SECTION-IINTRODUCTION1.1 Background of the studyIn ancient Vedic Era, there was crude form of banking because deposits, pledges, politics of loan and interest can be traced from Many Smriti.
In 15th and 16th century, Roman emperor collapsed, as a result, revival of commercial and trading in European countries. Similarly, following communities or groups also revived. Such as: a. The Merchants b. The Goldsmith c. The Money-lenderTherefore, in accordance with the opinion of greatest economist, G.
Growther, these three groups are the ancestors of bankers. Whereas in the connection to traceable origin and development of banking institution in the world, ???The bank of Venice??? of Italy was established in 1157 A.D. as the first banking institution in the world. The second banking institution namely, ???The Bank of Barcelona??? of Spain was established in1401A.D. After that, ???The Bank of England??? was incorporated in 1964 A.
D. as the first joint Stock Bank and later on it becomes the first central bank in the world in 1884 A.D.
A bank is a financial institution engaged in the monetary transactions. It receives deposits and lends to those who need money for some purposes paying and charging interest at fixed rate percentage per annum. Bank also provides agency services such as remitting and collecting cash on behalf of the customer, opening bank drafts and letter of credit facilities, underwriting shares of newly established companies and many more.According to the commercial bank act 2031, ???A commercial bank means the bank which deals in exchanging currency, accepting deposits, giving loans and doing commercial transaction. They accept various kinds of time and saving deposits while they have expanded their lending activities to include term loans to business, consumer loans, long term mortgage loans and investments in debt securities of all types of a wide range of maturities.
Nepal Bank Ltd., Rastriya Banijya Bank Ltd., Investment Bank Ltd., The Bank of Kathmandu Ltd., NCC Bank, Himalayan Bank Ltd. Nabil Bank, SBI Bank etc are some of the commercial banks providing facilities in Nepal right now.1.
1.1Concept of BankBank is the almost important financial institution in the economic and essential business in the thousands of local towns and cities. So the bank must be identified by the functions they perform in the economy.
Simply speaking bank is an institution, which deals with money and credits. It is a financial institution, which accepts deposits from the public and in turn advances loan by creating credit. They invest the deposit collected from different people in different sector. So they play a significant role in the economic development of the country integrated and. speedy development of a country is possible only when competitive banking service reaches nooks and corners of the country.The word ???Bank??? was derived from Latin word ???Bancus??? which refers to the bench on which the banker would keeps its money and his records. Some people trace its origin to the French word ???Banque??? and the Italian word ???Banca???.
The development of banking was rightly observed by Geoffrey Crowther, ???The present day Banks has the ancestors of particulars notes one of the merchant. The bankers two other ancestors are the lender and goldsmith. Lending and borrowing are almost as old as money itself.??? 1A bank is an organization whose principal operation is concerned with accumulation of the temporary idle money of the general public for the purpose of advancing to other for expenditure.???2 According to US law, any institution offering deposits subjected to withdrawal on demand and making loan of a commercial or business is bank.1.1.2 Commercial BanksAlthough banks can be categorized into different types on the basis of its functions, objectives, etc, the word ???bank??™ will always be synonymous with the commercial banks and its functions.
Basically the function of commercial banks are same all over, the basic functions are various types of deposit facilities namely; saving, fixed, current, safety of public money, remittance of money, letter of credit, guarantee, loans, locker facility, foreign exchange, serving as agent to clients. The commercial banks of Nepal also do the same function.The developments of commercial banks in Nepal, in context of modern banking are not so long.The establishment of Nepal Bank Limited at 30 kartik 1994 B.S. marked the beginning of the modern banking system in Nepal.
However its activities were confined to deposit mobilization and commercial lending. The establishment of Rastriya Banijya Bank at 10 magh 2022 B.S. under ???Rastriya Banijya Bank Act 2021??? had added new impetus to the various part of country.
Nepal Rastra Bank was established in 14 Baisakh 2013 B.S. under ???Nepal Rastra Bank Act 2012??? as a Central Bank of Nepal.
For the sound development of the economy and healthy competition in banking sector His Majesty??™s Government has adopted positive attitude and has started implementing open economic policies. As a result, Joint Venture Banks were established .Then after; foreign banking technique took place in Nepal. After the democratic Government???s open policy from 2048 B.S. the banking institution began to grow rapidly. It attracted the investors and then came the hoard of joint venture public limited, commercial bank in the country.|S.
N |Names |Date |Head Office ||1 |Nepal Bank Ltd. |1937/11/15 |Kathmandu ||2 |Rastriya Banijya Bank |1966/01/23 |Kathmandu ||3 |Agriculture Development Bank Ltd. |1968/01/02 |Kathmandu ||4 |NABIL Bank Ltd. |1984/07/16 |Kathmandu ||5 |Nepal Investment Bank Ltd. |1986/02/27 |Kathmandu ||6 |Standard Chartered Bank Ltd. |1987/01/30 |Kathmandu ||7 |Himalayan Bank Ltd. |1993/01/18 |Kathmandu ||8 |Nepal SBI Bank Ltd.
|1993/07/07 |Kathmandu ||9 |Nepal Bangladesh Bank Ltd. |1994/05/06 |Kathmandu ||10 |Everest Bank Ltd. |1994/10/18 |Kathmandu ||11 |Bank of Kathmandu Ltd. |1995/03/12 |Kathmandu ||12 |Nepal Credit and Commerce Bank Ltd. |1996/10/14 |Rupandehi ||13 |Lumbini Bank Ltd. |1998/07/17 |Chitwan ||14 |Nepal Industrial and Commercial Bank Ltd.
