How to Write Internship Report in Bachelors of Business Administration (BBA)
Note: This report is only for sample purpose. This will guide BBA students on successfully writing the report. This report is for students of Tribhuvan University, Kathmandu University, Pokhara University, Purbanchal University.
CHAPTER-I
INTRODUCTION
- Background Of The Study
Investment policy is the plan that directs an investor’s effort towards goals. Without it, an investor is likely to pursue inefficient approach that lead to unsatisfactory results. It is a combination of philosophy and planning as it expresses the investor’s attitude towards important investment management issues. It is the set of guidelines and procedures the directs the long term management of the investor’s assets. It delineates the investor’s specific goals and how s/he expects to achieve them.
An investment policy is any government regulation or law that encourages or discourages investment in the local economy. Investment policy in many nations is tired to keep local assets in local investments, in exchange for a substantial investment in a business that will create jobs there. (www.fiscalreference.com)
The initial step an investing policy involves is determining the investment objectives and the amount of one’s investable fund. Investment is always related with risks and returns. Making money alone cannot be an appropriate objective. It is appropriate to state that the objectives are to make a lot of money by recognizing the possible losses. Therefore, investment objective should be stated in terms of both risks and returns. Settings a clear investment policy also involves the identification of the potential categories of financial assets for consideration in the ultimate portfolio. The identification of assets depends upon many things, such as investment objectives, investment fund, tax consideration etc.
Investment is very risky job for a purposeful, safe and profitable investment. Bank must follow sound investment policy. The fundamental principle of investment must be followed thoroughly for profitable investment. Investment policy should ensure maximum amount of investment to all sectors with proper utilization. There is highly liquidity in the market and it seems no profitable place to invest these days. Investment policy provides the bank several inputs through which they can handle their investment operation efficiently ensuring the maximum return with minimum risk, which ultimately leads the bank to the path of success to achieve its organizational objectives of shareholders’ wealth maximization.
1.2 Profile of Everest Bank Limited
Everest Bank Limited (EBL) started its operations in 1994 with a view and objectives of extending professionalized and efficient banking service to various segments of the society. The bank is providing customer-friendly services through Anywhere Branch Banking System (ABBS), which enables customer for operational transactions from any branches.
With an aim to help Nepalese citizens working abroad, the bank has entered into arrangements with banks and finance companies in different countries like U.A.E., Kuwait, Bahrain, Qatar Saudi Arabia, Malaysia, Singapore and U.K. Bank has set up its representative offices at New Delhi (India) to support Nepalese citizen remitting money and advising banking related services.
Everest Bank Limited (EBL), one of the leading banks of Nepal commenced its operation in 1994. Its head office is situated in Lazimpat, Kathmandu Nepal which regulates all its branches. The bank has 45 branches, 55 ATM counters and 21 Revenue collection counters across the country. It has objectives of extending professionalized and banking services through the country. EBL has joint venture partner with Punjab National Bank that is holding 20% equity in the bank and turned it around to a highly profitable bank. Punjab National Bank (PNB) is third largest bank in india which offers a wide variety of banking services.
This bank has been steadily growing in its size and operation. For its excellence in banking service, the bank has been confirmed with “Bank of the year 2006, Nepal” by the banker, a publication of Financial Times, London. Similarly, the bank bestowed with the “NICCI Excellence Award” by Nepal India chamber of commerce for its spectacular performance under finance sector.
Drawing its strength from its joint venture partner, EBL has been steadily growing its size and operation. The bank is providing customer friendly services through a network of 27 branches across the nation. The main branches of EBL are situated in Baneshwor, Kathmandu. Furthermore, the bank has branches in Teku, Pulchowk, Balaju, Lazimpat, Pokhara, Janakpur and Biratnagar amongst several other places/cities.
1.3 Objectives
A project work is a systematic study of specific situation in financial organization. The main objective of the project work report is to fulfill its partial requirement of which is designed by the faculty of management. Its objectives of the study are:-
- To analyze the leading policies and deposit and investment trends of the sample bank EBL.
- To explore the impact of loan and advances and deposit mobilization in total investment of EBL.
- To evaluate the investment decisions of EBL in the context of existing regulation.
1.4 Rationale
The needs and importance of this study has been felt for some important reasons.
- The economic development of any country depends upon the effective mobilization of the available funds which are collected from reliable sources.
- Investment is a backbone of economic development.
- The study of investment policy help to improve the situation and correction can be made accordingly.
- It helps to add the existing literature of the Nepalese financial management, particularly to the literature of investment policy management in the Nepalese context.
- The study has also practical significance. The finding and conclusion of the study can be used by management of bank as guide in the financial and investment policy management of the bank.
- The government for making policy regarding joint venture banks and used by teacher and students as reading materials.
- In case of investment alternatives and portfolio management, there are so many alternatives like commercial and industrial sector, agriculture sector, deprive sector, manufacturing and trading sector and other productive sector and other productive sector under the regulations of NRB. From this study commercial bank come to know, how to cope their portfolio so that the risk can be minimizes and return can be maximized.
1.5. Conceptual review:
Investment
Investment is nothing but deploying our saving in a manner that ensures safety of our money and provides a sustained return to supplement our regular income. The term investment covers a wide range of activities. It is commonly known fact that an investment is only possible where there is adequate saving. If all the incomes and saving are consumed to solve the problem of hand to month and to the other basic needs, then there is no existence of investment. Therefore, both saving and investment are interrelated.
Investments are made in assets. Assets in all are of two types, real assets (land, building, factories, etc). These two investments are not competitive but complementary. Highly developed institutions for financial investment greatly facilitate real investment. A number of definitions regarding investment are available. But we can simply say that investments are the use of disposable funds with a view to achieving additional income or growth in value.
