MOBILIZATION OF SAVING DEPOSIT OF NABIL BANK

LIMITED

A Project Work Report

By

Name of Student
T.U. Registered Number: ..............................
Name of Campus

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELORS OF BUSINESS STUDIES (BBS)

Bhairahawa

Feb, 2020
 CHAPTER I

INTRODUCTION

1.1 Background of the study

It is very hard to collect the correct information of the origin of bank. The word “Bank” has
derived from the Italian word “Banco” which means accumulation of money of stock. It is
believed that its origin is from the French word “Banque” which means “beach” for keeping,
lending and exchanging of money or coin in the market place by money lenders or money
changers. It is believed that the ancestors of modern banking system were merchants, goldsmiths
and moneylenders. Modern banking sowed its seed in the medieval Italy despite strong Christian
prohibitions against charging interest.

The bank had started in Italy in 12th century as a public bank. The Bank of Venice that was
established in 1158 A.D. was the first bank in the history of banking. Following its
establishment various banks such as Bank of Barcelona, which was established in 1401 A.D was
the second bank of the world. Similarly, Bank of Geneva (1407), Bank of Amsterdam (1609),
Bank of Hindustan (1770) were established. The first central bank was the “Bank of England”
which was established in 1844 AD.

Bank is a financial institution, which is engaged in monitory transaction. Bank has always been
the most importance and largest financial intermediates. Banks collect the scattered money from
public providing those interests and services. This collection becomes the capital for the bank to
invest. “Banking means the accepting of money for the view of lending or investment of deposit
from the public repayable on demand or otherwise and withdraw able by cheque, draft or
otherwise”, is according to Banking Regulation Act 1949 of India. World Bank says “Banks or a
financial institution that accepts funds in the forms of deposit repayable on demand or at short
notice.”

History of Bank in Your Country

In the context of Nepal, like as in the other countries the goldsmith and landlords where the
ancient banker. The Nepalese people were highly exploited by ‘Sahu Mahajan’ by charging
higher interest rate, compound interest rate and even by manipulating the principal amount. The
introducing of ‘Tejarath Adda’ during the tenure of the Prime Minister Ranoddip Sing (1993
B.S.) was the first step towards the institutional development of banking in Nepal. The first
commercial bank ‘Nepal Bank Limited’ was established on 30th Kartik 1994 B.S. and started to
perform proper banking activities. With the realization of central bank to develop monetary
policy as well as to have proper control over commercial banks and banking sectors NRB, the
central bank of Nepal, established in 1956 B.S. under the Nepal Rastra Bank Act 1955 B.S. is
the monetary, regulatory and supervisory authority of banks and financial institutions. The
new Nepal Rastra Bank Act 2002 B.S. which replaces the erstwhile Act has ensured operational
autonomy and independence to the Bank. Likewise, Rastra Banijya Bank under the full
ownership of government was established on Magh 2022 B.S. as per ‘Rastra Banijya Bank Act
2021 B.S.’.

The growths of the banks accelerated only after the adoption of liberal economic policy by
Nepalese Government .This has attracted many new investors and encourage opening many new
modern banks with joint venture of foreign banks. At present there are 7 joint venture banks
operating in Nepal which includes Nabil Bank Ltd. on 29th Ashad, 2041B.S. with joint venture
of National Bank, Bangladesh, Standard Chartered Bank Ltd. on 16th Marg 2043B.S. with its
joint venture of Standard Chartered Grind Lays Bank, Australia &UK, Himalayan Bank Ltd on
5th Marg 2049B.S. with the joint venture of Habib Bank of Pakistan, Nepal SBI Bank Ltd. in
23th Ashad 2050 B.S. with joint venture of State Bank of India, Nepal Bangladesh Bank Ltd. on
23th Jestha, 2051B.S. with the joint venture of International Finance Investment and Commercial
Bank, Bangladesh, Everest Bank Ltd. on 1st Kartik 2051B.S. with joint venture of Punjab
National Bank, India, NMB Bank Ltd. on 20th baishak, 2065 with joint venture of Young Lien
Reality SDN BHD, Malaysia.

