A STUDY ON

INVESTMENT POLICY ANALYSIS OF COMMERCIAL BANKS

(With references to NIBL & NABIL Bank)

BY
Sudip Dahal
Shanker Dev Campus
Campus Roll No.: 808/064
T.U. Registration No.: 53-2-2-1461-2004
2nd Year Symbol No.: 391412

A Thesis Submitted to:

Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirements for the Degree of

Masters of Business Studies (MBS)

Kathmandu, Nepal
2014
 RECOMMENDATION

This is to certify that the Thesis

Submitted by

SUDIP DAHAL

Entitled:

A STUDY ON INVESTMENT POLICY ANALYSIS OF COMMERCIAL BANKS

(with reference to NIBL & NABIL Bank)

Has been prepared as approved by this Department in the prescribed format of the
Faculty of Management. This thesis is forwarded for examination.

…………………………… ................................................. ……………………………

Prof. Dr. keshav Raj Joshi Prof. Dr. Kamal Deep Dhakal Asso. Prof. Prakash Singh Pradhan
(Thesis Supervisor) (Head of Research (Campus Chief)
Department)

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 VIVA-VOCE SHEET
We have conducted the viva-voce of the thesis presented
By
SUDIP DAHAL
Entitled:
A STUDY ON INVESTMENT POLICY ANALYSIS OF COMMERCIAL BANKS
(with reference to NIBL & NABIL Bank)

And found the thesis to be the original work of the student and written according to
the prescribed format. We recommend the thesis to be accepted as partial fulfillment
of the requirement for the
Degree of Master’s in Business studies (M.B.S.)

Viva-Voce Committee

Head, Research Department …………………………..

Member (Thesis Supervisor) …………………………..

Member (External Expert) ...……………………….

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 DECLARATION

I, hereby, declare that the work reported in this thesis entitled “A study on investment
policy analysis of commercial banks in Nepal” submitted to office of the Dean,
Faculty of Management, Tribhuvan University, is my original work done for the
partial fulfillment of the requirement for the Masters of Business Studies (MBS)
under the supervision of Prof. Dr. Keshav Raj Joshi of Shanker Dev Campus,
Putalisadak, Kathmandu.

……………...
Sudip Dahal
Researcher
Roll No: 808/064
Shanker Dev Campus
T.U. Regd. No…53-2-2-1461-2009

Date: - Aug, 2014

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 ACKNOWLEDGEMENT

This is an attempt to present thesis entitled “A study on investment policy analysis of

commercial banks in Nepal” prepared for partial fulfillment of the requirement for
the Degree of Master of Business Studies (MBS) is an outcome of continuous and
immeasurable cooperation and support of several hands. I would like to express my
heartfelt gratitude to all for their support.
I express my sincere honor and special sense of gratitude to my academic supervisor,
Prof. Dr. Keshav Raj Joshi for their generous guidance, thoughtful encouragement
and brilliant insight throughout this research work.
I owe great intellectual debt for support and immense contribution to Administrative
of NBBL. I am thankful to library staffs of Shanker Dev Campus and T.U. library for
their cooperation.

Sudip Dahal
Researcher
Roll No: 808/064
Shanker Dev Campus
T.U. Regd. No…53-2-2-1461-2009