|1998/07/21 |Morang ||15 |Machhapuchhre Bank Ltd. |2000/10/03 |Kaski ||16 |Kumari Bank Ltd. |2001/04/03 |Kathmandu ||17 |Laxmi Bank Ltd. |2002/04/03 |Parsa ||18 |Siddhartha Bank Ltd. |2002/12/24 |Kathmandu ||19 |Global Bank Ltd |2007/01/02 |Kathmandu ||20 |Citizens Bank International Ltd |2007/6/21 |Kathmandu ||21 |Prime Commercial Bank Ltd |2007/9/24 |Kathmandu ||22 |Sunrise Bank Ltd |2007/10/12 |Kathmandu ||23 |Bank of Asia Nepal Ltd |2007/10/12 |Kathmandu ||24 |Development Credit Bank Ltd |2001/01/23 |Kathmandu ||25 |NMB Bank Ltd |1996/11/26 |Kathmandu ||26 |Kist Bank Ltd | |Kathmandu ||27 |Mega Bank Ltd | |Kathmandu | List of Licensed Commercial Banks1.1.3 Functions of Commercial BankAmong various types of Banks, commercial bank is one of the most popular banks among mass population of Nepal. Generally, a commercial bank has several branches.
It collects scattered idle money from general public as deposit and charges a good amount of interest by lending the fund to trade and industries. Beside collecting deposit and granting loan, these banks also provide other banking services to its customers e.g. agency banking services, transfer of fund, discounting bill of exchange, exchanging foreign currencies, overdraft facilities, L/C and guarantee facilities, locker facilities, underwriting of securities etc. “Bank may be defined as an establishment that performs one or more of the following functions: Accepts custody of money; Lends money; Extends credit; Issues currency; or Facilitates the transfer of funds by means of cheques, drafts, bills of exchange, or other instrument of credit.”Almost all the commercial banks are authorized to transact various kinds ofbusiness that is generally considered to be the important functions of a commercial bank. “Principally, commercial bank accepts deposits and provides loans, primarily to businessfirms there by facilitating the transfer of funds in the economy.??? Commercial banks workfor overall development of industries, trade and commerce, services and also agriculture.
Major functions of commercial banks of Nepal are as follows-1) Accepting DepositsBank accepts deposit in different types of accounts. a) Current AccountA current account is a running account with amounts being paid into and drawn out of the account continuosly. This is also called demand deposit, which never becomes time-barred. Banks do not pay any interest on credit balance on this account. Any balances below the minimum will be liable to incidental charges. The minimum balance and the charges shall be as determined by the bank time to time. b) Saving AccountSavings account is mainly meant for non-trading customers who have some potential for savings and who do not have numerous transactions entering their account.
A normal rate of interest is provided in this account and clients are restricted to freely operate their account by some rules such as maintaining operate their accounts by some rules such as maintaining minimum balance. Any balance below minimum will be liable to incidental charges as fixed by bank time to time, which may differ from one bank to another.c) Fixed Deposit AccountFixed deposit constitutes a very important resource for bank, as bank need not keep greater reserve in respect of such deposit. As per the regulation of NRB different banks independently follow a different interest rate policy having regard to the size of deposits held by them. These are deposited by the customers for a fixed period of minimum 14 days and maximum no time limit. This is withdrawn able on maturity and not on demand that is why this is called time deposit.2) Advancing LoanBank performs the function of advancing loan to the needy.
The needy may be an individual or any other institution. Bank provides the following types of loan– Overdraft- T /R loan/ importers loan- Hire purchase loan- Direct loan with collateral- Discounting bills of exchange/cheque- Working capital loan- Loan on government bond- Priority sector loan- Hypothecation loan- Deprived sector loan- Pre-export loan- Term loan- Loan against fixed deposit.3) Agency Services Bank performs various functions as an agent on behalf of its client. Under agency service, it performs the following functions– Collection of cheque- Fund transfer- Payment of cheque, Bills and Promissory note- Security brokerage services- Issuance of letter of credit and guarantee- Receipt of payment of certain dividend, interest etc.3) Miscellaneous Services Under this heading we can categorize the following functions– Issuance of Travelers Cheque- Safe deposit locker service- Financial advisory service- Collection of trade information and statisticsCredit creation and Credit Card service1.1.
4 Origin of Bank in NepalBanking concept existed even in the ancient period when the goldsmiths and the rich people used to issue the receipt to the common people against the promise of safekeeping if their valuable item. On the presentation of the receipts, the depositors would get back their gold and valuable items after paying a small amount for safe-keeping and saving. The goldsmiths and the moneylenders became bankers of those days who started performing two functions of modern banking-accepting deposits and advancing loans. However stage wise development of banking can be narrated as follows:a) The first phase of banking development Eight century king ???Gunakamdev??? renovated the Kathmandu city by taking loan.
At the end of some century merchant named ???Shankhardhar??? has started the New Year Nepal sambhat after freeing all people of Kathmandu from debt. In the 11th century during Malla reigns there was evidence of professional moneylenders and buyers. Tejarath Adda was established in 1877 A.D. which provided loan at very low rate of 5%.
b) The second phase of banking development The modern banking in Nepal has started with establishments of Nepal bank ltd in 1994 B.S. Having felt the need of development of banking sector and to help the government formulate monetary policies, Nepal Rastra Bank set up in 2031 B.