Since, the financial sector in Nepal is small, it is growing fast. At present banking system
comprises of NRB, 16 commercial bank and many financial companies, contractual,
saving institution and non- government organization conduction limited banking
activities transaction. The umbrella act set out regulation for licensing, supervision and
cancellation of commercial bank. Currently, the growths of commercial banks are shown below:-
List of Commercial Nepal Bank
1. Kumari Bank
2. Nepal Bank
3. Rastriya Banijya Bank
4. Agriculture Development Bank
5. Nabil Bank
6. Nepal Investment Bank
7. Standard Chartered Bank Nepal
8. Himalayan Bank
9. Nepal SBI Bank
10. Nepal Bangladesh Bank
11. Everest Bank
12. Bank of Kathmandu Limited (After the merger with Lumbini Bank)
13. Nepal Credit and Commerce Bank Limited
14. Prabhu Bank
15. Laxmi Bank
16. Global IME Bank Limited (After the merger with Janata Bank Nepal Limited)
17. Citizens Bank International Limited
18. Prime Commercial Bank
19. Sunrise Bank
20. NMB Bank Nepal
21. NIC Asia Bank
22. Siddhartha Bank
23. Machhapuchchhre Bank
24. Mega Bank Nepal Limited
25. Civil Bank Limited
26. Century Bank Limited
27. Sanima Bank
Introduction of Nabil Bank

A commercial bank is a financial institution which collects saving from many persons and
institutions and provides credit or loan facility to different industrial and commercial business.
Commercial banking business consists of changing cash into hank deposit and bank deposit into
cash, transferring bank deposit form one person or institution to other, giving bank deposit in
exchange for cheques, bills of exchange, government securities etc.

Nepal Bank Limited established in 1994 BS is the first commercial bank in Nepal. Commercial
banks perform various functions. Among them, accepting various types of deposit is the main
function of commercial banks. Commercial banks are directly related with the people and
institution. The commercial bank is an important bank. Its function is very attractive for people.
Although these banks are truly inspired with the objective of gaining profit, these commercial
banks are also established to accelerate common people’s economic welfare and facility to make
available loan to the agriculture, industry, and commerce and to provide the banking
services to the public and the state. In Nepal the commercial bank perform the following
functions. Of the many function of the commercial bank acceptance of deposits is one of them.
The bank allows for opening the three types of accounts to accept deposit for their customers.
They are current, saving and fixed deposit account. People can collect their money in one of the
three as their need. But the interest is given to the saving and fixed account. The commercial
bank performs the important function of accepting all sorts of deposits. It earns profit by
investing that money in another place.

Another function of the commercial bank is to provide loan. A commercial bank provide loan to
a person, company and institution etc. A bank can earn a lot of profit from it. A bank is capable
of gain benefit in its banking development by receiving the interest as pre law and its internal
policies. It provides the loan by accepting the security of debtor. A bank flow the loan
against a third person guarantee or with the pledge of the third person. A bank provides the
loan on basis of agreement or deed of loan. It provides loan on basis of the following deed
securities:

▪ With the pledge of goods, .and pledge of gold and silver.

▪ With the security of immovable property
▪ With the security of other similar goods.
Nabil Bank Limited (Nabil) commenced its operation on 12 July, 1984 as the first joint venture
bank in Nepal, Dubai Bank Limited. Dubai (Later acquired by Emirates Bank International
Limited, Dubai) was the first joint venture partner of Nabil. Currently NB (international) limited.
Ireland is the foreign partner. Nabil Bank limited had the official name Nepal Arab Bank Limited
till 3lst December 2001. Nabil is the pioneer in introducing aims innovative products and
marketing concept in banking sector of Nepal with 15 branches and 2 counters in all major
cities. It is the only bank having its presence at Tribhuvan International Airport of the country.
Also, the number of outlets in the country is the highest among the joint venture and private
banks operating in Nepal. Success of Nabil is a milestone in the banking history of Nepal as it
paved the way for the establishment of many commercial banks and financial institutions.

Nabil, as a pioneer in introducing many innovative products and marketing concepts in the
domestic banking sector, represents a milestone in the banking history of Nepal as it started an
era of modern banking with customer satisfaction measured as a focal objective while doing
business. Operations of the bank including day-to-day operations and risk management are
managed by highly qualified and experienced management team. Bank is fully equipped with
modern technology which includes ATMs, credit cards, state-of-art, world-renowned software
from Infosys Technologies System, Banglore, India, Internet banking system and Telebanking
system. Nabil provides a full range of commercial banking services through its outlets spread
across the nation and reputed correspondent banks across the globe. Moreover, Nabil has a good
name in the market for its highly personalized services to the customers. At the time of
commencement it had Rs. 100 million as Authorized Capital.

