, it means that 52% Changes in
ROA noted by CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH TO TDP
 44

and remaining is 48% explained by other factors. Adjusted R square is comparing

the explanatory power of the regression model. The adjusted R square is a modified
variable of R Square that has been adjusted for no of prediction in the model. The
above table shows adjusted R square is 0.392, it indicate 39.20% variation in ROA is
explained by other factors, The standard error of estimate is 0.37477, indicating that
the units variance of the observation value of ROA regression line is 0.37477.

Statistical Significance

In the ANOVA table, the F-ratio determines if the whole statistical model of regression
fits the data. When the P Value is less than the alpha value (0.05), independent
variables are statistically more likely to predict the dependent variable than not.

Table 4.9 Analysis of Variance (ANOVA)

ANOVAa
Model Sum of Df Mean Square F Sig.
Squares

1 Regression 2.281 4 .570 4.060 .020b

Residual 2.107 15 .140

Total 4.388 19

a. Dependent Variable: ROA

b. Predictors: (Constant), CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH
TO TDP
c. Correlation is significant at the 0.05 level (2-tailed)
Source: Calculate from SPSS Software

The table no 4.9 ANOVA result shows that P value less than alpha value
(0.020<0.05). It means there is significant relationship between independent variable
(CA/CL, CASH TO CA, CASH TO TDP and CASH RESERVE RATIO) And
Dependent Variable (ROA). The ANOVA with F- statistic of 4.060 is show the overall
regression model is fit for data. The F Value proved that there is a significant
relationship between independent variable and dependent variable (ROA).
 45

Table 4.10 ROA Coefficient Matirix

Coefficientsa

Model Unstandardized Standardized T Sig.

Coefficients Coefficients
B Std. Error Beta
1 (Constant) -7.716 2.821 -2.735 .015

CA/CL 8.415 2.528 .678 3.329 .005

CASH TO CA .592 .392 2.906 1.508 .152
CASH TO TDP -.411 .334 -2.404 -1.229 .238
CASH RESERVE -.024 .012 -.495 -2.037 .060
RATIO
a. Dependent Variable: RO A
Source: Calculate from SPSS Software

This study sought to establish a linear regression function of the variables with ROA
as the dependent variable. From the table 4.10 the study established the following
regression equation.

The theoretical model regression equation: ROA= a1 + b1CR + b2CBBCAR +

b3CBBTDR + b4CRR

The established regression equation is: ROA = - 7.716 + 8.415*CR +

0.592*CBBCAR – 4.11*CBBTDR – 0.24*CRR.

Table 4.10 shows the regression result for the factors effecting profitability of selected
commercial banks in Nepal in the study period. The result reveals that Cash to total
deposit and Cash Reserve Ratio are negatively impact on banks return on asset with
beta coefficient are 0.411 and 0.024 respectively. The Current Assets to Current
Liability, Cash and bank balance to current Assets are positively related with banks
return on assets and beta coefficient 8.415 and 0.592. This table shows significant
value are (0.005<0.05), (0.152>0.05), (0.238>0.05) and (0.06>0.05) respectively. It
means there is significant relationship between independent variable (CA/CL) with
 46

ROA but insignificant relationship between CASH TO CA, CASH TO TDP and
CASH RESERVE RATIO with ROA.

4.5.2: The Multiple Regressions of ROE on Liquidity

The regressing ROE on liquidity variables (current ratio, cash & bank balance to TD
ratio, CRR ratio, and cash & bank balance to CA ratio) on the liquidity condition of
chosen banks has been studied. This regression module's equation is as follows:

ROE = a1 + b1CR+ b2CBBCAR + b3CBBTDR + b4CRR …………….………. (ii)

Where,

ROE = Return on Equity

ROA = Return on Assets
CR = Current Ratio
CBBTDR = Cash and bank balance to total deposit ratio
CBBCAR = Cash and bank balance to current Assets ratio
CRR = Cash Reserve Rario a1 = Constant
b1, b2,b3,b4 = Regression Coefficient

Table 4.11: ROE Model Summary

Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .736a .541 .419 2.725320450361948
a. Predictors: (Constant), CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH
TO TDP
Source: Calculate from SPSS Software