S.as the central Bank of Nepal. In B.S. 2022, government set up Rastriya Banijya Bank as a fully government owned commercial bank. The agriculture development bank was established with the objective in agriculture.
c) The third phase of banking development The process of development of banking system in Nepal was not satisfactory. Nepal was observing the events that were taking places in the world also. The country can??™t change it status by using only its own capital in the country without importing the new technology from the foreign country and accordingly, law and policy have been enacted by the state to encourage to foreign investment on banking sector. From this, the real form to the development from the banking system started in Nepal. In order to established and develop other joint venture commercial banks and other financial institution, Nepal adopted liberal free economic policy. Accordingly, Nepal is allowed to established different joint venture banks under the collaboration with foreign banks. d) In fourth phase of banking development In 2041 B.S.
His Majesty??™s Government of Nepal established 5 rural development banks. They are as follows: a) Eastern Rural Development Bank b) Central Rural Development Bank c) Western Rural Development Bank d) Mid-Western Development Bank e) Far-Western Development BankIn order to establish and develop other joint venture commercial banks and other financial institution, Nepal adopted liberal free economy policy. After 2041 B.S.
the government gradually liberalizes and opened up the financial sector, resulting in the rapid entry of the foreign banks. Later in 2041 B.S.
with the grand opening of NABIL Bank Limited, other commercial banks started emerging in the private sectors. As a result, now there are altogether 26 commercial banks operating at different parts of the country. At present, the banking sector is more liberalized and there are various types of banks working in modern banking system. This includes central, development and commercial banks. Evolution of the information technology has revolutionized the banking sector is saving lots of time and money by implementing IT.
Invention of different software and hardware, which are very essential and available for functioning bank such as Banking Software, ATM,E-banking, Mobile Banking and Card like Debit card, Credit card, Prepaid card etc. which helps the customer as well as banks to operate and conduct their activities more efficiently and effectively. This helps bank to generate more customers and own bank goodwill.1.2 Introduction of Everest Bank LimitedNepal??™s Government opened the banking sector for private and foreign participation from the mid-eighties; Everest Bank Limited (EBL) was setup in the private sector and commenced its operations on October,1994.
India being the major trade partner of Nepal, the obvious choice with the promoters of the Bank was to join hands with an India Bank. Thus EBL entered into a joint venture in January 1997 with Punjab National Bank (PNB), one of the largest commercial banks in India with over 3700 branches and 300 foreign correspondents around the globe.EBL has the advantage of having not only the financial strength of its partner but also their banking expertise. Under a Technical Service agreement singed between the two banks, PNB has been providing top management services and banking expertise to EBL. With over 100 years of successful banking expertise to their merit, PNB has greatly helped the bank in laying down sound systems and procedure. Currently with 23 branches in various part of the Kingdom of Nepal, EBL operates with the objective of providing the full range of quality banking services to both the business community and common man. This bank was opened in joint venture with Punjab National Bank of India with the following share holding pattern.
1.2.1 Capital Structure of Everest Bank LimitedTable No 2Share capital and Shareholding capitalAs on July 15, 2009|Particulars |Amount ||Authorized Capital |1000000000 ||Issued Capital |840620000 ||Paid Up Capital |838821000 |Figure No 1Showing the Share Capital[pic]1.2.2 Product and services of Everest Bank LimitedEBL is well known and famous for providing highly personalized services to customers. It provides full range of commercial banking services through its branch network nationwide. To extend more of efficient services to its customers, Everest Bank has been adopting innovative and latest banking technology.
Today it offers varieties of services to its customers. Everest Bank Limited mainly, offers following services: I. Deposit: Everest Bank Limited accepts various types of deposits from their customer??™s. Depending upon the nature of the deposits, interest rate is determined.
Different types of accounts can be opened at any EBL branches upon completion of simple documentary requirement. Like saving deposit, current deposit, fixed deposit, saving premium account, cumulative deposit scheme. II. Loan: Everest Bank Limited also provides loan facilities to needy individual and companies for productive purpose. Loans are given to the business customers to meet their working capital and long-term requirement. Personal customers take loan against their fixed deposit. Small loan for productive purpose is also given to personal customer. Everest bank limited has also lends money to priority loan to these sectors.
Everest Bank has launched retail loan and corporate loan. Everest bank limited has giving hand in the economic development of the country. EBL has pioneered in extending various customer friendly products such as home loan, education loan, EBL property plus and Home equity Loan. III. Letter of credit: ???A letter of credit is defined as a letter issued by the bank on behalf of buyer in favor of the seller, expressing its definite undertaking to effect payment for the specified amount provided the seller complies with the term and condition stipulated in the letter.??? Payment by means of letter of credit involves action between two banks, one in the importer??™s country and other in exporter??™s country. IV. Guarantee : ???A guarantee is a definite and irrecoverable undertaking by a bank and its customers to make payment up to a specified sum of money to be beneficiary on demand in case of default by its customer.
??? The need of bank guarantee arises in business thus Everest Bank Limited has provided guarantee to their customers. Naturally, business customers enjoy this service. V. Remittance of funds: Sending and receiving funds to/from various places is the necessary of the present day.
Remittance services of Everest Bank Limited have made benefited both the business the personal customers. Everest Bank limited has made funds transfer through various modes like demand draft, telegraphic transfer order, swift fax and mail payment order. VI. Bills: Business and personal receive the cheque/drafts drawn on other banks. Banks collects the proceeds of such cheque and pay to customers. VII. 365 Days Banking and Holding counter: The Customer today, especially the working class, is very busy and free only during holidays.
There is a need for banking facilities ha their free time. Thus, the bank offers 365 days banking facility. New Road branch which is the biggest market place. The facility of holiday counter is offered during holidays like Dashain and Tihar through all Kathmandu Valley branches and few of Terai region branches so that customers are not derived of financial requirement during long holidays. VIII. Business BankingMost of the large corporate in the country has been partner and that is the reason its growth in the segment is high.