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 TABLE OF CONTENTS
Page No.
Recommendation i
Viva–Voce Sheet ii
Declaration iii
Acknowledgement iv
Table of Contents v
List of Tables ix
List of Figures xi
Abbreviations xii
CHAPTER – IINTRODUCTION
1.1 Background of the Study 1
1.1.1 Commercial banks in Nepal 4
1.2 Profile of Sampled companies 5
1.3 Statement of the problem 6
1.4 Objective of the Study 8
1.5 Significance of the Study 8
1.6 Limitation of the Study 8
1.7 Organization of the Study 9
CHAPTER – IIREVIEW OF LITERATURE
2.1 Conceptual Frame Work 11
2.1.1 Concept of Investment 11
2.1.2 Principal of Investment Policy 12
2.1.3 Feature of Investment Policy 14
2.1.4 Investment Uncertainty (Risk) 17
2.1.5 Investment Portfolio 19
2.2 Review of Related Studies 23
2.2.1 Review of Books 23
2.2.2 Review of Articles 25
2.2.3 Review of Unpublished Thesis 26
2.3 Research Gap 32
CHAPTER – III RESEARCH METHODOLOGY
3.1 Research Design 34
3.2 Nature and source of data 35
3.3 Population and Sample 35
3.4 Data Analysis Procedure 36
3.5 Data Analysis Tools 36
3.4.1 Financial Tools 36
3.4.2 Statistical Tools 37
CHAPTER – IV PRESENTATION & ANALYSIS OF DATA
4.1 Analysis of Deposit and Investment of Sampled Bank 41
4.2 Investment Pattern of NIBL 43
4.3Analysis of Credit position 46

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 4.3.1 Credit position of NIBL 46
4.3.2 Credit position of NABIL 48
4.4 Ratio Analysis 49
4.4.1Credit Deposit Ratio 49
4.4.2 Loans and advances to Total deposit Ratio 51
4.4.3 Total deposit to investment Ratio 52
4.4.4 Total deposit to Net profit ratio 53
4.4.5 Total investment to Net profit ratio 55
4.5 Correlation Analysis 56
4.5.1 Correlation between Deposit and Investment 56
4.5.2 Correlation between loan &Adv and Investment 57
4.5.3 Correlation between Investment and net profit 58

4.6 Trend Analysis 58

4.6.1 Trend analysis of Investment of NIBL 60
4.6.2 Trend analysis of Investment of NABIL
61
4.7 Major Findings of the Study 63

CHAPTER – VSUMMARY CONCLUSION & RECOMMENDATION

5.1 Summary 67
5.2 Conclusion 68
5.3 Recommendation 69
BIBLIOGRAPHY
APPENDICES

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 LIST OF TABLES
Page No.
Table: 4.1: Deposit and investment position of NIBL & NABIL 42
Table: 4.2: Investment Pattern of NIBL 44
Table: 4.3: Investment Pattern of NABIL 45
Table4.4: Credit Position of NIBL 47
Table: 4.5: Credit position of NABIL 48
Table: 4.6: Credit deposit ratio 50
Table: 4.7: Loans and advances to Total deposit Ratio 51
Table: 4.8: Deposit to investment Ratio 52
Table: 4.9 Deposit to net profit Ratio 54
Table: 4.10 Investment to net profit Ratio 55
Table: 4.11: Correlation between Deposit and investment 56
Table: 4.12: Correlation between loan & Advance and Investment 57
Table: 4.13: Trend Analysis of investment of NIBL 60
Table: 4.14: Trend Analysis of investment of NABIL 62

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 LIST OF FIGURES
Page No.
Figure: 4.1: Presentation of deposit position 42
Figure: 4.2:Trend Line of Investment of NIBL 44
Figure: 4.3:Trend Line of Investment of NABIL 46
Figure: 4.4: Trend Line of Credit of NIBL 47
Figure: 4.5:Trend Line of Credit of NABIL 49
Figure: 4.6:Trend Line of Credit Deposit Ratio 50
Figure: 4.7:Trend Line of loan & adv to deposit Ratio 52
Figure: 4.8:Trend Line of investment to deposit Ratio 53
Figure: 4.9: Trend Line of deposit to net profit Ratio 54
Figure: 4.10 Trend line of investment to net profit Ratio 55
Figure: 4.11 Trend line of investment of NIBL 61
Figure: 4.12 Trend line of investment of NABIL 63