1.2 Statement of Problems

As we know that the main objective of any business organization e.g. Bank is profit
maximization. Deposit mobilization is the key factor to attain this objective: therefore, if the
bank fails to employ its funds suitably it is not possible to maximize profit. A bank has to make
decisions with a framework of statutory requirements of credit regulation by center bank, as well
as the national objectives that are determined in the matter of the provision of credit from time to
time. What is the trend of risk and return pattern along the studied time horizon?
The problems of the of Nabil Bank related to saving and deposits are as follows.

 What is the real and adjusted nature of EPS, BVPS etc.?

 Is Nabil Bank common stock really suitable for investment?

 What is nature of ROE, EPS, P/E ratios growth is equity etc?

1.3 Objective of the study

The main objective of the study is to fulfill the partial requirement of T.U to complete BBS
project. The objective of this fieldwork is to analyses deposits collected in NABIL. The study
intends to present a brief and clear picture of deposit and its utilization. The objective of the
study includes.

 To find out deposit trend of NABIL bank.

 To analyses the cost of deposit

 To analyses whether the deposits are being properly utilized or not

1.4 Rational of the study

Deposit collection is the major function of all commercial banks, which help to carry out almost
all transaction of the bank. Mostly among the various deposit features provided by commercial
banks, fixed and saving deposit are considered to be more important In the case of term deposit
although the banker pay interest (longer the period higher the interest).

 To find out the position of Nabil Bank

 To find out the strength and weakness of Nabil Bank

 To find out the marketing style and public relation of the bank.

1.5 Report Structure

This study has been comprised into three sections, each devoted to some aspects of deposit
analysis of commercial banks (Nabil bank ltd). The titles of each of these sections are
summarized and the contents of each of these chapters of this study are briefly mentioned here.
Chapter 1 : Introduction / Background
Chapter 2 : Related Literature Review
Chapter 3 : Methods
Chapter 4 : Results and findings
Chapter 5 : Discussion and Conclusion
The first section deals with the subject matter consisting General Background, Nature of the
Study, Objectives of the Study, Methodological Aspects, Limitations of Study. The second
section is concerned with nature of study Related literature review. The third section concerned
with the researches methods of the study. The fourth section results and findings and
presentation of data through tables, diagrams for five years. The fifth section discussions and
conclusion the reference is incorporated at the end of the study.
 CHAPTER II

LITERATURE REVIEW

2.1 Conceptual Review

Deposit collection is one of the main features of commercial bank. A commercial bank receives
deposit in different accounts namely current, fixed and saving. These are the direct deposits.
When a bank receives cash it grants a right to the depositors to withdraw it whenever they like
Nepal Banijya Bank Act has regulated all the deposit 2031. The act specifies “Deposit” means
amount deposited in current, fixed and saving deposit account of bank or financial institutions.
Among many functions of a commercial bank the main function is deposit function, which all the
commercial banks perform, in simple terms; deposit is a function of collecting surplus from
savers.

Conceptual Framework: Funds Allocation and Saving Deposit Mobilization.

Investment

Loans and Advances

Deposit

Assets Purchased
Banks are majorly determined by the conceptual framework namely investment, loans
&advances and the asset purchased. This variable has the significant impact on the deposit
mobilization mechanism and practices of the banks which in turn influences the performance.
This study is based upon above mentioned deposit variable in order to explain the relationship
between the variables and the performance of the banks under study.

Investment

Commercial banks are those which collect the immobilized capital from public, organizations
etc as deposits and invest these capitals in different sectors like business, industries, and services
etc, which fulfill the demands of capital in these sectors. Banks invests its fund in different
banking activities and different fields. Many types of fields are shown in market for investment
(Smith, 1993). But banks invest its funds in profitable and safety activities. Bank invests its
funds in the various possible sectors such as share and debenture, government securities and joint
venture. Share a unit of ownership interest in a corporation or financial asset. While owning
shares in a business does not mean that the shareholder has direct control over the business’s
day-to-day operations, being a shareholder does entitle the possessor to an equal distribution in
any profits, if any are declared in the form of dividends (Brennan et al., 2011). The two main
types of shares are common shares and preferred shares. Likewise, a debenture is an unsecured
loan one offer to a company. The company does not give any collateral for the debenture, but
pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the
debenture holders are paid later than bondholders. Debentures are different from stocks and
bonds, although all three are types of investment. Government securities are the securities issued
by the government to raise the funds necessary to pay for its expenses. Treasury bills, debt
restructuring bills, government bonds, and government saving bonds are an example of
government securities.

