A CASE STUDY ON LOAN MANAGEMENT OF NMB BANK
A CASE STUDY ON LOAN MANAGEMENT OF NMB BANK
CHAPTER – I
INTRODUCTION
1.1. Origin of the work “Bank”
The term
bank is derived from the Latin work ‘Bankus’ ; Italian work Branca, French work
‘Banque’ and German word ‘bank’ which means Joint stock company. In most simple
form, banking is old as authentic history. The early bankers ‘the Jews in
Lombardy’, transacted third business at business at benches in the market
place. When they were unable to meet their liabilities, the depositors used to
break their benches and the term bankrupt and derived.
1.1.1 Meaning and Nature of bank
A bank is
an institution, which deals with money and credit. It accepts deposits from the
public and mobilizes the fund from public to productive sectors. It also
provides remittance facility to transfer money one place to another. Generally,
bank accepts deposits from business institution and individuals, who is
mobilized into productive sectors mainly business and consumer lending. Bank is
therefore, known as a dealer of money. At present context, bank is not only
confined to accepting deposits and disbursing loan. In addition to this, a bank
may be engaged in different types of function such as remittance, exchange
currency, joint ventures, underwriting, bank guarantee, discounting bills, etc.
In short the term ‘modern banking refers to an institution having the following
features.
Banks are
the principal source of credit for millions individuals and families and for
many units of government. They are among the most important financial
institution in the economy. Moreover, for small local business ranging from
grocery stores to automobiles dealers; banks are often the major source of
credit to stock them with merchandise. Banks
·
It deals with money; it
accepts deposits and advances loan.
·
It also deals with credit;
it has the ability to create credit by expanding liabilities.
·
It also commercial
institution; it aims at earning profit.
According to prof. Kinley- “A bank is an establishment which makes to individuals such advance of money as may be required and safely made and to which individuals entrust money when not required by them for use.”
Banks are
among the most important sources of short term working capital for business.
They have become increasingly active in recent years in making long term
business loans for new plant and equipment when business and consumers must
make payments for purchase of goods and service, more often they use bank
provided cheques credits or debit cards or electronic accounts connected to a
computer network.
1.1.2 History of banking
The bank
of Venice, established in 1157 AD is supposed to be the ancient bank.
Originally it was not a bank IV real sense being simply and officer for the
transfer of the public debt. Subsequently Bank of Barcelona (1401) and Bank of
Geneva (1407) were established. The Bank of England first English bank was
established in 1964 ‘the bank in Hindustan establishes in 1770 AD was first
Indian Bank. Nepal bank Ltd establishes in Nepalese bank history.
1.1.3 Origin of Bank in Nepal
In
context of Nepal our history of banking far banking is concerned with debt, we
may go back in the Nepalese history, where a merchant namely “Sankhadhara” is
recorded. He was the person who alone paid all debts of the people of existing
in the country at that time. Since then the introduction a new era called
“Nepal Sambhat”. Yhiss record provides the existence of money lending function
at that time. During the course of development of borrowings, we further come
across the trem “Tanka Dhari” at the end of the 14th century meaning
moneylenders. They are one of the 64 castes classified on the basis of
occupations.
In 1877
AD. Tejarth Adda was established by then government. The main purpose of this
institution was to provide credit facility to the general public at the minimum
interest rate of 5 percent. The Establishment of this institution marked the
beginning of organized financial institution in Nepal.
1.2. Modern Banking in Nepal
Nepal
Bank ltd is the first modern bank of Nepal. It is a taken as the milestone of
modern Banking of the country. This was established in 1937 AD it was set to.
From the beginning it has rendered the different banking services to the
customers. Hence to solve the problems, Nepal Bank ltd was established as the
first Commercial Bank in Nepal. Later on the central bank, Nepal Rastra Bank
(NRB), in 2012 was established. The purpose of this bank was to conduct the
task in maintaining the stability of the exchanges rate promoting country wide
circulation of the national currency, foreign currency earning and implement
exchange central Measures.
A sound
banking system is important for smooth development of banking system. It can
play a key important role in the economy. It gathers saving from all over the
country and provides liquidity for industry and trade. For more than decades,
no more banks have been established in the country. After declaring free
economy and privatizations policy. Government encourages the foreign banks for
jointure in Nepal.