The table no 4.11 describes the model summary of the regression analysis between the
independent variables (CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH TO
TDP) and dependent variable ROE. The column R shows the multiple correlation
coefficient value is 0.736, it indicates the good level of prediction. R square column
present R square value, also called coefficient of determination, which tells us what
percent of variability in the dependent variable accepted for by the regression on the
independent variable. In above table R square is 0.541, it means that 54.10% Changes
 47

in ROE noted by CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH TO TDP
and remaining is 45.90% explained by other factors. Adjusted R square is
comparing the explanatory power of the regression model. The adjusted R square is a
modified variable of R Square that has been adjusted for no of prediction in the
model. The above table shows adjusted R square is 0.419, it indicate 41.90%
variation in ROE is explained by other factors, The standard error of estimate is
2.7253, indicating that the units variance of the observation value of ROE from the
regression line is 2.7253.
Statistical Significance

In the ANOVA table, the F-ratio determines if the whole statistical model of regression
fits the data. When the P Value is less than the alpha value (0.05), independent
variables are statistically more likely to predict the dependent variable than not.

Table 4.12 Analysis of Variance (ANOVA)

ANOVAa
Model Sum of Df Mean Square F Sig.
Squares

1 Regression 131.388 4 32.847 4.422 .015b

Residual 111.411 15 7.427

Total 242.798 19

a. Dependent Variable: ROE

b. Predictors: (Constant), CASH RESERVE RATIO, CA/CL, CASH TO CA, CASH
TO TDP
c. Correlation is significant at the 0.05 level (2-tailed)
Source: Calculate from SPSS Software

The table no 4.12 ANOVA result shows that P value less than alpha value
(0.015<0.05). It means there is significant relationship between independent variable
(CA/CL, CASH TO CA, CASH TO TDP and CASH RESERVE RATIO) And
Dependent Variable (ROE). The ANOVA with F- statistic of 4.422 is show the
overall regression model is fit for data. The F Value proved that there is a significant
relationship between independent variable and dependent variable (ROE).
 48

Table 4.13 ROE Coefficient Matirix

Coefficientsa

Model Unstandardized Standardized T Sig.

Coefficients Coefficients
B Std. Error Beta
1 (Constant) .639 20.513 .031 .976

CA/CL 15.376 18.383 .167 .836 .416

CASH TO CA 9.311 2.852 6.150 3.265 .005
CASH TO TDP -7.478 2.428 -5.886 -3.079 .008
CASH RESERVE -.190 .087 -.517 -2.179 .046
RATIO
a. Dependent Variable: ROE
Source: Calculate from SPSS Software
This study assesses to establish a linear regression function of the variables with ROA
as the dependent variable. From the table 4.13 the study established the following
regression equation.

The theoretical model regression equation: ROA= a1 + b1CR + b2CBBCAR +

b3CBBTDR + b4CRR

The established regression equation is: ROA = 0.639 + 15.376*CR + 9.311*CBBCAR

– 7.478*CBBTDR – 0.190*CRR.

Table 4.13 shows the regression result for the factors effecting profitability of selected
commercial banks in Nepal in the study period. The result reveals that Cash to total
deposit and Cash Reserve Ratio are negatively impact on banks return on asset with
beta coefficient are 7.478 and 0.190 respectively. The Current Assets to Current
Liability, Cash and bank balance to current Assets are positively related with banks
return on assets and beta coefficient 15.376 and 9.311. This table shows significant
value are (0.416<0.05), (0.005>0.05), (0.008>0.05) and (0.46>0.05) respectively. It
means there is significant relationship between independent variable (CA/CL) and
CASH TO TDP with ROA but insignificant relationship between CASH TO CA and
CASH RESERVE RATIO with ROA.
 49

4.6 Major Findings of the Study

The research is concerned with analysis of liquidity and profitability in Nepalese
commercial banks over different five fiscal years from FY 2073/74 to FY 2077/78.
Secondary sources have been used to collect required data and information to meet the
objectives of the study. The primary sources of secondary data used in the study are
annual reports provided by the relevant selected commercial bank. The financial tools
for data analysis in this study are the current ratio(CR), cash reserve ratio(CRR), CBB
to current assets ratio(CBBCAR), CBB to total deposit ratio(CBBTDR), Similarly the
statistical tools utilized to support the result throughout the course of five year include
mean, standard deviation, coefficient of variation, correlation and regression models.
The major findings of this study can be summarized as follows:

i. According to CR analysis, The average current ratio of ADBL(1.2 times)

is higher than other banks and EBL(1.1times) is lowest. Compared to
other chosen banks, ADBL has a stronger position in terms of liquidity.