Through its business banking it offers a warehouse of products and services to match the need of valued clients. IX. Centralized Banking System: The bank is connected to all its counters through the Centralized Banking System and transactions from any branch can be done due to a centralized database. X.
Revenue Counters: EBL has been collecting government revenue from Pulchowk, Lazimpat, Babar Mahal, Singha Durbar, BirGunj Custom Office and ICD Dry Port. This step has helped the bank in supporting the government with its capabilities and competencies of quick and reliable service to the society. XI.
Evening Counters The bank has been looking forward to services various needs of the customers and hence in this effort the bank has been serving through evening counters at 12 branches. All the 10 valley branches have evening counters and in addition Pokhara and Janakpur also serve through the counters. XI.
EBL Debit Card: EBL Debit Card is the key to ultimate convenience regarding day to day transactions providing the power of real cash in form of card. Associated with the Small Choice Technology (SCT), it facilitates wide sharing of ATMs under SCT network. Therefore, EBL Debit card can be accessed at any of the 150 ATMS linked with SCT for withdrawing cash and also at any of the merchant establishments (POS) having SCT logo, for purchasing goods and services. The card can be accessed in India through any of the 1500 Punjab National Banks ATMs. 1.
2.3 Organizational structure |Management Structure | v| Board of Directors | v|Chairman | v|Executive Director | v|Deputy General Manager | v|Assistant General Manager | v|Chief Manager | v|Officers | v|Assistants |1.2.4 Introduction to LiquidityLiquidity is defined as bank??™s capacity to exchange cash for deposits. In other word, liquidity is bank??™s capacity to meet immediate maturing liabilities. The degree of liquidity depends upon the relationship between cash assets plus those assets, which can be quickly turned into cash and the liability awaiting payment. Public put their money with hope that bank repays it as a demand by them, this is great trust of public to the bank. If the bank fall to repay the money on demand in such case bank may lose public trust towards the bank and even bank may collapse.
Considering this fact, bank should maintain enough liquidity for transaction motive, precaution of security motive and speculative motive.In the case of Nepal, liquidity denotes the money use, in the current account, saving account, fixed account and the money in margin account of the economic system. Liquid assets means, the cash balances of the bank, the balance held by a bank in the Nepal Rastra Bank and liquidity appeared in economy. The commercial banks or financial institution should keep the stock of liquid assets according to the ratio of liability of deposit fixed by the bank.For the first time, Nepal Rastra Bank had implemented the monetary policy by issuing the rules of credit control in 31st Shrawn 2031(1974).
This rule had defined the liquid asset of the commercial banks. It had regarded liquid asset as the cash stock of the commercial banks, short-term and security short-term business security, the government and the treasury bills. It is clear from it that the liquid assets mean the cash and the asset, which can be converted immediately in the time of need.
According to R.S.Sayers, ???Liquid is the words that the banker uses it decide his ability to satisfy demand for cash in exchange of deposits.???1.
2.5 Types of Deposits in Everest Bank LimitedDeposit is important, as a commercial bank??™s deposit policy is the most essential policy for its existence. The growth of bank depends primarily upon the growth of its deposits. The volume of funds that management will use for creating income, through loans and investment, is determined largely by the banks policy governing deposits. In other words, the growth of the bank accelerates and retires with the changer or liberalization of the deposit policy of that particular bank.In the banking business, the volume of credit extension must depend upon the deposit base of the bank.
The deposits create power of commercial banks and forces to raise the assets along with the liabilities side of the balance sheet. Traditionally, the deposit structure of a commercial bank was thought to be determined by the depositors and not by bank management. There are regular changed in this view in the modern banking industry.
Thus banks have evolved from relatively passive acceptors of the bank liabilities that management has been influencing through deliberate actions.This new approach of influencing liabilities though management policy action is referred as liability management under which bank decides the source of financing to be used and determines the amounts needed from each source. Among the most important function of the EBL there are mainly three types of deposits. Bank accepts deposit form general public in different types of accounts.1.
Current Deposit Current account is that type of account where the customers just get protection of their money against any theft or robbery, The Bank will be either change money for protection or given interest for the deposit of the money in the bank. Any individual or organization can open an account upon some basic amount of deposits. The depositor can withdraw any required amount of money.2.
Saving Deposits The main aim of opening a saving deposit account is to lessen the thrift among the lower income- class people and encourage saving habit of the people for the future purpose. In this deposit account, the bank may give lower rate of interest and money can be withdrawn with minimum limit given to the concerned bank. Pre ??“ notice is needed when sum over a fixed amounts are required to be withdrawn. The current interest rate the EBL is offering for saving is 4% p.a. (This is the revised interest rates with effect from 3-July 2004)3.
Fixed Deposits This account is deposited for the fixed time and principal is paid on after maturity date. A fixed amount is deposit in the bank and according to which the interest rate is decided by the bank.1.3 Objectives of Study The objectives of the study can be highlighted on the following points mentioned as follows: ? To identify the trend of increasing or decreasing in bank saving deposit with compare to previous year as well as with other commercial bank. ? To identify the problem in collecting deposit and in operating to accountancy faced by depositor, consumer as well as by the staff of the bank. ? To access the contribution made through deposit regarding the national development. ? To access the sources of deposit from which we have to know that which the major source for the deposit is.1.
4 Significance of the study This project work report has been prepared for the partial fulfillment of the requirement for the Bachelor of Business Studies. This project work report has been prepared. On the basis of fieldwork information collected from Everest Bank Limited. By making this type of project report we students may enable to enhance our knowledge in the field of banking problems.