1.3. Types of Banks
There are different types found in
the world the following are the common banks:-
1) Commercial Bank
The banks
which perform the all kinds of banking business are known as Commercial banks.
Generally Commercial banks deal with Finance trade commerce since they collect
deposit from the general public and provide loan to businessman and traders
there are 27 commercial banks in Nepal.
2) Central Bank
The
central bank is the apex bank in countries, which controls regulates and
supervise the monetary and banking structure. It is owned by the government of
the country. It operates in national interest. It regulates and issues currency
and performs banking and agency services for the state. For this purpose it
keeps cash reserves of commercial banks and manage the international currencies
acts as the lender of the last resort. Nepal Rastra Bank is the central bank of
our country.
3) Development Bank
Development
Bank is the bank established to promote the development of a particular sector
of economy. It is established by the government which has responsibility to
enhance the development of agriculture industry tourist, etc. In context of
Nepal NIDC is the first development bank which was established in 2018 BS,
Agricultural Development was the second development of the country.
4) Exchange Bank5) Savings Bank6) Cooperative Bank7) Merchant BankCommercial Banks
Commercial
banks are that which performs all kinds of banking business. Commercial banks
are defined as leading financial institutions which issues demand liabilities
used as means of payments and at the same time makes loans to the business.
Commercial banks have expands their activities on both the assets and
liabilities side. They accept various kinds of time and saving deposits while
they expand their lending activities to include term loan to business
consumers’ loan. Long term loan mortgage loan and investment in debt securities
of all types of a wide range of maturities.
Banks
hold cash assets to meet legal reserve requirements and daily transactions
needs and they have correspondent relationships with other Banks. Bank holds
government securities, securities for both liquidity and income resources.
Commercial banks accumulate the saving from the community and arrange for their
productive use. They supply the financial need of the modern business by
assisting in the objectives targeted by the central banks and by fulfilling the
financial needs. Commercial banks acts as business firms to operates
efficiently.
Functions of the Commercial Banks
The
functions of commercial banks are broader in scope, size and magnitudes.
Commercial Banks are the major financial intermediaries whose primary functions
is the transfer of monetary resources from the savers to the users. Principally
commercial banks accepts deposits and provides loans primarily in business firm
there by faciliting the transfer of funds in the economy. Untimely commercial
banks works for overall development of industries, trade, commerce and
agriculture too. Commercial banks the following functions.
Primary Functions
Commercial
banks have to perform primary functions of accepting deposits, providing loan
and funds involvements in earning assets to balance the portfolio of assets
managements the primary functions of commercial bank are as follows.
1. Accepting Deposits
Commercial
banks accept deposits from the individuals, partnership firms and corporations
and also from center government and local governments. It is the most important
functions of the commercial bank. In the context of commercial Banks in Nepal,
there are basically noninterests bearing and interest bearing deposits includes
currents deposits margin deposits and other deposits. But interest bearing
deposits consist of savings deposits fixed deposits.
2. Providing Loans
The
second’s important functions of banks are to provide different types of loan.
The principal business of commercial banks is to make a loans to qualified
borrowers. The commercial banks earn the profit by giving loan. Bank loans can
classified as a loans, overdraft, cash credit, discounting of bills and so on.
3. Investments
Commercial
banks also extend credit when they purchase securities and this category of
assets may be especially attractive when loan demand is slack as a way of
employing loan able funds. Investments of the commercial banks consist
government securities government saving bonds central banks bonds corporate
shares and debentures and other investments.
Secondary Functions of Commercial Banks
Besides
the primary functions of accepting deposits and lending money, banks perform a
number of other functions which are called secondary functions. These are given
below
·
Issuing letter of credit,
traveler’s cheques, circular note, etc.
·
Undertaking safety custody
of valuable, important documents and securities by providing safety deposits
vaults or lockers.
·
Providing customers with
facilitates of foreign exchanges.
·
Transferring money from one
place to another and from one branch to another branch of the bank.
·
Standing guarantee on behalf
of its customer, for making payments for purchase of goods, machinery,
vehicles, etc.
·
Providing reports on the
credit worthiness of customers.