II. Based on (CRR) analysis, the Cash reserve ratio of all selected
commercial banks have successful to meet the standard set by NRB for
cash reserve ratio in all fiscal year . ADBL(33.54%) is higher than other
selected commercial banks and the liquidity position of ADBL is more

satisfactory than that of NABIL, EBL and HBL BANKS. iii. According to
CBBCAR analysis, HBL has a higher mean cash & bank balance to Current
Assets Ratio (7.97%) than Nabil Bank Limited (4.02%). It shows the more
significant the ratios, the greater their capacity to satisfy their client's daily
cash obligations.
iv. Based on the CBBTDR investigation, HBL Bank has the greatest
mean cash & bank balance to total deposits proportion (9.35%) and
Nabil Bank Limited has a low ratio (4.87%). It displays that Nabil
Bank Limited maintains the lowest liquidity levels relative to total
deposits, while HBL maintains the highest levels.
v. According to ROA analysis, The average return on assets of ADBL
(2.22%) is higher and NABIL (1.14) is lower .it means ADBL is more
successful and 1.14% is less successful in generating profit from the
 50

investment in total assets among the sample banks or selected

commercial banks earn on average with relates to proper utilization
of assets.
vi. From the ROE analysis, The average return on shareholders of
NABIL (17.98%,) is higher and ADBL (12.49%) is lower .it means
NABIL is more more satisfied, proper utilization of equity and
generated more percentage of return from shareholders’ equity. the
ADBL is less

satisfied and not proper utilization of equity..

vii. According to the correlations analysis, ROA with CA/CL is positive
(0.496) significant relationships and CASH TO CA, CASH TO DP,
CASH RESERVE RATIO are positive but insignificant relationships.
Similarly, ROE with CA/CL, CASH TO DP, CASH RESERVE
RATIO are negative relationship but not statistically significant and
ROE with CASH TO CA is 0.012 positive (0.012) relationship but not
statistically significant.
viii. From to the multiple regression of liquidity on ROA analysis, ROA
with CASH TO DP and CASH RESERVE RATIO are negatively
impact with beta coefficient are 0.411 and 0.024 Respectively similarly
The Current Assets to Current Liability, Cash and bank balance to
current Assets are positively impact with beta coefficient 8.415 and
0.592.
ix. According to the multiple regression of liquidity on ROE analysis,
ROE with Cash to total deposit and Cash Reserve Ratio are
negatively impact with beta coefficient are 7.478 and 0.190
Respectively similarly The Current Assets to Current Liability, Cash
and bank balance to current Assets are positively Impact with beta
coefficient 15.376 and
9.311.
 51

4.7 Results of Hypothesis Testing

Tables 4.7 summarize the bivariable correlation matrix between the two variables.
Only hypotheses with a p-value less than 0.05 are accepted. The hypothesis'
acceptance shows the importance of the independent variable on the independent
variable and vice versa.

i. Hypothesis (Ho1): There is a statistically significant and positive relationship

between Current Ratio and ROA..
ii. Hypothesis (Ho2): There is not statistically significant and negative
relationship between Current Ratio and ROE
iii. Hypothesis (Ho3): There is not statistically significant and positive
relationship between CR Ratio and ROA. iv. Hypothesis (Ho4): There is not
statistically significant and negative relationship between CR Ratio and ROE
v. Hypothesis (Ho5): There is not statistically significant and positive
relationship between Cash and Bank Balance To Current Assets Ratio and
ROA.
vi. Hypothesis (Ho6): There is not statistically significant and positive
relationship between Cash and Bank Balance To Current Assets Ratio and
ROE
vii. Hypothesis (Ho7): There is not statistically significant and positive
relationship between Cash and Bank Balance To Total Deposits Ratio and
ROA.
viii. Hypothesis (Ho8): There is not statistically significant and negative
relationship between Cash and Bank Balance to Total Deposits Ratio and
ROE.