Principles of Sound Lending and Investing policy
Some of the principles of sound lending and investment policies which the banks have to keep in mind are mentioned below:
- Safety and Security
While selecting the sectors for investing the funds a bank should be very much conscious regarding the safety and security of its funds. It should never invest in securities, which are too volatile because a little difference may cause a great loss. Similarly, the businessman who is expected to be bankrupt at once or earn a million in a minute should not be financed at all. The banks must invest its funds in legal securities only. The bank should accept those types of securities, which have market abilities; ascertain ability, stability and transferability and it also should accept those securities, which are commercial, durable and of high market prices. For the safety and securities in investing funds the bank can use the investment portfolio tools also.
- Liquidity
Liquidity generally refers to the cash or any assets that can be converted in to cash immediately. Generally, people deposit money in the bank under different account with confidence that bank will repay their money whenever it is needed. It order to maintain the confidence to depositors, the bank must always be ready to meet the current or short-termobligationwhen theybecome due for repayment. Liquidity is the capacity of bank to pay cash against deposits. Hence, the liquidity position of a bank is such an important factor.
- Profitability
Commercial banks invest on those sectors from where more and more return can flow, through maximizing the return on its investment; bank can maximize its volume of wealth. Hence, the investment of granting loans and advances by them are highly influenced by the profit margin. Generally the profit of commercial bank depend upon the interest rate of the bank, volume of loan provided, time period of loan and nature of investment on different securities. Profitability is only the term, which always motivated commercial banks to invest its money more and more.
- Suitability
A bank should always know why a customer is in need of a loan. If a borrower misuses the loan granted by the bank, he will never be able to repay the loan and bank will possess heavy bad debts. Therefore, in order to avoid such circumstances advances should be allowed to select a suitable borrowers and it should demand all the essential detailed information about the scheme of the project. Bank must keep in mind the overall development plans of the nation and credit policy of the bank.
- Diversification
The bank should be careful that while granting loan; it should not be invested in one sector only. To minimize profit, a bank must diversify its investment on different sectors. Diversification of loan helps to sustain loss according to law of average because if investment in securities of a companies are made. In this way, the loss can be recovered.
Sources of funds for the investment
There are different sources of funds for the investment of the bank:
- Capital
Capital is the lifeblood of the trade and commerce. Capital is needed for the operation of the bank as in other business. But it is only a nominal source. Still it can be used for the investment purpose. The capital fund consists of two elements like:
- Shares
- General Reserves
- Shares
Sources of fund to invest. By increasing the issue of shares, the bank can increase its capital.
- General Reserves
The bank is required to assign certain percentage of its profit to the reserves. This reserve is also invested.
- Accumulated profit
When there is a need of more funds for investment, the bank can retain the accumulated profit. The bank invests its accumulated profit.
- Deposit
Deposits are the main sources of funds. By providing certain rate of interest, commercial banks call for the deposit from the customer. Mainly, banks accept three types of deposits i.e. current deposit, fixed deposit, saving deposit. These different types of deposits are used for lending the money to different sectors like agriculture, productive work, trade, irrigation and industry. The deposits will lead to increase in the working capital of the bank.
- External and Internal
The funds can be collected by borrowing money through different banks or different institution. In a developing country like Nepal, borrowing is very important. The commercial bank may not have sufficient fund to invest in different sector. In that case it has to borrow from other bank or other institutions. Generally the commercial bank borrows from two sources i.e. external and internal. Generally external borrowing means the borrowing from foreign banks, and foreign government. Internally, the commercial bank borrows mainly from Nepal Rastra Bank. So the commercial bank cannot provide loan or investment without the funds. From the above different sources of fund the commercial bank grant loan.
Evaluating Investment risk
The investment risk involved in purchasing securities can be evaluated either on an individual basis or in the context of total asset portfolio basis of the bank. Therefore, both security specific and portfolio considerations should be taken into account to understand the risk of investment securities.
- security specific risk
This risk includes the individual risk that affects the return from the individual securities. Securities specific risk includes default risk, price risk, marketability risk and call risk.
I. Default risk
Default risk is the risk that a security issuer will default on making its promised interest and principal to the buyer of a security. The higher the default risk, the higher the interest rate that will be demanded by the buyer of the security to compensate him/her for this default (or credit) risk exposure. Not all securities are default risk.
II. Price risk
Price risk refers to the inverse relationship between the movement in interest rates and the change in price of securities. The longer the duration of a bond, the greater its price risk (i.e., the percentage change in the price of a security can be estimated as the negative of duration times the expected changes in interest rates divided by the quantity one plus the current level of interest rates.
- Marketability Risk
The Marketability feature of security refers to the securities that can be sold on short notice without a significant price concession. Thus, there are two dimensions to a security’s marketability: the time required to sell the security and the price realized from the sale relative to the last quoted price. If a long period of time, a high transaction cost, or a significant price concession is required to dispose of a security, the security has poor marketability and generally is not considered suitable for inclusion in a marketable securities portfolio.
- Call Risk
The cash flow risk resulting from the possibility that a callable bond will be redeemed before maturity. Callable bonds can be called by the company that issued them, meaning the bonds have to be redeemed by the bondholder, usually so that the issuer can issue new bonds at a lower interest rate. This forces the investor to reinvest the principle sooner than expected, usually at a lower interest rate.
- Portfolio Risk
A portfolio is simply a collection of investment vehicles in two or more than two financial assets to meet a common investment goal. Principles of portfolio planning are based on the nation that investors who hold portfolios can reduce risk, often to a level below that of any of the individual investments in insolation, without sacrificing returns. Different investors have different objectives for their portfolios. The primary goal of a growth oriented portfolio is long term price appreciation. An income oriented portfolio stresses current dividend and interest returns.