Roles of commercial Banks in Economy
A well
development banking system is a necessary precondition for economic development
in a modern economy. Besides providing financial resources for a growth of
industrialized, banks can also influence the direction in which these resources
are to be utilized. In modern economy, banks are to be considered not merely as
dealers in money but also utilize the resources necessary for economic
development. It is the growth of commercial banking in 18th and 19th
centuries that facilitated the occurrence of industrial revolution.
The main
objective of commercial banks is to mobilize the resources for productive use
after collecting them from different places. It brings about greater mobility
of resources to meet the emerging necessity of the economy, which are capital
formation, encouragement to entrepreneurial innovations, influencing economy
activity, promotion of trade and industry, development of agriculture and other
neglected sectors.
Therefore
the fate of the country is greatly determined by the active role of commercial
banks. Banks provide facilities to their customers by providing loans,
remitting funds, purchase and sale of bills of other markets information’s.
These services help to run the business and other economic development
activities rapidly as well as smoothly which ultimately helps in economic
development.
Commercial Banks available in Nepal
There are
31 commercial banks till now which are as follows
List of Commercial Banks
Sources: Banking and financial statistics published by: Nepal Rastra Bank
NMB Bank
Limited (NMB) is the first commercial bank of Nepal that has been able to
upgrade from a Financial Company to full-fledged Commercial Bank. Nepal
Merchant Banking and Finance Ltd., the erstwhile name of the institution, was
amongst the leading financial institutions in its category till May 2008 when
the transformation process for the upgrade was complete and changed its name to
NMB Bank Limited.
NMB is
the brainchild of leading Nepali entrepreneurs with dream of framing the
ultimate in Merchant Banking and Financial Services. Harnessing from its
strength on Merchant Banking the Bank has decided to broaden its scope of
services by building synergies to its current operations. This unprecedented
event has been possible by way of strong commitment and confidence of all the
stakeholders’ viz. customers, promoter, shareholders, regulators, and
employees. NMB is the brainchild of leading Nepali entrepreneurs with dream of
framing the ultimate in Merchant Banking and Financial Services. Harnessing
from its strength on Merchant Banking the Bank has decided to broaden its scope
of services by building synergies to its current operations. This unprecedented
event has been possible by way of strong commitment and confidence of all the
stakeholders’ viz. customers, promoters, shareholders, regulators, and
employees.
More Vision
To
establish ourselves as a leader in banking by providing a range of financial
services suitable to the needs of the market with high priority on customer
care while simultaneously embracing the interests of all stakeholders and value
of a good corporate citizen.
Mission
To gain
supremacy in growth, profit, customer care and social response in banking by
way of:
·
Leveraging and integrating
the existing strengths of the institution.
·
Reaching out and serving
wide range of customers within and outside the country.
·
Developing a culture of “Giving Extra Care to the Customers”.
·
Being innovative in
designing and delivering services.
·
Adopting prudent investment
practices for building up a sound assets base.
·
Developing internal and
external efficiencies by prudent use of technology.
·
Building operational
efficiency through smarter processes and controls.
·
Providing exciting and
challenging career prospects for the employees.
·
Placing high priority on stakeholders’
interest and statutory compliance.
·
Acting responsibly for
making contributions to the society at large.
Credit
Corporate and Institutional Banking
·
Project and Term Financing –
Independent or Syndicated Term Loans.
·
Working Capital Financing
for Large Corporate
·
Trade Finance – Letters of
Credit, Guarantees, Import/Export Bills Discounting, etc.
·
Loan Syndication
·
Correspondent Banking
Business and Small and Medium Enterprise (SME) Banking
·
Structured Product Based SME
Finance – Term or Working Capital Loan
·
Financing of Medium Size
Enterprises – Indigenous Credit Facilities
·
Loan Against Marketable
Securities
Retail Banking
·
Structured Consumer Loans:
o
Auto Finance
o
Mortgage (Home) Loans
o
Personal Overdrafts
o
Personal Loans
o
Educational Loans
Credit
Corporate and Institutional Banking
·
Trade Finance – Letters of
Credit, Guarantees, Import/Export Bills Discounting, etc.