4.8 Discussion
Based on the information given by the relevant commercial banks the following are
the study's discussion findings with an examination of the liquidity and profitability in
 52

Nepalese commercial banks: The study is concerned with the financial position
analysis of Nepalese commercial banks such as ADBL, NBL, EBL and HBL in
different fiscal year from FY 2073/74 to 2077/78 between various financial indicators.
Various literatures such as journal articles and previous theses related with the study
have been studied to conduct the study. Various past researchers have conducted their
studies on financial performance analysis taking different financial institutions of
different places/countries at different time intervals through various financial and
statistical tools and techniques. Thus, the findings of the study may or may not
support to the findings of the previous studies.

From the correlation analysis, ROA with CA/CL is positive significant relationships
and CASH TO CA, CASH TO DP, CASH RESERVE RATIO are positive but
insignificant relationships. Similarly, ROE with CA/CL, CASH TO DP, CASH
RESERVE RATIO are negative relationship but not statistically significant and ROE
with CASH TO CA is positive relationship but not statistically significant. The result
is consistent with the previous studies of Budha (2021), Shrestha & Jha (2020), Khan
and Ali(2016), Mishra(2019). Found Liquidity of commercial banks is positively
correlated with profitability. It implies bank's profitability would rise as its amount of
liquidity rose. The best way for banks to increase value for their shareholders is to
maintain an optimal liquidity level that will enable them to pay their short-term
obligations as they become due.

The multiple regression of liquidity on ROA and ROE analysis, ROA with CASH TO
DP and CASH RESERVE RATIO are negatively impact and The Current Assets to
Current Liability, Cash and bank balance to current Assets are positively impact, and
ROE with Cash to total deposit and Cash Reserve Ratio are negatively impact
similarly The Current Assets to Current Liability, Cash and bank balance to current
Assets are positively Impact. The result is consistent with the previous studies of
Budha (2021), Akter and Mahmud (2014) And the CBBCDR has negative significant
relationship with profitability ratios of selected commercial banks and shrestha
(2018), Budha(2021) has positive impact. In the banking industry, It means more
liquidity equals less profitability in the sector of banking and conversely. Profitability
 53

demonstrates the banks' successful and profitable effort to maximize value through
time, whilst liquidity demonstrates is operational strength.
CHAPTER – V SUMMARY, CONCLUSION AND
RECOMMENDATIONS

5.1 Summary
Liquidity management is a broad term that refers to the systematic and scientific
management of cash balances. Liquidity is defined as the portion of total assets that
can be paid quickly to meet current obligations. Liquidity management refers to
money and assets that can be converted into money in a short period of time. The term
"independent" refers to a person who does not work for the government. Banks
maintain liquidity in the form of cash & bank balances, funds on call or at short
notice, investment in government instruments and other instruments that can be
quickly converted into cash, as well as other forms of investments. It is such a big
amount of the deposit that is due on demand. Inadequate liquidity tarnishes the
organization's image, whereas excess liquidity harms profitability.

Profitability is the end result of numerous policies and initiatives. The ratio of assets
to liabilities is so examined by management. Profitability ratio is a popular financial
analysis technique. It is described as the systematic application of ratios to interpret
financial data in order to identify strength and condition. The ratios contribute no
information while being computed; they just display the relationship in a more
meaningful way, allowing us to draw inferences from them additionally, in financial
research and corporate performance. It assists in decision-making by forming
relationships and interpreting diverse ratios. Making quantitative assessments of the
firm's financial situation and performance is helpful as an analyst.