- Inflation Risk
The chance that changing prices levels within the economy will adversely affect investment returns is inflation risk or purchasing power risk. Specially, this risk is the chance that generally rising prices (inflation) will reduces purchasing power- the amount of a given commodity that can be purchased with a rupee.
- Review of Previous work
- Yadav, S.(2073), in his study paper on “investment Policy of Rastriya Banijya Bank LTD.” Has concluded that most of the banks are concentrated on compliance with Rastra Bank’s rules on reserve requirements credit allocation (investment decision) and interest rates.
- While analyzing loan portfolio quality, operating efficiency and soundness of bank investment management has largely been overlooked.
- He further adds that mismanagement in financial institution has involved inadequate and over optimistic loan appraisal, high risk diversification of loan portfolio and investments, high risk concentration, related parties lending etc. are major causes of investment and loan that has gone bad.
- Shrestha, J.(2072), in her study paper, “investment Policy to make an analysis of contribution of commercial bank lending to the gross domestic product (GDP) of Nepal.
- In research methodology, she has considered GDP as the dependent variable and various sectors of viz.
- Agriculture, industrial, commercial service and general multiple regression technique has been applied to analyze the contribution.
- Research Methodology
Research methodology is a systematic way to the research problem. Research methodology describes the methods and process applied in the entire study. It counts on the resources an technique available and to the extent of there reliability, validity
1.6.1 Research Design:
Research design is the plan, structure and strategy of investigation convinced so as to obtain answer to research question and to control variance. The research design allows the researchers to take an appropriate measure and direction towards the predetermined goals and objectives. The research design is analytical and descriptive in nature. Research design is a plan, structure and strategy of investigation.
- Population and Sample:
Commercial banks in Nepal are playing vital roles to collect money in the state. Nepal has many nationalized and private banking ventures. There are 27 commercial banks of Nepal. There are enlisted 28 lists of licensed commercial banks of Nepal.
In additional to this, there are now, 33 development banks, 24 financial companies and 72 micro-credit financial institution established in Nepal. These banks have played significant roles in creating banking habit among the people, widening area and business communities and the government of various people. Out of them Everest Bank Ltd. Is one of the largest Network banks of Nepal? This is a case study of EBL.
1.6.3 Sources of Data
Secondary Data
The data which are originally collected but obtained or unpolished sources are known as secondary data. These data are not original in character. The sources helping as secondary for the preparation of this project work are published book by bank, official records, newspaper and unpublished sources.
This report is based on secondary data like annual report, other published data of bank.
- Data Collection Procedures
Since the entire project is bsed on the variables and factors influencing financial decision of the Nepal bank ltd, the secondary data have been used. Even through some primary data were collected through personal objectives, visit to the bankers and response from questionnaries distributed. The data required for the purpose is directly obtained from the financial statements of concerned banks.
All the secondary data are complied, processed and tabulated in the times series as per need and objective. Formal and Informal talks with the staffs and authorities of the bank were also helpful to achieve the additional information of the related problem. The sources of data collections are as follows:
- Annual financial reports of EBL
- NBL’s publications i.e. Banks news, Bio-annual journal, etc
- Annual budget of EBL
- Unpublished records of Nepal Bank
- Magazines and Newspaper
- Banks websites (i.e. www.EBL.com.np)
- College Library Youth Campus, Janakpurdham
1.6.5 Data Analysis Tools and Technique
Data analysis is the process of gathering, arranging, classifying, modeling and analyzing the data with the purpose of gathering useful information.
Data analysis is a process of gathering, modeling and transforming data with the goal of highlighting useful information, suggestion, conclusion, and supporting decisions making. Data analysis has multiple facts and approaches, encompassing, diverse technique under a variety of names in different business, sciences, and social sciences domain. The following tools will be used in this study.
1.6.5.1 Financial Tools
Financial ratios are calculated to evaluate the liquidity position of the bank. It is the relationship between financial variables contained in the financial statement (i.e. Balance sheet, Profit and Loss account and income statements). It helps the related parties to spot out the financial strength and weakness of the firm. There are several financial tools, which can be applied in order to analyze the deposit collection and mobilization of commercial banks. In this study following financial tools are used.
- Liquidity Ratios
Liquidity ratios measure a firm’s ability to pay its short-term obligation out of current or liquid assets. These ratios focus on current assets and current liabilities. They are used to ascertain the short-term solvency of a firm. The ratios used to test the liquidity of a bank are as follows:
- Current ratio
The ratio between current assets and current liabilities is known as current ratio. Higher the current ratio better is the liquidity position. This ratio measure the bank’s short term solvency i.e. its ability to meet short-term obligation. It can be expressed as follows:
Current Ratio=Total current assets
Total current liabilities
- Cash and Bank Balance to Total Deposits Ratio(Cash Reserve Ratio)
Cash and bank balances are the most liquid current assets. This ratio majors the percentage of most liquid fund with the bank to make immediate payment to the depositor. This ratio is calculated by dividing the cash and bank balance by the amount of total deposit. It is expressed as follows.
Cash Reserve Ratio=Cash and Bank Balance
Total Deposit
- Cash and Bank Balance to Current Assets Ratio
This ratio measures the proportion of most liquid assets i.e. cash and balance among the total current assets of the bank. Higher ratios show the bank’s ability to meet its demand for cash. It is expressed as:
Cash and Bank to = Cash and Bank Balance
Current assets Ratios Current Assets
- Loan and Advance to Current Asset Ratio
Loan and Advance to current asset ratio shows the percentage of loan and advances in the current assets. It is expressed as:
Loan and Advance to = Loans and Advances
Current asset ratio Current Assets
- Asset Management Ratio (Activity Ratio)
Activity ratios are employed to evaluate the efficiency with the firms managers and utilizes its assets. Assets management ratio measures how efficiently the bank manages its resources. The following ratios are used under assets management ratio.