·
Loan Syndication
·
Correspondent Banking
Business and Small and Medium Enterprise (SME) Banking
·
Structured Product Based SME
Finance – Term or Working Capital Loan
·
Financing of Medium Size
Enterprises – Indigenous Credit Facilities
·
Loan Against Marketable
Securities
Retail Banking
·
Structured Consumer Loans:
·
Auto Finance
·
Mortgage (Home) Loans
·
Personal Overdrafts
·
Personal Loans
·
Educational Loans
Board of Directors
Pawan Kumar Golyan (Chairman)
Managing Director of Golyan Group of Companies, a leading business group in the country with interests in Textiles, Import/Export, Cashmere Product, Property Management, Banking, Insurance, etc.
Managing Director of Golyan Group of Companies, a leading business group in the country with interests in Textiles, Import/Export, Cashmere Product, Property Management, Banking, Insurance, etc.
Atma Ram Murakar (Director)
Chairman of Murakar Organization, a leading business group in the country with interests in Edible Oil, Iron & Steel, Carpet, General Trading, Banking, etc.
Purushotam lal Sanghai (Director)
Chairman
of Triveni Group, a leading business groups in the country with diversified
business activities. The group has interests in Textile, Cement, Property
Management, Banking, Insurance, Edible Oil, Import/Export, etc.
Shanti Byahut (Director-Representative Employees Provident Fund)
Ms.
Byahut possesses 25 years of experience in Employees Provident Fund in senior
positions.
Harishchandra Subedi (Director-Representative from General Share-holder)
Advocate,
Supreme Court corporate law practioner with 14 years’ of experience.
Rita Pant (Director)
Ex. Executive
Director, Nepal Rastra Bank / Professional Director
Pradeep Kumar Nepal (Director- Representative from General Share-holder)
Retired
Banker with experience of over two decade in Nepal Industrial Development
Corporation, the Development Banking institutions as its Deputy General
Manager.
1.4.
Objectives of the Study
Objectives of the Study
The objectives of my study of this
report is as follows
·
To identify the trend of the
deposit collection of NMB
·
To identify the trend of the
loan disbursement of NMB
·
To find the investment between
deposits.
·
To find interest bearing
deposits and non interest bearing deposits
·
To identify the problems
face by the bank
1.5.
Significance of the Study:
Significance of the Study:
The significance or importance of
this study is as follows:
·
The report is prepared for
the partial fulfillment of the requirement for Bachelor of Business Studies.
·
It helps to get actual
information about the performance of the bank relating to Loan management of
NMB
·
It helps to develop the
communication skills of the students, which may be helpful in their career
path.
·
It helps to train the
students for administration and managerial functions.
·
It helps to train the
students for administration and managerial functions.
·
It helps to gain practical
knowledge about the Loan management of NMB Bank Limited.
·
It helps to gain experience
about the fieldwork process.
1.6. Research Methodology1.6.1 Research Design
Research
is a systematic inquiry undertaken to find out the different information of the
study. Research is gathering, processing, interpreting and reporting of the
informational small business needs market research. By research design we mean
an overall framework or plan for the activities be undertaken during the course
of a research study. The research design serves as a framework for the study
guiding the collection and analysis of the data the research instruments to be
utilized and the sampling plan to be followed. Specifically speaking research
design describes the general plan to be followed.
Specially
speaking research design describes the general plan for collecting analyzing
and evaluating data after identifying.
The basic
elements of a research design are as follows
·
The problem.
·
The methodology.
·
Data gathering.
·
Data analysis.
·
Report Writing.
1.6.2 Data Collection procedures
The data
are collected from both primary and secondary sources. For collection the data
NMB office Babarmahal was visited to collect the annual Reports. Internet was
also view and some important files are downloading. Some of the information was
acquired from the customer’s service desk.
2. Sources of data
Data may
be obtained from through from various sources, which are as follows as below
I.
Primary Data: Primary data
are original data gathered by the researcher for the research project at hand.
Thus these data are collected for meeting the specific objectives of the study.
Primary data can be collected through interviews, questionnaires, observations
and experiments.
II.