The main objective of this study is to analyze the Liquidity and profitability position
of the Agriculture Development Bank (ADBL), Nabil Bank Limited (NBL),Everest
Bank Limited (EBL) and Himalyan Bank Limited (HBL). However, the study of all
the commercial banks is almost impossible and thus only Four banks ADBL, EBL,
NBL and HBL is taken as sample. Many financial indicators, including the CR ratio,
the CRR ratio, the cash & bank balance to total deposits, the cash & bank balance to
 54

current assets, ROE, ROA and others have been analyzed in order to meet the goals
specified. For this study, it has use only secondary data analysis. The study has use
only four commercial banks as a sample of the study. This analysis has been done
using data from a variety of secondary sources, including published financial reports
from a few banks. The study covers only five years data from 2073/74 to 2077/78.
The data and information gathered from many sources has been evaluated and
presented, with analysis and evaluation carried out using various financial and
statistical techniques. Financial tools include various liquidity and profitability ratios,
while statistical tools include average, standard deviation, coefficient of variation,
correlation coefficient, and regression analysis. The researcher indicates that applied
quantitative research for achieving the objectives of the study. Moreover, the study
will follow descriptive and causal comparative research design.

According to the study's findings, Profitability is inversely correlated with the

liquidity of Nepalese commercial banks. This could be understood to mean that a
bank's profits would increase as its liquidity increased. Banks can therefore boost
value for shareholders by maintaining an ideal liquidity level, which ensures that the
bank is able to pay short-term commitments when they become due. By doing this, it
is certain that the bank won't face unforeseen expenses like stock shortages,
bankruptcy fees, or opportunity costs brought on by excess liquidity. The liquidity
level should not fall below the minimal require because this would result in the
organization's inability to satisfy short-term obligations. After evaluating the financial
data, ADBL appears to be good in terms of current ratio, but EBL appears to be the
worst in terms of current ratio among the sampled banks. According to CBBCAR,
Himalyan Bank Limited appears to be the most appealing, whilst Nabil Bank Limited
is the least appealing. Similarly, Himalyan appears to be good, although Nabil Bank
Limited has the lowest CBBTDR of the examined institutions. In terms of return on
assets(ROA) ADBL Bank appears to be the most appealing commercial bank, whereas
Nabil Bank Limited appears to be the least appealing But Nabil Bank limited seems
attractive and ADBL is least attractive as per return on equity (ROE).
5.2 Conclusion

The study's goal was to examine Nepalese commercial banks' liquidity and
 55

profitability from 2073/74 to 2077/78 in this study Current assets, cash reserve ratio,
cash and bank balance to current assets, cash and bank balance to total deposits have
been taken as independent variables and ROA & ROE have been taken as dependent
variable.

Using the current ratio, ADBL liquidity position is stronger compared to that of the
selected sample banks, which shows a greatest potential for short-term affordability,
or the willingness to fulfill short-term commitments. Current ADBL, NBL, HBL, and
EBL ratios are lower than the benchmark of 2:1. Although, such benchmark is not
most necessary in the banking sector, it should be better if ADBL, NBL, HBL and
EBL keep such ratio to ensure the sound liquidity position.

Based on the ratio of total deposits to cash & bank balance, HBL has a higher
percentage of total deposits collected in the form of cash & bank balance than other
banks, which helps it to satisfy short-term liquidity needs. ADBL, NBL, EBL and
HBL has remained successful to meet the standard set by NRB for cash reserve ratio
in all fiscal year. To meet short-term demand or liquidity, ADBL liquidity position is
more adequate than that of NBL, EBL, and HBL.

Using the ROA, ADBL profitability position is higher, while NBL is lower, when
compared to the other selected banks., which clearly indicated that ADBL is more
successful and NBL is less successful in generating profit from the investment in total
assets among the samples As a result, it is advised that NBL boost the usage of assets
that create higher earnings. As a result of the return on equity, the profitability position
of NBL is better than that of ADBL, EBL and HBL. It means NBL is more satisfied of
shareholders and proper utilization of equity and generated more percentage of return
from shareholder's.

