A CASE STUDY ON LOAN MANAGEMENT OF NMB BANK

A CASE STUDY ON LOAN MANAGEMENT OF NMB BANK


CASE STUDY ON LOAN MANAGEMENT


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



A CASE STUDY ON LOAN MANAGEMENT OF NMB BANK


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.

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
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:
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.
Commercial banks are organized institutes providing loans for the needed. The loan advancement is the main function of commercial banks. Similarly, interest on loan has become their main sources of income. Banks do deposits accepting and lending business. Loans are provided to earn interest. However, sometimes it may be difficult even for the repayment of principal. In this situation interest earning becomes far awaited business it dealt.

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
% change
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
13.52
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.
Proper appraisal of projects.

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