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 ABBREVIATIONS

A.D Anno Domini

ABBS Any Branch Banking System
ADB Agriculture Development Bank
ATM Automated Teller Machine
B. S. Bikram Sambat
CD Credit Deposit Ratio
Co. Company
CRR Cash Reserve Ratio
FA Fixed Assets
FY Fiscal Year
GDP Gross Domestic Product
Ktm. Kathmandu
LA Loan & Advance
LTD Limited
MBA Masters' of Business Administration
MBS Masters' of Business Studies
NABIL Nepal Arab Bank Limited
NCC Nepal Credit & Commerce
NEPSE Nepal Stock Exchange
NIBL Nepal Investment Bank Limited
NRB Nepal Rastra Bank
T. U. Tribhuwan University

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 CHAPTER - I
INTRODUCTION

1.1 Background of the study

Investment policy is the proper management of any fund or wealth to maximize value
or to obtain this high or favorable return with law risk considering the protection of
Invest forms the inflation and other possible harms. Banks are disbursing their money
as investment in trade business and industry. Due to the grown on banking sector in
Nepal and huge competition, investment are comparatively losses. Therefore, Banks
should be following the principle of investment for profit. An investment policy
should ensure maximum profit and minimum risk. Investment policy determines the
investor's objective and the amount of its investable wealth because there is possible
relation between risk and return for sensible investment strategies.
Investment by individuals, business and government involves a present sacrifice of
income to get on expected on future benefit as a result investment raises an economy
of nations. Investment usually involves putting money into a bet, which is not
necessarily marketable in order to enjoy a series of return the investment is expected
to yield. On the other hand speculation is usually a shorter run phenomenon.
Speculators tend to buy assets with the expecting of a profit than can be earned from
subsequent price charge and sale. Investments are usually made expecting a certain
stream of income, which has existed, will not change in the future."Investment in its
broadest sense means the sacrifice of current dollars for future dollars. Two different
attributes are generally involved time and risk. The sacrifice takes place in the present
and its magnitude generally is certain" (Shape Alexander and Baily, 1998).
Banking sector specially commercial bank play a vital role in the process of
canalizing the available resources in the needed Sectors. Financial system contacts
two component i.e. depositary financial institution and non-depository financial
institution. Commercial banks are depositary financial institution whereas employed
providence fund, development bank insurance companies etc. are non-depositary
financial institutions all the economic activities are directly or indirectly channeled
through banks. Banks accept money as a deposit from public and invest it in form of
loan and advances. Financial institutions act as an intermediary role between the
persons who lend and who borrow. Bank pools the scattered fund and mobilizes them

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in productive sector .bank came into existence mainly with the objective of collecting
the idle Fund, mobiles them into productive sector and causing an overall economic
development. The bankers have the responsibility of safeguarding the interest and
deposited amount of depositor.
Overall national development of any country depends up on the economic
development of that country and economic development largely depends up on the
financial infrastructure of that country. Therefore, the primary goal of any nation
including Nepal is rapid economic development to promote the weal fare of the
people and the nation as well. Nepal being one of least developed countries has been
trying to embark up on the path of economic development by economic growth rate
and developing all sectors of economy. The commercial Bank is simply a business
corporation organized for the purpose of maximizing the value of shareholder’s
wealth Invested in the bank at an accepted level of risk. They are different from other
firm, as their performance is a kin to their financial structure. The amount of the
bank’s capital risks of its loans and the nature of its deposits of affect its ability to
make money and remain profitable.
The banks will generate their income in a different way. They collect money from
savers and lend it to borrowers. They make profit by paying less for savings than what
they charge to the borrowers. Banks also generate income by providing other services
for which they charge fees and commissions. Such services include trust
administration, safety deposit account services and others. Meanwhile, banks have
also entered in to financial advisory services, foreign trading, processing and
investments.
The success of any organization, which in other words means the maximization of
wealth of its shareholder, depends amount other thing on its sound investment policy.
Development factor of a country is mobilization of domestic resources and their
investment for productive use to the various sectors. Integrated and speedy
development of the country is possible only when competitive banking services reach
every hooks and corners of the country. The fundamentals principals of investment
must be followed thoroughly for profitable investment.
Good investment policy ensures maximum amount of investment to all sectors with
proper utilization. There is highly liquidity in the market but there is no profitable
place to invest. Flowing of money hundred times more than required when required