Through this, we may be able to deal such type of activities. The main significance of the study is: ? To get desired data some aspect of liquidity by performing various financial analysis. ? To find out and come to the conclusion about the liquidity position of the Everest Bank Limited. ? To find out the strength, weakness, opportunity and threat of the bank.
? To identify the problems of the banking sector. ? To find out the marketing style of the bank. ? To find out the main objective of the bank.
1.5 Limitations of the Study ? The study period cover five years beginning from 2003 to 2009 ? There are many factors that affect liquidity of bank. However only related factors are taken into consideration in this study. ? The study has been felt inadequate to some extent due to non availability of literature journals. ? Lack of industry average ratios for comparisons.
? Only Everest Bank Limited out of commercial banking industry and 6 years trend is taken. ? This data is concerned mainly through secondary data i.e. annual reports and texts book, hands out provided by class teacher etc.
Therefore accuracy of this report on the reliability of secondary data. 1.6 Methodology of the studyResearch methodology refer to the various techniques and tool to make the study significant and efficient. Various sequential steps are adopted in studying a problem with certain objectives in view.
Financial analysis is a major tool of research analysis. This is useful to reflect the liquidity position of the concerned banks.1.6.1 Research DesignVarious financial analysis tools have been used in this study, is less descriptive because the historical secondary data have been mainly deployed for the analytical purpose.
Secondary data which includes the annual reports published by the relative bank, financial statements of the bank by Nepal Rastriya Bank, review materials etc. Such data and information have been processed through various processes like editing, calculating and results have been interpreted in the form of ratio percentage for clear view.1.6.2 Method AnalysisVarious financial analysis tools have been used in this study. This analysis of data will be done according to pattern of data available.
The relationship between different figures related to study topic using ratio topic analysis. The various calculated results are tabulated in a chronological order under different heading, which are later on compared with each other to interpret results.1.6.3 Sources of DataThe source of data means the place of materials from which the required data have been found.
There are mainly secondary data available for study i.e. the main source of data is balance sheet of the Everest bank limited from 2003 to 2009 published in its annual report.1.6.4 Statistical Tools and TechniquesVarious statistical tools have been used in this study to analyze and interpret the collection data. Tables and diagrams have been used to further illustrate the changes in the percentages and it??™s been calculated through financial tools:(a) Financial Tools ? Cash & bank balance (exe. Money at call) to C.
D. ratio = Cash & bank balance (exe. Money at call) * 100% Current Deposit ? Fixed Deposit to Total Deposit Ratio = Fixed Deposit * 100% Total Deposit ? Cash and bank Balance to Total Deposit = Cash and bank Balance * 100% Total Deposit ? NRB Balance to Total Deposit = NRB Balance * 100% Total Deposit(b) Statistical Tools Mean= ? * X N ? Standard Deviation = vx-?x N ? Coefficient of Variation=? * 100% ?x1.7 Organization of the study The study will be organized into three chapters. Which are :Chapter I: Introduction of the studyThis chapter deals with the introduction part of the study. It includes background, introduction of the EBI, focus of the study, statement of the problems, objectives of the study, significance of the study, limitation of the study, introduction of financial Analysis, research methodology and organization of the study.
Chapter II: Presentation and Analysis of DataThis chapter deals with presentation and analysis of data. It is the main body of research which is concerned with the analysis of different financial ratios and statistical analysis related to different ratio of Everest Bank Limited.Chapter III: Summary, Conclusion and RecommendationsThis is the last chapter of the study, which provides summary and conclusion, suggestions and recommendation for improving the future performance of the study bank.
These chapters discuss the summary derived from data.SECTION-II analysis of data2.1 IntroductionEvery presentation of the data follows its analysis so that it can be drawn out and future prediction can be initiated.
For the purposed of the analysis simple method of financial tools, ratios analysis and statistical tools, mean (average), standard deviation, coefficient of variation is used.2.2 Analysis2.2.1 Ratio AnalysisRatio analysis is widely used as a tool of financial analysis. It defines systematic use of ratios to interpret the financial statement.I.
Saving Deposit to Total Deposit RatioTable No 3Showing Saving Deposit to Total Deposit Ratio|F.Y. |Saving Deposit |Total Deposit |Ratio ||2003 |2757952815 |6694963060 |41.19% ||2004 |3730614285 |8063902086 |46.26% ||2005 |4806832298 |10097690989 |47.60% ||2006 |6929216891 |13802444988 |50.
20% ||2007 |9029255366 |18186253541 |49.65% ||2008 |11883857171 |23976298535 |49.57% ||2009 |14782330769 |33322946246 |44.36% || | |Average |46.98% |(Source: Annual Report of EBL)The ratio of Saving Deposit and Total Deposit are 41.19%, 46.
26%, 47.60, 50.20%, 49.65%, 49.57% and 44.
36% in fiscal year 2003, 2004, 2005, 2006, 2007, 2008 and 2009 respectively. Saving deposit is sorts of short- term liquidity which can be withdrawn by depositors. Lower the ratio of saving deposit to total deposit higher the liquidity ratio. In the fiscal year 2004 ratio was 46.26%, which is greater than fiscal year 2003. The ratio of fiscal year 2006 was 50.20%, which is greater than last year 2005 ratio. Figure No 2 Showing the Saving Deposit and Total Deposit[pic]Finding:This year ratio is 44.
36%, which is less than last year??™s ratio 49.57%, which indicates liquidity, has increased than last year.II. Fixed Deposit to Total DepositTable No 4Showing Fixed Deposit to Total Deposit|F.Y |Fixed Deposit |Total Deposit |Ratio ||2003 |2794741927 |6694963060 |41.74% ||2004 |2897961217 |8063902086 |35.