- Loan and advances to Total Deposit Ratio
This ratio is calculated to find out that which bank are able to utilize their total deposits on loan and advances for profit generating purpose. This ratio can be expressed as:
Loan and Advances to Total = Loan and Advances
Deposit ratio Total deposit
- Total Investment to Total Deposit Ratio
This ratio implies the utilization of firm’s deposit invested in government securities and share and debentures of other companies and bank. It is expressed as:
Total Investment to total deposit ratio= Total Investment
Total Deposit
- Loan and Advance to Working Fund Ratio:
Loan and advance indicates the ability of any bank to canalize its deposit in the form of loan and advance to earn high return. It is expressed as:
Loan and Advance to Working = Loan and Advances
Fund ratio Working Fund
- Profitability Ratios
The profitability ratios are calculated to measure the operating efficiency of a company. It is the indicator of the financial performance of any institution. This implies that higher the profitability ratio, better the financial performance of the bank and vice versa. The following ratios are used to calculate profitability ratios.
I. Return on Total Working Fund Ratio
This ratio measures the overall profitability of all working funds i.e. total assets. A firm has to earn satisfactory return on assets or working fund for its survival. It is expressed as follows:
Return on Total Working Fund Ratio = Net profit
Working fund
- Return on Loan and Advances Ratio
This ratio indicates how efficiently the bank has employed its resources in the form of Return on loan and advances. It is expressed as:
Total interest earned to =Total interest earned
Total working fund ratio Total working fund
- Total Interest Earned to Total Working Fund Ratio
This ratio is calculated to find out the percentage of interest earned to total assets (working fund). Higher ratio implies better performance of the bank in terms of interest earning on its total working fund. It is expressed as:
Total Interest earned to = Total interest earnedworking Fund Ratio Total working fund
IV. Total Interest Paid to Total Working Fund Ratio
This ratio is calculated to find out the percentage of paid on liabilities. With respect to total working fund. It is expressed as:
Total Interest Paid to = Total interest earned
Total Working Fund Ratio Total working fund
- Risk Ratios
Risk taking is the prime business of bank's investment management. It increases effectiveness and profitability of the bank. These ratios indicate the amount of risk associated with various banking operations, which ultimately influences the bank's investment policy. The following ratios are used to calculate risk ratios.
- Liquidity Risk Ratio
Liquidity risk ratio measure the level of risk associated with the liquid assets i.e. cash, bank balance etc. that are kept in the bank for the purpose of satisfying the depositor’s demand for cash. Higher the ratio, lower is the liquidity risk. It is expressed as:
Liquidity Risk Ratio= Total Cash and Bank Balance
Total Deposit
- Credit Risk Ratio
Credit risk ratio measure the possibility that loan will not be repaid or the investment will deteriorate in quality or result in loss to the bank. By definition, it is expressed as the percentage of non-performing loan to total loan and advances. It is expressed as:
Credit Risk Ratio= Total Loan and Advances
Total Assets
- Capital Risk Ratio
Capital risk ratio indicates how much assets values may decline before the position of depositors and other creditors. The capital risk is directly related to the return on equity (ROE). Higher the ratio, low is the capital risk. It is expressed as:
Capital Risk Ratio = Capital (Paid up + Reserves)
Risk Weighted Assets
- Limitations
Various problems and challenges are to be faced during the preparation of project work report. The limitations of study are as given below:
- The study is based on the secondary data for technical and fundamental analysis.
- The five years data is available in continuous form for creating this report.
- Lack of knowledge and experience.
- Non availability of right person at right time.
- There are 28 commercial banks in Nepal. But this study is not include the entire commercial banks. It includes only one bank i.e. EBL
- This study is partial fulfillment for the degree of BBS 4th year to obtain 50 marks.
- This study is fully based on student’s financial resource and can be carried out within the limited time.
CHAPTER-II
Result and Analysis
In this chapter an attempt has been made to analyze and evaluate major financial items, which have an Impact on investment management and fund mobilization of Everest Bank Ltd. Number of financial ratios that are crucial in evaluating the fund mobilization of commercial banks have been calculated and analyzing in this chapter. After this, the investment policy of the banks has been explored.
2.1. Data Presentation and Analysis of Results
We have tried to analyze and evaluate those major financial items, which are mainly related to the investment management and fund mobilization of EBL. The ratios are designed and calculated to highlight the relationship between financial items and figures. It is a kind of mathematical procedure to derive relationship between two or more variables. The important financial ratios, which are to be calculated for this study, are as follows:
TABLE: 1
CURRENT ASSETS TO CURRENT LIABILITIES RATIO Of EBL ON FY
2073/74 to 2077/78
| Fiscal year | Current Assets (in Rs) | Current Liabilities (in Rs) | Ratio |
| 2073/74 | 33348051377 | 103882257046 | 0.21 |
| 2074/75 | 34248379017 | 101580548929 | 0.19 |
| 2075/76 | 53046388907 | 148121950785 | 0.11 |
| 2076/77 | 18501880690 | 16639770076 | 0.51 |
| 2077/78 | 16868473763 | 15105080198 | 0.76 |
Source: Annual report of EBL
Note: Current Ratio = Total Current Assets
Total Current Liabilities
Where,
Current assets= Cash balance+ Balance with NRB+ Balance with BFIs+ Money at call and short notice
Current Liabilities= Deposits+ Bills payable + Proposed dividend+ Income tax liabilities+ other liabilities
From the above table and graph, current ratio is 0.21, 0.19, 0.11, 0.51 and 0.76 on FY 2073/74 to 2077/78 respectively. In the FY 2073/74 current ratio is 0.21 but it is decreased to 0.19, 0.11 on FY 2074/75 and 2075/76 respectively. But again it is increased to 0.51 and 0.76 in FY 2076/77 and 2077/78 respectively, which shows that liquidity position of the bank is not effective.