Secondary Sources: Secondary
sources of data are those already gathered by others. Sources of accounting
data are as follows
i)
Annual Reports
ii)
Related websites
iii) Books and journals
iv) Daily business Magazine
1.6.3 Methods of data analysis
The data
are analyzed by using different financial tools and techniques along with some
statistical tools and also analyzes by diagrams wherever useful
Presentation Tools Used
·
Tables
·
Pie charts
·
Bar diagrams
1.6.4 Analytical tools usedFinancial Tools
·
Credit to deposit ratio
·
Investment to total deposit
ratio
·
Spread Ratio
·
Equity to deposit Ratio
·
Interest income with loan
·
Interest Expenses with
deposits
Statistical Tools
Average
mean
Mean=E
x/n
Mean Y=E
y/n
Trend
line analysis (using least square method)
Correlation
coefficient
1.7. Limitations of the Study
Followings are the limitations of
the study:
·
The study had to be
conducted with limited data so all the objectives of the study are not
fulfilled.
·
The reports concentrates on
selected topic i.e. loan and deposits of the bank and do not cover the overall
financial aspects of the banks.
·
The analysis and comparison
is done for only 5 years (from 2008/09 to 2012/13) which dosen’t reveal the
things before after that period.
·
The study is based on NMB
study so it does not reveal the true situation of whole banking sector of the
Nepal.
·
Tools used by the researcher
are not free from limitations.
·
The study is based on
financial statement only it does not consider the other factors of the banks.
1.8. Organization of the Study
The field
study about fix loan management of NMB has been divided into three different
appropriate chapters along with bibliography, The sequential chapter, are:
1st chapter is Introduction in which all the information about the bank is given. It
includes origin of the bank, list of commercial bank, function and service of
NMB, Methodology, sources of study, limitations of significance of the study,
Limitations of the study, the study and chapter scheme or plan.
2nd chapter is Data presentation and analysis of loan, Major finding of the data
types of deposit offered by bank, types of loan made by bank, Trend line
analysis of total deposit.
3rd chapter is Summary, Conclusion and Recommendations.
Besides
this, list of tables, bibliography mentioned.
CHAPTER –
II
PRESENTATIONS AND ANALYSIS DATA
2.1 Major findings of the dataDeposits:
Deposits are the funds collected by form accounts holders from the
security and transactions motives. It is the amount of money or a valuable item
that is received into a bank as security against as a possible loss. Deposits
are the foundation upon which banks thrive and grow. They are unique items on a
bank’s balance sheet that distinguishes it from other types of a business firm.
The ability of a bank’s management and staff to attract checking and savings
accounts from business and customers is an importance’s measures of the banks
acceptance by the public.
2.2 Types of Deposits Officered by banks.
In the context of commercial banks there are basically Non interest
bearing deposits and interest bearing deposits
The Non interest bearing deposits includes
·
Current deposits
·
Margin deposits
·
Other deposits
Interest bearing deposits includes
·
Saving deposits
·
Fixed deposits
·
Call deposits.
Total Deposits Trends of NMB Bank ltd
It gives the idea about deposits of the bank through 5 fiscal year. The
total deposit figures of NMB are shown as below.
Table: 2.1
Total Deposits Trends of NMB Bank ltd
Years
|
Total Deposit
|
2008/09
|
747259172
|
2009/10
|
862855852
|
2010/11
|
1296388884
|
2011/12
|
1661604750
|
2012/13
|
6787907436
|
Source: Annual report of
NMB/2068
Figure: 2.1
Total Deposits Trends of NMB Bank ltd
From above table it is clear them NMB total deposits have been increasing
every year.
Loan
Loan is the sum lent to others for certain time period with the agreement
to charge interest on principal. The interest is charged calculating certain
percentage on the principal. When money belonging to one is advanced to another
to be used for certain time period is called loan. Loan is the major assets of
Banks. The basic objective of loan advancement is to earn interest for lending
the sum for specified period.
2.2.1 Types of Loans Made By Banks
Banks make a wide variety of loans of a wide variety of customers for
many different purposes. For customers the cause of loan purchasing may be
investment in business, purchasing automobiles, educations constructing home
office building. On the basis of loan purpose, bank loan can be divided into
several categories.
1) Real Estate Loan
It is the credit extended to purchase or improve real property such as
land and buildings.
2) Financial Institution Loan
It is the credit extended to banks and other financial service providers.
Mostly finance companies insurance companies’ credit banks co operatives saving
and credit firms.
3) Agricultural Loans
Agricultural loans are the credit extended to support farmland branch
operations. This loan is extended to assist in planting, harvesting crops,
starting.
4) Commercial Loan and Industrial Loan
Commercial Loan and industrial loans are extended to business firms to
support the production and distribution of their product and services.