91% ||2005 |3403958307 |10097690989 |33.71% ||2006 |4242351769 |13802444988 |30.74% ||2007 |5626661717 |18186253541 |30.94% ||2008 |6446181289 |23976298535 |26.89% ||2009 |7049978230 |33322946246 |21.16% || | |Average |31.59% |(Source: Annual Report of EBL)The ratios of fixed deposit to total deposit are 41.
74%, 35.94%, 33.71%, 30.
74%, 30.94%, 26.89% AND 21.
16% fiscal year 2003, 2004,2005,2006,2007,2008 & 2009 respectively. The highest fixed deposit to total deposit ratio is 41.74% in the fiscal year 2003 and the lowest fixed deposit to total deposit ratio is 21.16% in the fiscal year 2009.Figure No 3Showing the Fixed and Total Deposit[pic](Source: Annual Report of EBL)Finding :The current year ratio is 21.16%, which is the highest fixe deposit to total deposit ratio within fiscal year 2003 to 2008. This means liquidity in the bank is less than previous year. The average ratio is 31.
59%III. NRB Balance to Total Deposit RatioTable No. 5Showing the NRB Balance and Total Deposit|F.Y. |NRB balance |Total Deposit |Ratio ||2003 |730,330,780 |6,694,963,060 |10.91% ||2004 |442,243,223 |8,063,902,086 |5.48% ||2005 |779,669,004 |10,097,690,989 |7.72% ||2006 |1,139,514,873 |13,802,444,988 |8.
26% ||2007 |1,178,198,197 |18,186,253,541 |6.48% ||2008 |1080914554 |23,976,298,535 |4.51% ||2009 |4787163541 |33,322,946,246 |14.37% || | |Average |17.92 |(Source: Annual Report of EBL)The above table and figure shows that the ratio of NRB to Total Deposit from the fiscal year 2003 to 2009. They are as follows 10.91%, 5.
48%, 7.72%, 8.26%, 6.48%, 4.
51%and 14.37%. The highest ratio for the seven is 14.37% in year 2009 and the lowest ratio is 4.
51% in the year 2008. The ratio of current year is 14.37%.
Figure No 4Showing the NRB Balance and Total Deposit [pic]Findings:The statutory requirements of the balance to NRB by all the commercial banks are 32.38% of the saving deposit, and, here, EBL is succeeding to fulfill the basic requirement. The average ratio is 17.92%.III. Cash in Hand to Total Deposit RatioTable No 6Showing the Cash in Hand and Total Deposit|F.Y.
|Cash in Hand |Total Deposit |Ratio ||2003 |136658509 |6,694,963,060 |2.04% ||2004 |128757118 |8,063,902,086 |1.60% ||2005 |192590297 |10,097,690,989 |1.91% ||2006 |259347645 |13,802,444,988 |1.88% ||2007 |534996791 |18,186,253,541 |2.94% ||2008 |822989425 |23,976,298,535 |3.43% ||2009 |944695793 |33,322,946,246 |2.88% || | |Average |2.
38% |(Source: Annual Report of EBL)The above table and figure shows the ratio of Cash in Hand to Total Deposit ratio from the fiscal year 2003 to 2009, which are as follows: 2.04%, 1.60%, 1.91%, 1.88%, 2.94%, 3.
43%, and 2.89%. The highest ratio was in the current fiscal year i.e. 3.43& and the lowest ratio is in 2004 i.e.
1.60%.Figure No 5Showing the Total Deposit and Cash in Hand[pic]Findings:The current year ratio is 6.39%, which is the highest ratio that shows bank has kept more cash balance in compare to last 7 years.IV. Short term investment Ratio to Total DepositTable No 7Showing the Short term Investment and Total Deposit|F.Y. |Short term Investment |Total Deposit |Ratio ||2003 |1653977060 |6,694,963,060 |25% ||2004 |2535657694 |8,063,902,086 |31% ||2005 |2109544852 |10,097,690,989 |21% ||2006 |4180628220 |13,802,444,988 |30% ||2007 |4964427586 |18,186,253,541 |27% ||2008 |4958405544 |23,976,298,535 |21% ||2009 |5948480273 |33,322,946,246 |18% || | |Average |25% |(Source: Annual Report of EBL) Short term investment includes Nepal government treasury bond, Nepal government saving bond, Nepal government other securities, Nepal Rastriya Bank Bond, Foreign securities, Local licensed institution, foreign banks and other investment.
The ratio of short term investment to saving deposit is fluctuating. In the fiscal year 2003 it is 25%. In the fiscal year 2007 it is 27%. In the last fiscal year 2009 it is 18%.Figure No 6Showing the Total Deposit and Short Term Investment[pic]Findings:This shows that the ratio fluctuates over the years. The average ratio of short term investment to total deposit is 25%.V. Total Cash & Bank balance to Total DepositTable No 8Showing the Total Cash & Bank balance and Total Deposit|F.
Y. |Total Cash & Bank balance |Total Deposit |Ratio ||2003 |3523977060 |6,694,963,060 |53% ||2004 |3796657694 |8,063,902,086 |47% ||2005 |3729544852 |10,097,690,989 |37% ||2006 |6571628220 |13,802,444,988 |48% ||sss2007 |7355427586 |18,186,253,541 |40% ||2008 |7962405544 |23,976,298,535 |33% ||2009 |6161371163 |33,322,946,246 |18.50% || | |Average |39.5% |(Source: Annual Report of EBL)Total short term balances includes cash in hand, cash at bank and other financial institution, cash at Nepal Rastra Bank and Short term investments. The ratio of Short term balances to saving deposit is in decreasing trend. The ratio in 2003 is 53% which has decreased up to 18.