Graphical presentation of current asset to current liabilities of EBL on FY
2073/74 to 2077/78
Figure: 1
TABLE: 2
CASH AND BANK BALANCE TO TOTAL DEPOSIT RATIO OF EBL ON FY
2073/74 to 2077/78
| Fiscal year | Cash and Bank balance(in Rs) | Total deposit (in Rs) | Ratio (%) |
| 2073/74 | 21383490030 | 95094461030 | 17.46 |
| 2074/75 | 26595674050 | 94091892005 | 18.81 |
| 2075/76 | 31612189890 | 12956815289 | 15.01 |
| 2076/77 | 41261224581 | 14879087689 | 16.08 |
| 2077/78 | 58974584121 | 15987687909 | 17.98 |
Sources: Annual report of EBL
Note: Cash Reserve Ratio = Cash and Bank Balance
Total Deposit
From the above table and graph, the cash reserve ratio is 17.46%, 18.81%, 15.01%, 16.08% and 17.98% on FY 2073/74 to 2077/78 respectively. In FY 2073/74 cash reserve ratio is 17.46% and it is increased to 18.81% from FY 2074/75. But it is decreased in the FY 2075/76. Again it increases to 16.08% and 17.98% in FY 2076/77 and 2077/78, which shows that the bank has not effectively managed its cash and bank balance out of total deposit.
Graphical presentation of cash and bank balance to total deposit ratio of EBL on FY
2073/74 to 2077/78
Figure: 2
Table: 3
CASH AND BANK BALANCE TO CURRENT ASSETS RATIO OF EBL ON FY
2073/74 to 2077/78
| Fiscal year | Cash and Bank balance (in Rs) | Current Assets (in Rs) | Ratio (%) |
| 2073/74 | 21383490030 | 33348051377 | 76.11 |
| 2074/75 | 26595674050 | 34248379017 | 93.64 |
| 2075/76 | 31612189890 | 53046388907 | 13.09 |
| 2076/77 | 32787981232 | 49093483841 | 56.11 |
| 2077/78 | 49809092138 | 60124352672 | 68.98 |
Sources: Annual report of EBL
Note: Cash and bank balance to current assets ratios= Cash and Bank balance
Current assets
Where,
Cash and Bank balance= Cash balance+ Balance with NRB+ Balance with other BFIs.
From the above table and graph, the cash and bank balance to current assets ratio is 76.11, 93.64, 13.09, 56.11 and 68.98 on FY 2073/74 to 2077/78 respectively. In FY 2073/74 cash and bank balance to current asset ratio is 76.11% but it increased to 93.64% in FY 2074/75 . Again it decreased to 13.09% in FY 2075/76. It increase to 56.11 and 68.98 in FY 2076/77 and 2077/78, which shows that bank has not properly managed its cash and bank balance out of current assets.
Graphical presentation of cash and bank balance to current assets of EBL on FY
2073/74 to 2077/78
| Fiscal year | Loan and Advance (in Rs) | Current Assets (in Rs) | Ratio |
| 2073/74 | 77287764142 | 33348051377 | 2.99 |
| 2074/75 | 78986723431 | 34248379017 | 3.80 |
| 2075/76 | 112007182134 | 53046388907 | 2 |
| 2076/77 | 219890921929 | 67879021235 | 4.87 |
| 2077/78 | 398989271227 | 71287627762 | 5.11 |
Sources: Annual report of EBL
Note: Loan and Advance to = Loan and advances
total deposit ratios Total deposit
From the above table and graph, loan and advances to current assets ratio is 2.99, 3.80,2, 4.87 and 5.11 on FY 2073/74 to 2077/78 loan and advances to current assets ratio is 2.99 which goes on increase to 3.80 on FY 2074/75.Again it decreasing to 2 on FY 2075/76. It increase to 4.87 and 5.11 in FY 2076/77 and 2077/78 which shows that bank granting loan and advances to its customer ability decrease out of its current assets.
Graphical presentation of loan and advances to current assets ratio of EBL on FY
Figure: 3
TABLE: 4
LOAN AND ADVANCES TO CURRENT ASSETS RATIO OF EBL ON FY
2073/74 to 2077/78
| Fiscal year | Loan and advance (in Rs) | Current Assets (in Rs) | Ratio |
| 2073/74 | 77287764142 | 33348051377 | 2.99 |
| 2074/75 | 78986723431 | 34248379017 | 3.80 |
| 2075/76 | 112007182134 | 53046388907 | 2 |
| 2076/77 | 310392926900 | 63098728727 | 4.31 |
| 2077/78 | 458798209299 | 79094839399 | 4.71 |
Sources: Annual report of EBL
Note: Loan and advance =Loan and Advances
To total deposit ratio Total deposit
From the above table and graph, loan and advances to current assets ratio is 2.99, 3.80, 2, 4.31 and 4.71 on FY 2073/74 to 2077/78 respectively. In FY 2073/74 loan and advances to current assets ratio is 2.99 which goes on increase to 3.80 on FY 2074/75. Again it decrease to 2 on FY 2075/76. It increase to 4.31 and 4.71 in FY 2076/77 and 2077/78, which shows that bank granting loan and advances to its customer ability decrease out of its current assets.