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when there were called by the banks and financial institutions is the example of high
liquidity in the money market.
The initial step investing policy involves is determining the investment objectives and
the amount if one’s investing able 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 objective policy also involve the identification of the
potential categories of financial assets depends upon many things such as investment
objectives investable fund, tax consideration etc.
Investment is a 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 high
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 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 maximum.
Investment operation of commercial bank’s is very risky for this, commercial banks
have to pay due considerations while formulating investment policy. A healthy
development of any commercial bank depends upon its investment policy. A good
investment policy attracts both borrowers and lenders which help to increase the
volume and quality of deposits, loans and investment.
1.1.1 Commercial Banks in Nepal
Commercial banks are very important for the development of national economy.
Theyaccept public saving as deposits and advance them as loans to the persons,
businessorganizations and government when they required. The development of
commercialbanks is in increasing trend after the restoration of democracy in
1990A.D. The firstcommercial bank is Nepal Bank Limited that was established in 30
Kartik 1994 B.S(1937 A.D.). And the second is RBB established in 10/10/2022 B.S.
After a long period of establishment of these two banks, NABIL Bank is the
firstcommercial bank from the private sector. This is the first joint venture bank of

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Nepalalso. There after many other joint venture and non joint venture banks were set
upunder the Commercial Bank Act, 2063 and Company Act, 2053.
Now, Thirty-One Commercial banks are operating in the country.The door is opened
now for the establishment of commercial banks with newpolicy relating to
commercial bank issued by Nepal Rastra Bank considering thatbanking of entrance
is not favorable in the liberal and market oriented economicenvironment and to
create the competitive environment. Thus, it is expected that thenumbers of
commercial banks will be increased in future. According to new policyissued by
NRB, the paid up capital of new opening commercial bank at national levelmust be
Rs. 2000 million.
If the newly opened bank is joint venture with foreign bank or financial institution, it
ispermitted to open new commercial banks with head office at Kathmandu
valleycontracting three years management with 67% investment of foreign such
institution,the ratio of ownership of share will be 7:3 between founder and public
respectively.
There are many functions of commercial banks and the principal functions are
asfollows.
• To accept deposit
• To provide loans and advances
• To create credits
• To perform agency function
• To carry out utility functions.
The commercial bank and banker has its own right and duties. The rights
arementioned point-wise as follows.
• Banker enjoys a general lien over customer's securities in his possession.
• He has an implied right to change a reasonable commission for his service
andinterest upon loans.
• He has the right of set-off like any other debtors.
• He has the right to appropriate payment as per the rules laid down in
Clayton'scase.
• Banker need not seek out the creditor to make the payment. It is the creditor
whoshould demand payment.
Similarly, the duties of banker are as follows.