5) Individual Loan
This is the loans extended to private individuals for private and
household purpose. Generally individual
Table: 2.2
Loan Trend of the NMB Bank of 5 years
Year
|
Loan
|
2008/09
|
717195076
|
2009/10
|
1004449560
|
2010/11
|
1395884717
|
2011/12
|
1939967542
|
2012/13
|
5194210667
|
Sources: Annual Report of
NMB/2068
Figure: 2.2
Loan Trend of the NMB Bank of 5 years
Credit Deposit Ratio
This
ratio shows the relationship between the Loan and deposit. It shows that how
much loan has given by the bank.
Table: 2.3
Credit
Deposit Ratio
Year
|
Loan
|
Deposits
|
Credit Deposit Ratio
|
2008/09
|
717195076
|
747259172
|
95.97
|
2009/10
|
1004449560
|
862855852
|
116.40
|
2010/11
|
1395884717
|
1296388884
|
107.67
|
2011/12
|
1939967542
|
1661604750
|
116.75
|
2012/13
|
5194210667
|
6787907436
|
76.52
|
Source: Annual report of
NMB/2068
Figure:2.3
Credit
Deposit Ratio
Deposit Equity relationship
This ratio shows that how much fund is collected through company Equity.
Table: 2.4
Deposit Equity relationship
Year
|
Deposits
|
Equity
|
2008/09
|
747259172
|
194883185
|
2009/10
|
862855852
|
231373949
|
2010/11
|
1296388884
|
284473656
|
2011/12
|
1661604750
|
1213480775
|
2012/13
|
6787907436
|
1592053407
|
Sources: Annual report of
NMB/2068
Figure: 2.4
Deposit Equity relationshipTable: 2.5Nonperforming Loan
Year
|
Non Performing Table
|
2008/09
|
3.87
|
2009/10
|
1.85
|
2010/11
|
1.73
|
2011/12
|
1.52
|
2012/13
|
0.51
|
Source: Annual report of
NMB/2068
Figure: 2.5Nonperforming Loan
Spread Rate
Spread Rate is the average interest income. It is the major income
sources of Bank. Higher the spread rate the income also high and vice versa.
Spread rate is calculated by following formula:
Interest Income, Interest Expense, Interest earning assets, Interest paying liabilities
Table: 2.6
Spread Rate
Year
|
Spread Rate
|
2008/09
|
4%
|
2009/2010
|
3.62%
|
2010/11
|
3.58%
|
2011/12
|
2.41%
|
2012/13
|
3.58%
|
Sources: Annual report of
NMB/2068
Figure: 2.6
Spread Rate
Relationship between the Investment and deposit
The table shows the relationship between how much investment is incurred
through the deposit.
Table: 2.7
Relationship between the Investment and deposit
Year
|
Deposits
|
Net Investment
|
2008/09
|
747259172
|
707631742
|
2009/10
|
862855852
|
772757877
|
2010/11
|
1296388884
|
854678075
|
2011/12
|
1661604750
|
1242902362
|
2012/13
|
6787907436
|
1857563476
|
Sources: Annual report of
NMB/2068
Figure: 2.7
Relationship between the Investment and deposit
Table: 2.8This shows the relationship between the interest expenses and deposit.
Year
|
Interest expense
|
Deposits
|
|
2008/09
|
79192582
|
747259172
|
6.1
|
2009/10
|
72335660
|
862855852
|
4.29
|
2010/11
|
140253280
|
1296388884
|
6.28
|
2011/12
|
139095730
|
1661604750
|
7.17
|
2012/13
|
254260906
|
6787907436
|
3.54
|
Source: Annual report of NMB/2068
Figure: 2.8
This shows the relationship between the interest expenses and deposit.