Graphical presentation of loan and advance to current assets ratio of EBL on FY
2073/74 to 2077/78
Figure: 4
Table: 5
LOAN AND ADVANCES TO TOTAL DEPOSIT RATIO OF EBL ON FY
2073/74 TO 2077/78
| Fiscal year | Loan and Advances (in Rs) | Total deposit (in Rs) | Ratio (%) |
| 2073/74 | 77287764142 | 95094461030 | 68.50 |
| 2074/75 | 78986723431 | 94091892005 | 76.37 |
| 2075/76 | 112007182134 | 129568152895 | 228.69 |
| 2076/77 | 210989892112 | 356897123099 | 234.97 |
| 2077/78 | 398609867627 | 479909112398 | 295.32 |
Sources: Annual report of EBL
Note: Loan and advances to =Loan and advances
Total deposit ratios Total deposit
From the above table and graph, the loan and advances to total deposit ratio is 68.50%, 76.37%, 228.69%, 234.97% and 295.32% on FY 2073/74 to 2077/78 respectively. In the FY 2073/74 loan and advance to total deposit ratio is 68.50% and it goes on decrease to 76.37% on FY 2074/75. Again it increase to 228.69%,234.97% and 295.32% on FY 2075/76to 2077/78 respectively, which shows that bank loan and advance capacity increase out of total deposit which is better from bank point of view.
Graphical presentation of loan and advances to
Total deposit ratio of EBL on FY
2073/74 to 2077/78
Figure: 5
TABLE: 6
TOTAL INVESTMENT TO TOTAL DEPOSIT RATIO OF EBL ON FY
2073/74 TO 2077/78
| Fiscal year | Total investment (in Rs) | Total deposit (in Rs) | Ratio (%) |
| 2073/74 | 11964561347 | 95094461030 | 14.36 |
| 2074/75 | 7859994156 | 94091892005 | 12.97 |
| 2075/76 | 21769680170 | 129568152895 | 59.17 |
| 2076/77 | 7617827282 | 31982976267 | 23.97 |
| 2077/78 | 81091920929 | 459809827628 | 67.55 |
Sources: Annual report of EBL
Note: Total Investment to = Total investment
Total Deposit Ratio Total Deposit
From the above table and graph, Total investment to total deposit ratio is 14.36%, 12.97%, 59.17%, 23.97% and 67.55% respectively. In the FY 2073/74 total investment to total deposit ratio is 14.36% but it goes on decreasing to 12.97% in FY 2074/75. Again it increases to 59.17% on FY 2075/76. It decreases in 23.97% in FY 2076/77. Again it increases to 67.55% in FY 2077/78, which shows that the bank has ability to invest out of total deposit.
Graphical presentation of total investment to total
Deposit ratio of EBL on FY
2073/74 TO 2077/78
Figure: 6
Table: 7
LOAN AND ADVANCES TO TOTAL WORKING FUND RATIO OF EBL ON FY
2073/74 TO 2077/78
| Fiscal year | Loan and advances (in Rs) | Total working fund (in Rs) | Ratio (%) |
| 2073/74 | 77287764142 | 116510445575 | 59.19 |
| 2074/75 | 78986723431 | 116946280388 | 64.03 |
| 2075/76 | 112007182134 | 170077533454 | 56.2 |
| 2076/77 | 81789982982 | 121879891829 | 67.01 |
| 2077/78 | 212980980980 | 398092888377 | 71.05 |
Sources: Annual report of EBL
Note: Loan and advance to = Loan and Advances
Working fund ratio Working Fund
Where, Total working fund= Total assets
From the above table and graph, loan and advances to total working fund ratio is 59.19%, 64.03%, 56.2%, 67.01% and 71.05% on FY 2073/74 loan and advances to total working fund ratio is 59.19% and it increased to 64.03 in FY 2074/75. Again it decreased to 56.2 in FY 2075/76. It increase to 67.01% and 71.05% in FY 2076/77 and 2077/78 respectively, which shows that bank granting loan and advances to its customer ability decreased out of its total working fund.
Graphical presentation of loan and advances to working fund ratio of EBL on FY
Figure: 7
Table:8
RETURN ON TOTAL WORKING FUND RATIO OF EBL ON FY
2073/74 TO 2077/78
| Fiscal year | Net profit (in Rs) | Total working fund(in Rs) | Ratio (%) |
| 2073/74 | 2006247780 | 116510445575 | 2.79 |
| 2074/75 | 2118021520 | 116946280388 | 2.78 |
| 2075/76 | 3054122062 | 170077533454 | 1.44 |
| 2076/77 | 4900929299 | 210099738377 | 3.12 |
| 2077/78 | 6786877880 | 410666279200 | 4.91 |
Sources: Annual report of EBL Note: Return on Total working = Net profit
Fund Ratio Working Fund
From the above table and graph, Return on total working fund ratio is 2.79%, 2.78%, 1.44%, 3.125, 4.91% on FY 2073/74 to 2077/78 respectively. In FY 2073/74 return on total working fund ratio is 2.79% but it decreased to 2.78% and 1.44% on FY 2074/75 and 2075/76. Again it increase to 3.12% and 4.91% in Fy 2076/77 and 2077/78, Which shows that bank hasn’t much earning in comparison to total working fund, which is not good from bank point of view.
Graphical presentation of return on total working fund ratio of EBL on FY 2073/74 to 2077/78
Figure: 8
TABLE: 9
RETURN ON LOAN AND ADVANCES RATIO OF EBL ON FY
2073/74 TO 2077/78
| Fiscal year | Net profit (in Rs) | Loan and Advances (in Rs) | Ratio (%) |
| 2073/74 | 2006247780 | 77287764142 | 4.71 |
| 2074/75 | 2118021520 | 78986723431 | 4.35 |
| 2075/76 | 3054122062 | 112007182134 | 2.55 |
| 2076/77 | 4512344321 | 12198375877 | 3.91 |
| 2077/78 | 5819104793 | 217492048201 | 5.47 |
Sources: Annual report of EBL
Note: Return on loan and advances ratio =Net profit
Loan and advances
From the above table and graph, return on loan and advances ratio is 4.71%, 4.35%, 2.55%,3.91% and 5.47% on FY 2073/74 to 2077/78 respectively. In FY 2073/74 return on loan and advance ratio is 4.71% but it decreased to 4.35%, 2.55% and 3.91% on FY 2074/75 or 2075/76 or 2076/77, which shows that bank earning is in fluctuating way i.e. not good from bank point of view.