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 • To receive his customer's money and cheques and other instruments for
collection.
• To repay the customer's deposit on the presentation of customer's mandate
knownas the cheque.
• To maintain secrecy in respect of customer's account and affairs.
1.2 Profile of Sample Companies
1.2.1 Nepal Investment Bank Ltd. (NIBL
Nepal Investment Bank Ltd. (NIBL), previously Nepal Indosuez Bank Ltd., was
established in 1986 as a joint venture between Nepalese and French partners. The
French partner (holding 50% of the capital of NIBL) was Credit Agricola Indosuez, a
subsidiary of one the largest banking group in the world. With the decision of Credit
Agricola Indosuez to divest, a group of companies comprising of bankers,
professionals, industrialists and businessmen, had acquired on April 2002 the 50%
shareholding of Credit Agricola Indosuez in Nepal Indosuez Bank Ltd. The name of
the bank has been changed to Nepal Investment Bank Ltd. upon approval of bank’s
Annual General Meeting, Nepal Rastra Bank and Company Registrar‟s office with
the following shareholding structure.
• A group of companies holding 50% of the capital
• Rashtriya Banijya Bank holding 15% of the Capital.
• Rashtriya Beema Sansthan holding the same percentage
• The remaining 20% being held by the General Public
1.2.2 NABIL Bank Limited
NABIL Bank Limited, the first foreign joint venture bank of Nepal commenced
operations in July 1984. NABIL was incorporated with the objective of extending
international standard modern banking services to various sectors of the society
pursuing its objective, NABIL provides a full range of commercial banking services
through its 30 points of representation across the kingdom in and over 170 reputed
correspondent banks across the globe.
NABIL Bank, as a pioneer in introducing many innovative products and marketing
concept in the domestic banking sector, represents a milestone in the banking history
of Nepal as it started an era of modern banking with customer satisfaction measured
as a focal objective while doing business. Operations of the bank including day-to-day
operations and risk management are managed by highly qualified and experienced

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management team. Bank is fully equipped with modern technology which includes
ATMs, Credit cards, state-of-art, world-renowned software from Infosys
Technologies system and banking system and Tele-banking system.
1.3 Statement of the Problem
In the contest of Nepal, The financial sector collect adequate amount from the mass,
however they could not find or locate new investment sectors required to mobilize
their funds, only few commercial banks are getting regular profits. Most of them are
unable to satisfy their shareholders and customers in earning profit and ensuring their
safe deposit.
The most important problem is poor investment climate prevailing in Nepal due to
heavy regulatory procedure, uncertain government policy, NRB’s stringent directives,
and unsecured social environment.
There are so many problems to collect scattered funds and to invest onto productive
area. Nepal is poor and developing country. There are most of the people are under
the poverty line. They have the problem to join mouth and hands per day. So how
they can collect money and deposit into bank? Government and private sectors are
unable to give employment to all educated people. Because of the Globalization and
liberalization, people’s needs are growing. But Nepalese industries are unable to
provide Nepalese products. Then our capital is going out of the country. So, how
investment is possible in our country? There are so many prospects of saving and
investment. We should find out the issues of saving and investment to gain prospects
of saving and investment. We have got peace process. Banks are growing faster and
faster and they are utilizing their best facilities and techniques. The most of remote
areas are out of reach of Banks. Now a day there is lack of liquidity in the market.
Strikes are being done by Industrial Labors and political parties. These activities are
affecting economic sectors. The government has been unable to use 100% of
development fund each year. Large numbers of banks existing in the economy.
Government has been unable to provide security in each place like SchoolCollege and
other. We feel lack of stable Government and its policies toward the investment in our
country. Thus our government and concerned sector should concentrate their mind to
remove the issues of investment for stable investment policies. Inflation is growing
day to day. These above issues are creating problems in investment process of Bank.
• Are the available fund properly utilized or not?

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 • What is the relationship between investment on loan and advance, deposit and
net profit?
• What is the investment portfolio behavior of the banks?

1.4 Objectives of the Study

The main objective of the study is to assess the investment policy and strategy
followed by the bank with reference to NIBL and NABIL Bank. The other specific
objectives of this study mentioned below.
• To find out the trend of deposit, investment, loan & advance and net profit.
• To access the investment portfolio of sample banks.
• To find out relationship between total investments, deposit, loan & advance
and net profit.
1.5 Significance of the Study
The focus of study is to highlight the investment process of commercial banks
expecting that the study can be bridge the gap between deposit and investment
process. On the other hand, the study would provide information to management of
the bank that would help them to take collective action. Investment is the most
important means of economic development. If savings are invested in unproductive
area economic growth will be broke out. So any firm or company should take right
polices of investment. So issues of investment should be found out and solved. Then
investment will be means of economic development of a country.
Suitable strategy plays vital role in a bank for their sustain existence. The study will
be helpful to aware the shareholder regarding investment policies of their banks. The
study suggests to the management how they can improve their managing power and
recommends what is the clue to raise the profit. Though, this is only study but it gives
feedback to policy makers, will useful them who formulate the policy for regulation.
All stakeholders can identify which bank is the best and to whom have to invest.
1.6 Limitations of the Study
Although there are several commercial banks in Nepal but the study has been
confined to two sampled banks i.e NIBL and NABIL Bank ltd. The main limitations
of the study are as follows.
• This study is mainly based on secondary data collected from annual report,
journals, Websites and different articles.