The multiple regression of liquidity on ROA and ROE, ROA with CASH TO DP and
CASH RESERVE RATIO are negatively impact and The Current Assets to Current
Liability, Cash and bank balance to current Assets are positively impact and ROE with
Cash to total deposit and Cash Reserve Ratio are negatively impact similarly The
Current Assets to Current Liability, Cash and bank balance to current Assets are
 56

positively Impact. It means more liquidity equals less profitability in the sector of
banking and conversely. Profitability demonstrates the banks' successful and
profitable effort to maximize value through time, whilst liquidity demonstrates is
operational strength.

5.3 Implications
The implications of this research mean how employee, shareholders researchers use
the finding of research in their practical life as suggestion. Based on the study's
findings and taking consider relevant issues, the following appropriate
recommendations have been collected to make the study more valuable to the
receivers and other parties. This study should be fruitful the employee, shareholders,
researchers and employee who are interested to this topic.

i. This research will provide financial advice to managers and investors

on how to combine debt and equity to maximize company
performance.
ii. The bankers may develop various strategic plans to increase
profitability on the basis of this study.
iii. This study will be utilized by investors and anyone interested in
investing to assess firms and determine what type of capital structure
combination creates the most profit for the company.
iv. This research will help other academics publish additional studies on
financial concerns and contribute to the community's knowledge.
Academicians planning to write dissertations for bachelor's and
master's degree programs offered in Nepal and around the world can
use the study results as a reference to back up their research.
v. This study will assist finance managers and other finance officers in
publicly traded firms in advising their management on the optimum
source of money that will contribute to the company's profitability.
 57

Implications for further research

i. This study only reveals the relationship between liquidity and profitability
position of four selected commercial banks only. Further researchers can be
carried out using large sampling other commercial and development banks too.
ii. As this study is limited to the analysis of secondary data. Future researcher can
be done using primary data with more sample and questionnaire which may
yield different result.
iii. As this study cover commercial banks in Nepal, it doesn’t consider financial
institutions and other sector to provide a more broad based analysis. It is also
recommended to research relationship between liquidity and profitability
position of other financial institutions of Nepal except commercial banks.
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Websites:
http://www.adbl.gov.np
http://www.nabilbank.com
http://www.everestbankltd.com
http://www.himalayanbank.com
http://www.nrb.org.np
http://scholar.google.com
APPENDICES
Annexure-1
 Selected Data of Sample Banks
EVEREST BANK

year CA/CL CASH TO Cash TO ROA ROE cash reserve

current Assets DEPOSIT ratio
2077/78 1.09 4.42 5.72 0.89 8.56 18.15

2076/77 1.09 5.72 7.22 1.42 13.5 14.43

2075/76 1.1 4.67 5.99 1.94 17.33 18.56

2074/75 1.11 7.1 8.71 1.97 16 17.75

2073/74 1.11 2.64 3.22 1.72 16.04 16.52

ADBL

year CA/CL CASH TO Cash TO ROA ROE cash reserve

current Assets DEPOSIT ratio
2077/78 1.22 4.92 6.5 1.59 11.2 36.21

2076/77 1.18 4.86 5.91 1.86 11.7 33.98

2075/76 1.2 7.8 9.67 2.77 14.78 27.2

2074/75 1.2 8.62 10.77 2.71 13 29.15

2073/74 1.2 9.8 12.31 2.15 11.77 31.18

Himalyan bank

year CA/CL CASH TO Cash TO ROA ROE cash reserve

current Assets DEPOSIT ratio
2077/78 1.13 6.9 8.24 1.68 14.89 26.51

2076/77 1.13 10.87 12.84 1.79 15.4 31.39

2075/76 1.13 6.18 7.25 2.21 18.34 26.25

2074/75 1.14 7.58 8.82 1.67 14.17 23.05

2073/74 1.12 8.32 9.6 2.19 21.58 26.64

Nabil bank

year CA/CL CASH TO Cash TO ROA ROE cash reserve

current Assets DEPOSIT ratio
2077/78 1.16 2.55 3.26 1.71 15.19 3.66
2076/77 1.15 2.05 2.52 1.58 13.61 11.2

2075/76 1.14 5.41 6.55 2.11 17.76 4.78

2074/75 1.16 5.04 5.9 2.61 20.94 10.05

2073/74 1.16 5.07 6.1 2.69 22.41 10.02

Source : Respected Annual Report of Banks