Graphical presentation of return on loan and advance ratio of EBL on FY
2073/74 to 2077/78
Figure: 9
Table: 10
TOTAL INTEREST EARNED TO TOTAL WORKING FUND RATIO OF EBL ON FY 2073/74 TO 2077/78
| Fiscal year | Interest earned (in rs) | Total working fund (in rs) | Ratio (%) |
| 2073/74 | 6747148285 | 116510445575 | 6.05 |
| 2074/75 | 6816040160 | 116946280388 | 6.72 |
| 2075/76 | 6616848976 | 170077533454 | 5.77 |
| 2076/77 | 7182893040 | 150019384282 | 6.81 |
| 2077/78 | 8474960394 | 160938122434 | 7.76 |
Sources: Annual report of EBL
Note: Total Interest earned =Total interest earned
To total working fund ratio Total working fund
From the above table and graph, total interest earned to total working fund ratio is 6.05%, 6.72%, 5.77%, 6.81% and 7.76% on FY 2073/74 to 2077/78 respectively. In FY 2073/74 return on total working fund ratio is 6.05% but it increased to 6.72% in FY 2074/75. It decreased to 5.77% in FY 2075/76, Again it increase 6.81% and 7.76% in FY 2076/77 and 2077/78 respectively, which shows that bank hasn’t much earning in comparison to total working fund, which is not good from bank point of view.
Graphical presentation of total interest earned to total working fund of EBL on FY
2073/74 to 2077/78
Figure: 10
Table: 11
TOTAL INTEREST PAID TO TOTAL WORKING FUND RATIO OF EBL ON FY 2073/74 TO 2077/78
| Fiscal year | Interest paid (in Rs) | Total working fund (in RS) | Ratio (%) |
| 2073/74 | 3009792494 | 116510445575 | 1.60 |
| 2074/75 | 3009792494 | 116946280388 | 1.14 |
| 2075/76 | 3009792494 | 170077533454 | 1.62 |
| 2076/77 | 3919049399 | 180942848492 | 1.91 |
| 2077/78 | 4098747666 | 190974683589 | 2.10 |
Sources: Annual report of EBL
Note: Total interest paid to =Total interest paid
Total working fund ratio Total working fund
From the above table and graph, total interest paid to total working fund ratio is 1.60%, 1.14%, 1.62%, on FY 2073/74 to 2077/78 respectively. In FY 2073/74 total interest paid to total interest paid to total working fund ratio is 1.60% but it decreased to 1.14 on FY 2074/75. Again it increased to 1.62%, 1.91% and 2.10% on FY 2075/76, 2076/77 and 2077/78 respectively, which shows that total interest paying capacity is increased in comparison to total working fund which is good from bank point of view.
Graphical presentation of total interest paid to total working fund of EBL on FY 2073/74 to 2077/78
Figure: 11
Table: 12
LIQUIDITY RISK RATIO OF EBL ON FY 2073/74 TO 2077/78
| Fiscal year | Cash and bank balance (in Rs) | Total deposit (in Rs) | Ratio(%) |
| 2073/74 | 21383490030 | 95094461030 | 17.46 |
| 2074/75 | 26595674050 | 94091892005 | 18.81 |
| 2075/76 | 31612189890 | 129568152895 | 15.01 |
| 2076/77 | 3768846837 | 17838683937 | 16.09 |
| 2077/78 | 4728347498 | 19338658021 | 17.78 |
Sources: Annual report of EBL
Note: Liquidity risk = Total cash and bank balance
Ratio Total deposit
From the above table and graph, Liquidity risk ratio is 17.46%, 18.81%, 15.01%, on FY 2073/74 to 2077/78 respectively. In FY 2073/74 liquidity risk ratio is 17.46% and it is increased to 18.81% on FY 2074/75. It decreased to 15.01% on FY 2075/76. Again it increase to 16.09% and 17.78% on FY 2076/77 and 2077/78 respectively, which shows that liquidity risk has decreased comparison to the previous financial year, which is good from bank point of view.
Graphical presentation of liquidity risk ratio of EBL On FY
2073/74 to 2077/78
Figure: 12
Table: 13
CREDIT RISK RATIO OF EBL ON FY 2073/74 to 2077/78
| Fiscal year | Loan and advance (in Rs) | Total assets (in Rs) | Ratio (%) |
| 2073/74 | 77287764142 | 116510445575 | 59.19 |
| 2074/75 | 78986723431 | 116946280388 | 64.03 |
| 2075/76 | 112007182134 | 170077533454 | 56.2 |
| 2076/77 | 783948499494 | 192044830200 | 59.04 |
| 2077/78 | 893884039929 | 204398473773 | 67.09 |
Sources: Annual report of EBL
Note: credit risk ratio= Total loan and advance
Total Assets
From the above table and graph, credit risk ratio is 59.19%, 64.03%, 56.2%, 59.04% and 67.09% on FY 2073/74 to 2077/78. In FY 2073/74, credit risk ratio is 59.19% and it increased to 64.03% on FY 2074/75. it decrease to 56.2% on FY 2075/76. It increase to 59.04% and 67.09% on FY 2076/77 and 2077/78, which shows that bank credit risk decreased in comparison to previous financial year which is good from bank point of view.