50% in the coming year 2009.Figure No 7Showing the Cash and Bank Balance and Total Deposit[pic]Findings:The highest ratio is in the fiscal year 2006. The average ratio is 39.5%2.2.
2 Liquidity RatioLiquidity ratio shows the relationship of a firm??™s cash and other current assets to its current liabilities. Liquidity ratio measures the ability of the firm to meet its current obligations. It shows the shot-term financial condition i.e. weakness and strength of the firm.
For the purpose of evaluating condition in fulfilling current obligation following ratio are calculated. I. Cash and Bank Balance (exe. Money at call) to Current DepositTable No 9Showing the Cash & Bank Balance and Current Deposit|F.Y. |Cash and Bank Balance (exe. m/c) |Current Deposit |Ratio ||2003 |1,869,899,556 |562,394,744 |332.49% ||2004 |1,074,048,154 |719,755,865 |149.
22% ||2005 |1,049,989,208 |1,025,025,340 |102.44% ||2006 |1,552,967,494 |1,145,794,695 |135.54% ||2007 |2,391,420,594 |1,673,983,140 |142.86% ||2008 |2658,168,043 |2,492,346,111 |106.65% ||2009 |6,164,371,163 |4,859,946,758 |126.85% || | |Average |156.58% |(Source: Annual Report of EBL) Cash and bank balance includes cash in hand and total bank balance.
In fiscal year, 2004 the ratio was 149.22%, which was less than last year i.e. 332.
49% and in fiscal year 2006, it was 135.54% which is greater than last year i.e. 102.44%Figure No 8Showing the cash & Bank Balance and Current Deposit[pic]Findings:The current year ratio is 126.85% which has inclined in compare to the last year fiscal year ratio I.e. 106.
65%. The highest ratio is in the fiscal year 2003 i.e.
332.49% and the lowest ratio in the year 2005 i.e. 102.44%.The average ratio is 156.58%.II.
Cash and Bank Balance (exe. Money at call) to Deposit (exe. Fixed Deposit) RatioTable No 10Showing the Cash & Bank Balance to Total Deposit|F.
Y. |Cash and Bank Balance (exe. |Deposit (exe. Fixed Deposit) |Ratio || |m/c) | | ||2003 |1,869,899,556 |3,900,221,133 |47.94% ||2004 |1,074,048,154 |5,165,940,869 |20.79% ||2005 |1,049,989,208 |6,693,732,682 |15.69% ||2006 |1,552,967,494 |9,560,093,219 |16.24% ||2007 |2,391,420,594 |12,559,591,824 |19.04% ||2008 |2658,168,043 |17,530,117,246 |15.16% ||2009 |6,164,371,163 |26,272,968,010 |23.46% || | |Average |22.62% |(Source: Annual Report of EBL)Deposits (exe. Fixed Deposit) includes all the deposit except fixed deposits. In fiscal year 2004 ratio was 20.79%, which lesser than year 2003 and in the fiscal year 2006 ratios, was slightly more than previous year.Figure No 9 Showing the Deposit exe. Fixed Deposit and Cash & Bank Balance[pic]Major findingsThe current year ratio is 23.46% which is the ratio of fiscal year 2009 and the highest ratio is 47.94% which is greatest ratio. The average ratio is 22.62%III. Cash and Bank Balance (exe. m/c) to Total Ratio (Cash reserve ratio)Table No 11 Showing the Cash and Bank Balance and Total Deposit|F.Y. |Cash and Bank Balance (exe. m/c) |Total Deposit |Ratio ||2003 |1,869,899,556 |6,694,963,060 |27.93% ||2004 |1,074,048,154 |8,063,902,086 |13.32% ||2005 |1,049,989,208 |10,097,690,989 |10.40% ||2006 |1,552,967,494 |13,802,444,988 |11.25% ||2007 |2,391,420,594 |18,186,253,541 |13.15% ||2008 |2658,168,043 |23,976,298,535 |11.09% ||2009 |6,164,371,163 |33,322,946,246 |18.50% || | |Average |15.09% |(Source: Annual Report of EBL)The above table shows the cash and bank balance (exe. m/c) to total deposit of the 2003,2004, 2005, 2006, 2007, 2008 and 2009 which are 27.93%, 13.32%, 10.40%, 1.25%, .15%, 11.09% and 18.50% respectively. The lowest ratio is in the year i.e. 11.09% which shows that the bank has invested more in that year.Figure No 10Showing the Cash & Bank Balance and Total Deposit [pic]Major FindingsSimilarly, the highest ratio is in the fiscal year 2003 i.e. 27.93% which shows that the bank had retained the funds. The average ratio is 15.09%.2.3 Statistical AnalysisCalculation of the mean, standard deviation, coefficient of variation, Karl Pearson??™s correlation coefficient between short term balances and Total Deposit.Table No 12Showing the Karl Pearson??™s correlation coefficient In millions|Year |Total Cash and Bank|Total Deposit(Y) |X=x-x | |Y=y-y | || |Balance(X) | | |(x-x)2 | |(y-y)2 ||2003 |3524 |6695 |-2062 |4251844 |-9611 |92371321 ||2004 |3797 |8064 |-1789 |3200521 |-8242 |67930564 ||2005 |3730 |10097 |-1856 |3444736 |-6209 |38551681 ||2006 |6572 |13802 |986 |972196 |-2504 |6270016 ||2007 |7355 |18186 |1769 |3129361 |1880 |3534400 ||2008 |7962 |23976 |2376 |5645376 |7670 |58828900 ||2009 |6164 |33323 |578 |334084 |17017 |289578289 ||Total |?X=39104 |?Y=114143 |?X=2 |?(x-x)=20978118 |?Y=1 |?