Loan and Advance

While at any given moment some depositors need their money, most do not. That enables banks
to use shorter-term deposits to make longer-term loans. The process involves maturity
transformation- converting short-term liabilities (deposits) to long term assets (loans). Banks pay
depositors less than they receive from borrowers, and that difference accounts for the bulk of
banks’ income in most countries. Banks can complement traditional deposits as a source of
funding by directly borrowing in the money and capital markets. They can issues securities such
as commercial paper or bonds; or they can temporarily lend securities they already own to other
institutions for cash- a transaction often called a repurchase agreement (repo). Banks can also
package the loans they have on their books into a security and sell this to the market (a process
called liquidity transformation and securitization) to obtain funds they can relend (Abraham and
Harrington, 2011). A bank’s most important role may be matching up creditors and borrowers,
but banks are also essential to the domestic and international payments system and they create
money. Not only do Individuals, businesses, and governments need somewhere to deposit and
borrow money; they need to move funds around- for example, from buyers to sellers or
employers to employees or taxpayers to governments. Here too a bank plays a central role. They
process payments, from the tiniest of personal checks to large-value electronic payments
between banks. The payment system is a complex network of local, national and international
banks and often involves government central banks and private clearing facilities that match up
what banks owe each other. In many cases payments are processed nearly instantaneously. The
payments system also includes credit and debit cards. A well-operating payments system is a
prerequisite for an efficiently performing economy, and breakdowns in the payments system are
likely to disrupt trade- and therefore, economic growth- significantly (Bhandari, 2010).

Asset Purchased

A long-term tangible piece of property that a firm owns and uses in the production of its income
and is not expected to be consumed or converted in to cash any sooner than at least one year’s
time. Banks purchases fixed assets such a land & building, furniture and fixtures, computer
software etc for the commencement of the business. Likewise, banks keep on increasing its
assets volume or bases during for the branch expansions.

2.2 Review of Previous Works

Bank accepts deposit from those that can save but can’t utilize profitably. People know that by
depositing in the bank they could avail with many more facilities. By saving in the bank people
have the opportunity of earning interest, useful contingencies; avoid risk such as theft lost
accidents, the deposit of commercial banks is increasing because people know its importance. So
banks accept money on current saving and fixed deposit accounts. Deposits are the main source
of capital for the lending activities of the banks. Banks utilize efficiencies to attract more
deposits to increase credit activities. Deposits are withdraw able according to the terms of
contract with the depositors to attract the people. The bank maintains different types of deposit
accounts.

According to Commercial Bank Act, the saving account means an account of amounts deposited
in a bank for savings purposes.

Saving Account are generally opened for the savings of customers (individuals, nonprofit
organization, charitable trusts, clubs, associations and cooperative) who want to save for meeting
future needs, Savings accounts is suitable for the customers who do not want to withdraw
frequently or who do not want to keep certain amount for fixed long period.

2.3 Research Gap

Various studies have been conducted in the past on financial analysis of commercial banks in the
US and other regions were found done. The research paper done in the context of Nepal mainly
emphasized on liquidity, profitability and leverage of the commercial banks. These studies lack
micro-level analysis and found applying traditional analysis of financial performance. In the
context of Nepalese banking environment, there are few academic researchers found conducted
in the frame work. However these researches lack analysis of the component i.e. Sensitivity of
Market Risk. This study attempts to evaluate financial performance of Himalayan Bank Ltd and
NABIL Bank Ltd..
 CHAPTER III

METHODOS

3.1 Research Design

The research methodology is the process of arriving to the solution of the problems through
planned and systematic dealing with the collection, analysis and interpretation of facts and
figures. As the research entirely considers about the about “Deposit Analysis of NABIL Bank”
The main purpose of this study is to show deposits and its utilization in NABIL with its financial
positions, collection and uses of funds, its prospects and its position in context of Nepal as well
as to recommended suggestions for its improvement. Those research methodologies have been
used which proves helpful to deposit analysis. For the purpose of achieving the objective, the
following methodology is used. The data has been collected by acquiring various kinds or
reposts, bulletins and journals from the organization. Similarly data has been acquired from NRB
also.