Graphical presentation of credit risk ratio of EBL on FY 2073/74 to 2077/78
Figure: 13
Table: 14
Capital Risk RATIO of EBL on FY 2073/74 to 2077/78
| Fiscal year | Total capital (in Rs) | Risk Weighted assets (in Rs) | Ratio (%) |
| 2073/74 | 7732723147 | 88929577 | 10.20 |
| 2074/75 | 5741095399 | 110005455 | 14.47 |
| 2075/76 | 8026863347 | 123391104 | 16.70 |
| 2076/77 | 7849858482 | 129595830 | 15.02 |
| 2077/78 | 8595783849 | 198575739 | 17.56 |
Sources: Annual report of EBL
Note: Capital Risk Ratio= Capital (paid up +Reserves)
Risk weighted assets
Where, Capital= Paid up capital+ Reserves
From the above table and graph, capital risk ratio is 10.20%, 14.47%, 16.70%, 15.02%, and 17.56% respectively. In FY 2073/74 capital risk ratio is 10.20% and it increase to 14.47% and 16.70% on FY 2074/75 or 2075/76 respectively. Again it decrease in 15.02% on FY 2076/77, and it also increase in 17.56% on FY 2077/78, which the standard determined by NRB for capital risk ratio is 10%, which is not properly managed by bank that shows that in future bank will suffer from liquidity crisis.
Graphical presentation of capital risk ratio of NBL on FY 2073/74 to 2077/78
Figure: 14
2.2 Major finding
From the above table and graphs, the researcher find many major things, the researcher find many major things, which is given as below:
- Current asset to current liabilities ratio is 0.21, 0.19, and 0.11 on FY 2073/74 to 2077/78 respectively.
- Cash and bank balance to total deposit ratio is 17.46%, 18.81%, 15.01% on FY 2073/74 to 2077/78 respectively.
- Cash and bank balance to current assets ratio is
76.11%, 93.64%, 13.09% on FY 2073/74 to 2077/78 respectively.
- Loan and advance to current asset ratio is 2.99%, 3.80%, 2% on FY 2073/74 to 2077/78 respectively.
- Loan and advances to total deposit ratio is 68.50%, 76.37%, 228.69% on FY 2073/74 to 2077/78 respectively.
- Total investment to total deposit ratio is 59.19%, 64.03%, 56.2% on FY 2073/74 to 2077/78 respectively.
- Loan and advances to total working fund ratio is 59.19%, 64.03%, 56.2%, on FY 2073/74 to 2077/78 respectively.
- Return on total working fund ratio is 2.79%, 2.78%, 1.44% on FY 2073/74 to 2077/78 respectively.
- Return on loan and advances ratio is 4.71%, 4.35%, 2.55%, on FY 2073/74 to 2077/78 respectively.
- Total interest earned to total working fund ratio is 6.05%, 6.72%, 5.77% on FY 2073/74 to 2077/78 respectively.
- Total interest paid to total working fund ratio is 1.60%, 1.14%, 1.62% on FY 2073/74 to 2077/78 respectively.
- Liquidity risk ratio is 17.46%, 18.81%, 15.01%, on FY 2073/74 to 2077/78 respectively.
- Credit risk ratio is 59.19%, 64.03%, 56.2%, on FY 2073/74 to 2077/78 respectively.
- Capital risk ratio is 10.20%, 14.47%, 16.70%, on FY 2073/74 to 2077/78 respectively.
CHAPTER-III
SUMMARY AND CONCLUSION
The last chapter of this study is summary; conclusion and recommendations which have discussed and explored the facts and matters required for various parts of the study. Through the analytical chapter by using some important financial as well as statistical tools, makes a comparative analysis of various aspects of the investment of concern commercial banks.
3.1. Summary
Investment policy is the initial step an investing policy involves is determining the investment objectives and the amount of one’s investable fund. Investment is always related with risks and returns. Making money alone cannot be an appropriate objective. It is appropriate to state that the objective is to make a lot of money by recognizing the possible losses. Therefore, investment objective should be stated in terms of both risks and returns. Setting a clear investment policy also involves the identification of the potential categories of financial assets for consideration in the ultimate portfolio. The identification of assets depends upon many things, such as investment objectives, investable fund, tax consideration etc. (Bhattarai Rabindra, 2004; 3).
The economic growth was very slow in earlier years. It has caught its full swing with the restoration democracy in the country. At present, overall economic growth rate still decline year by year. Reasons behind this decline are insecure situation faced by industry, decrease in the tourist arrival, drop in the production and export of carpet, garment and pashmina industry and political situation.
The evolution of the organized financial system in Nepal has more recent history than in other countries of the world. In Nepalese context, the history of banking is not more than six decades. After the announcement of liberal and free market economic based policy, Nepalese banks and financial sectors have greater network and access to national and international markets. Commercial banks play a vital role which deals with other people’s money and stimulate saving by mobilizing idle resources to those sectors having investment opportunities. Modern bank provides various services to their customers in view of facilitating their economic and social life.
3.2 Conclusion
The above maintained major finding led this study to the following conclusions:
- The liquidity position of EBL is comparatively nit satisfying but it has high investment in loan and advances to current assets ratio, cash and bank balance to total deposit ratio and cash balance to current assets ratio.
- EBL has high ratio in loan and advance to total deposit ratio, total investment to total deposit ratio but loan and advance to total working fund ratio is in increasing and decreasing trend.
- Analyzing the profitability of EBL, we found that the return on total working fund ratio, return on loan and advance ratio, total interest earned to total working fund ratio and total interest paid to total working fund ratio are in decreasing trend.
- From the view point of the risk ratio, capital risk ratio is in increasing trend, credit risk ratio and liquidity risk ratio is in increasing and decreasing trend.