Table: 2.9
Relationship between interest loan and Loan
Years
|
Interest income
|
Loan
|
% Interest income/loan
|
2008/09
|
148618041
|
717195076
|
20.72
|
2009/10
|
135871041
|
1004449560
|
|
2010/11
|
237933473
|
1395884717
|
17.04
|
2011/12
|
251409352
|
1939967542
|
12.95
|
2012/13
|
402582568
|
5194210667
|
7.75
|
Figure: 2.9
Relationship between interest income and Loan
Table: 2.10
Deposit composition of NMB
Deposits Composition of NMB Bank
|
2009/10
|
2010/11
|
2011/12
|
2012/13
|
Saving Deposits
|
342591198
|
444923070
|
395696971
|
1544421213
|
Fixed Deposits
|
516365836
|
682412718
|
926512315
|
2079158904
|
Call Deposits
|
164407593
|
314439976
|
3139334816
|
|
Current Deposits
|
11898
|
22412139
|
101421681
|
|
Margin Deposits
|
3898818
|
4526505
|
2543349
|
13570822
|
Source: Annual report of
NMB/2068
Figure:
2.10
Deposit Composition of NMB
2.2.2 Trend Line Analysis of Total Deposits
Trend line Analysis is the tool of time series analysis which gives us
the understanding of the past behavior of the Variable in different period and
helps to estimate the future movement of that Variable. There are many methods
of estimating trend line, among which here is used ‘Least square Method’s most
popular and widely used method. Using the Least square method I have calculate
the trend line of the total deposit using the 5-Years deposit figure.
Calculation of equation of trend line of total deposits
Equation of straight line is Yc=a+bx………….
Where, Yc=estimated value of total deposits
a=Y-intercept of the trend line
b=slope of the trend line
Table Estimation of trend line of total loan
CHAPTER – III
SUMMARY,
CONCLUSION AND
RECOMMENDATION
3.1
Summary
The modern banking system that we have today has passed through several
before reaching the present stage. Because of the liberal economic policy adopt
the Nepalese government; numbers of commercial banks are operating to Nepal.
Among the commercial established in Nepal. NMB is one of them:
The fieldwork report covers “Loan Management in NMB” and is prepared with objective of finding out whether NMB is able to manage loan effectively or no report consists of discussions and presentation of various aspects of Loan Management such as loans, advances and overdraft, loan loss provision, interest income or and advances. Bills purchased and discounted, commission and discount on purchased and discounted and total deposits. It is conducted by using Primary Secondary data. Arithmetic and financial and statistical tools have been used present, analyze and interpret the data on the aspects of Loan Management. The points for analysis and interpretations were:
A study of five years period of loans advances and overdraft shows that
the loan of NMB is following an increasing trend except in the year.
Trend line Analysis is the tool of time series analysis which gives us
understanding of the past behavior of the Variable in different period and
helps to estimate the future movement of that Variable. There are many methods
of estimating trend line, among which here is used ‘Least square Method’s most
popular and widely used method. Using that least square method I have calculate
the trend line of the total deposit using the 5-Years deposit figures.
3.2 Conclusions
After conclusion a thorough study of loan management in NMB, it can be
said that NMB is able to perform the loan management satisfactorily till date.
All the aspects of loan management have been paid due attention. Besides, the
study concludes the following points:
The loan assets of the bank is increasing in most of the years. This
shows that NMB having keen competition in banking sector is able to
substantially increase its lending capacity. If the loan is repaid within a
stipulated time, then the increasing trend in the loan can be appreciated. But,
if a default takes place, the outcome may be disadvantageous. A loan asset can
be a hen with golden eggs only if
there is the least or no chance of non repayment.
The fluctuation inherent in the interest income on loans and advances
ration is because of the declination of the interest rate itself. A declination
in the interest income to loans and advances is not a good sign for NMB.
The loan loss provision of NMB is increasing in most of the years. This
shows that bank is safe in case of non repayment of loan since there is
adequate provision. But at the same time it is not possible to rule out the
fact that a higher loan loss provision reflects the inefficiency of management.
3.3 Recommendations
There is no doubt that an effective management is must for all the
banking functions. However, it more important for lending functions of
commercial banks. Based on the conclusion derived from the study of loan
management of NMB, the bank is suggested to work in the light of the following
recommendations:
NMB has invested a maximum amount of its fund on risky asset i.e. is
loan. Thus the bank is always threatened by the fear of default. It will be the
better if the bank diverts some amount of its find from lending and invest it
in less risky investment alternative. This will help the bank to diversify the
risk.
The increase in the loan loss provision in NMB is reflecting the
inefficiency of management. The bank needs to reduce its loan provision as in
2004/2005. This can be done by proper risk management which includes:
Careful screening of loan application.
Proper valuation of securities.
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