The study report is based mostly on secondary information of NABIL. In addition to this,
reference has been made in library consult, class lectures, Related books of banking, financial
management and accounting during the preparation of this study.

3.2 Population and sample

The 27 commercial banks of the country Nabil Bank Ltd has been chosen and their performances
have been analyzed. Due to Lack of Penal access study mainly depends on the balance sheet
prepared by Nabil Bank Ltd, which is the secondary source. Nabil Bank Ltd has been selected
for the present study. Financial statement of this bank for the last five years has been taken as the
sample for this purpose.

3.3 Type of Data

For the preparation of this report different kinds of books are followed. In this report, all the data
collected is secondary in nature. Almost all the data has been collected form published annual
reports, brochures etc. Mostly all the data are collected from the concerned bank.
Secondary Data Source:

In this study, the main source of data is secondary which are collected from pre-published data
sources. The financial data from the published documents and audited financial statements were
manually extracted into the computer files of Microsoft Excel program which acted as master
database file. The data was refined further into spreadsheets to carry out financial
ratio calculation and graphical illustrations through mathematical functions and Chart program of
the Excel program.

3.4 Data Collection Procedure

The data collected from the above stated sources has been classified tabulated and interpreted for
easier study. The data collected are classified, tabulated and arranged in manner to make it easily
understandable with the use of tables in chronological order. After classification the data is
tabulated.

3.5 Instrument

Statistical methods are the mathematical techniques used to facilitate the analysis and
interpretation of numerical data secured from groups of individuals or groups of observation
from a single individual. The figures provide detail descriptions and tabulate as well as analyze
data without subjectivity but only objectivity.

Formula:-

Current deposit to total deposit ratio = Current deposit / total deposit

Saving deposit to total deposit ratio = Saving deposit / total deposit
Fixed deposit to total deposit ratio = Fixed deposit / total deposit

3.6 Techniques of Analysis

Financial ratios are the major tools used for the descriptive analysis of the study. In addition to
the financial tools, simple statistical tools are also used.
Financial Ratio Analysis tools are used to determine the performance of the banks in the
framework components. These ratios are categorized in accordance of the components. The
different tools brought up to prepare final report are as follows:-

i) Tables

ii) Bar diagrams

iii) Average

iv) Percentage

v) Financial ratios

3.7 Limitation of the study

The study does not present detailed analysis of deposit in NABIL due to lack of time relevant
data and resources. This study is limited to the information that was available from the bank and
other sources.

 Annual reports of NABIL

 Annual reports of NRB

 This study only covers the data of five years only.

 The study is based only in secondary data so it may contain reporting errors.

This includes all sources used in the study, using APA format for citation.
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Annual Report of NABIL from 2015 to 2019

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Dryden Press, 1998.

Ghimire, Shiva Raj (2011) “Fundamentals of Investment”: Kathmandu:

Khadka, Sherjung. (2011), “Banking and Insurance”. Kathmandu: Asia Publication.

Khan, M.Y. and Jain P.K., “Management Accounting”, New Delhi: McGraw Hill Publishing
Co. Ltd.

Khan, M. Y. and P.K., “Financial Management Policy”: New Delhi: McGraw Hill Publishing
Co. Ltd., 1978.

Pradhan, Radhe S (2009). “Financial Management": Kathmandu: Buddha Academic

Enterprises Pvt.Ltd: Nepal

Shrestha, M.K. and Bhandari, D.B (2010), “Financial Markets and Institution”. Asmita
Publication, Bhotahity, Kathmandu.

Singh, H.B. (2008), “Banking and Insurance”. Kathmandu: Asia Publication.

S.P. Gupta,”Statistical Method”.

Tiwari, Drona Prasad (2008). “Business Statistics”: Chabahil: Srijana Books Publishers and
Distributors

Van Horn James C.,“Financial Management Band Policy”: New Delhi Prentice Hall of India
Pvt. Ltd., 1986.

Van Horn James C.,“Fundamental Financial Management”: U.S.A. Prentice Hall Inc. Engle
Wood Cliff, 1983.

Website:

www.nabilbank.com

www.nrb.org.np