(y-y)=557065157 |(Source: Annual Report of EBL)Average of Cash & Bank Balance= ?x/n = 39104/7 = 5586 in millionAverage of Total Deposit= ?y/n =114143/7 =16306 in millionTherefore the average of short term balance of EBL, for the last seven years is NRs. 5586 million and the average of Total Deposit of EBL is NRs. 16306 in million.Standard DeviationStandard Deviation of Cash and Bank Balance (? ) =v?(x-X)2/N =v20978118/7 ? ? = 1731.48 in millionStandard Deviation of Total Deposit (?) =v?(y-y)2/N =v557065171/7 ? ? = 8920.80 in millionCoefficient of Variation (C.V.)The coefficient of dispersion based on standard deviation multiplied by 100 is known as C.V. it is independent unit.C.V. of Cash and Bank Balance = ?/x*100% = 1731.14/39104*100% ? C.V.=4.42% . C.V. of Total Deposit = ?/y.100% =8920.8/114143*100% ? C.V.=7.82%2.3.1 Correlation between Total Cash & Bank Balance and Total Deposit of Everest Bank LimitedLet the Total Cash & Bank Balance is denoted by ???X??? and the Saving Deposit by ???Y???.Then,| | | ||(X-X) |(Y-Y) |(X-X)*(Y-Y) ||-2062 |-9611 |19817882 ||-1789 |-8242 |14744938 ||-1856 |-6209 |11523904 ||986 |-2504 |-2468944 ||1769 |1880 |3325720 ||2376 |7670 |18223920 ||578 |17017 |9835826 ||Total | |?(X-X)(Y-Y)=75003246 |And the above calculated S.D. ? for Cash and Bank Balance (? x) =1731.148 ? for Total Deposit (? y) = 8920.80Now, we know that,Karl Pearson??™s correlation coefficient of variation, r =?(x-x) (y-y)/n ?x ?y = 75003246/7*1731.148*8920.80 r=0.687Table No 13Showing the Correlation Variables| | |Cash and Bank Balance |Total Deposit ||Cash and Bank Balance |Pearson correlation |1.000 |0.687 ||Total Deposit |Pearson correlation |0.687 |1.000 | Hence, the correlation between number of loans provided and the amount of loans is 0.687>0. This indicates that the Cash & Bank Balance and the Total Deposit are positively correlated which means when the Cash and Bank Balance increases the Total Deposit also increases.2.3.2 Trend AnalysisUsing the straight line method (assuming it to linear)Let the straight line trend be, Y= a + b X??¦.. (i)Table no 14Calculation of Trend Line|Year |Total Deposit(Y) | X | X? | X*Y |Trend value(Ye) ||2002-03 |6695 |-3 |9 |-20085 |3469 ||2003-04 |8064 |-2 |4 |-16128 |7748 ||2004-05 |10097 |-1 |1 |-10097 |12027 ||2005-06 |13802 |0 |0 |0 |16306 ||2006-07 |18186 |1 |1 |18186 |20585 ||2007-08 |23976 |2 |4 |47952 |24864 ||2008-09 |33323 |3 |9 |99969 |29143 ||Total |?Y=114143 |?X=0 |?X?=28 |?XY=119797 | |Working Note: Since ?X=0 So, a=?Y?N =114143 ?7? a =16306Similarly, b=?XY??X? =119797?28 ?b =4279Now substituting values of ???a??™ and ???b??™ in equation (i)If, x=-3 then, Y=16306+4279(-3) =3469If, x=-2 then, Y=16306+4279(-2) =7748If, x=- 1 then, Y=16306+4279(-1) =12027If, x= 0 then, Y=16306+4279(0) =16306If, x=1 then, Y=16306+4279(1) =20585If, x=2 then, Y=16306+4279(2) =24864If, x=3 then Y=16306+4279(3) =29143Figure No 11Trend Line of Total Deposit[pic]The above figure shows the two different trend lines which are represented by Y and Ye. The line shows the Total Deposit while the line Ye is the representing the trend values which are calculated above. The line representing the Total Deposit is increasing yearly up to final year 2008-09. On the other hand, the line representing calculated trend values is moving straight upward at a shooting rate. From the above calculation it shows that total deposit of the Everest bank limited is increasing trend because of b is positive (i.e. the increment (b) is of 4279 every year). If the value of b is positive then trend is increasing and if the value of b is negative the trend is decreasing that shows the inverse trend.SECTION-IIISUMMARY, CONCLUSIONS & RECOMMENDATION3.1 Summary Nepal being an under privileged country and more than 90% of the people being depended on agriculture, which sector is unable to provide full employment to the people, Nepal government has to activate people in the nations development through overall industrialization of nation. For which development of sound banking system is necessary.Modern commercial bank makes the economy always alive and smart to run and maintain day-to-day commercial, economic and banking transactions. In short, banking transaction helps a country to develop its economic condition swiftly.If there were systematic and scientific programs for economic development, countries like Nepal would have developed its economy as much as those countries which have developed. The whole economy of the under developed countries have been narrowed down.At present, commercial banks including joint venture banks are operating in Nepalese industries. It is remarkable fact that any country cannot have a developed economy in the absence of modern banking system. Because any development works need a sufficient capital and the lack of sufficient capital is also one of the main reasons as to why Nepal has been backward for developing its economy.