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 • This study covers five years data i.e. 2008/09 to 2012/13 fiscal years.
• This study has taken only two commercial banks as a sampled among 30
commercial banks.
• This study is only focus on investment policy of commercial banks.
• Financial as well as statistical tools were used for analysis.
1.7 Organization of the Study
The research will be divided into five chapters.
Chapter -I- Introduction
This chapter deals with the subjects matters of the study consisting background of
study, profile of sample companies, statement of problem, objective ofthe study,
significanceof the study, limitation of the study and organization of the study.
Chapter -II - Review of Literature
This chapter deals with review of the different literature of the study field. Therefore,
it includes conceptual framework along with the review of major books, journal,
research work and thesis etc.
Chapter - III- Research Methodology
This chapter includes research design, population &sample, sources and types of data,
data processing and method of analysis.
Chapter - IV- Data Presentation and Analysis
This chapter deals with analysis and interpretation of the data using financial and
statistical tools describe in chapter three. Similarly, this chapter also includes the
major findings of the study.
Chapter - V- Summary, Conclusion and Recommendation
This is the last chapter of the study. Itsummarizes the result of analysis and suggestive
framework.
Besides these, bibliography and annexure are presented at the end of the thesis.
Similarly recommendation, viva voice sheet, acknowledgements, table of contents,
list of tables, list of figures and abbreviations are included in thefront part of the thesis
report.

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 CHAPTER - II
REVIEW OF LITERATURE

After selecting the topic of the research, researcher should study different journals,
periodicals, newspaper, published bibliographies, books etc. to collect or gathering the
information about the selected topic of the research. This process of studying different
educational materials is known as review of literature. In simply review of literature
means to collect the information about the selected topic of the research through the
different sources. Review of literature means stock taking of available literature in
one's field of research. Literature review is a comprehensive review of previous works
on the general and specific topics considered in the report. The literature review may
also serve as a kind of bibliographic index and guide for the readers. It also
demonstrates where the current study fits into the scheme of things. The objective of
reviewing the literature is to develop certain expertise and knowledge in one's area.
Under this topic the following subject matter are reviewed.
• Conceptual Review
• Review of Journal & Articles
• Review of Previous Thesis
2.1 Conceptual Frame Work
The review of textbooks and other reference materials such as: newspapers,
magazines, research articles, journals and past thesis have been included in this topic.
Under the investment policy of commercial banks is matters are considered like the
mobilization strategy of the bank, documentation of fund mobilization processing,
review process, etc.
2.1.1 Concept of Investment
Investment can be defined as sacrifice of present consumption with expectation of
return in future. Investment takes place at present but return can be expected in future
but return in uncertain too. Uncertainty is measured by risk that why there is always
involvement of risk in investment. Investment usually involves putting money into
abet, which is not necessarily marketable in order to enjoy a series of return the
investment is expected to yield. On the other tend speculation is usually a shorter than
phenomena. Speculators tend to buy assets with expecting of a profit that can be

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earned from subsequent price change & sale. Investments are usually made expecting
a certain stream of income, which has existed, will not change in the future.
“Investment is made in assets. Assets in all are of two types’ real assets (land,
building, factures etc.) and financial assets (stock, bond, t-bills etc.). These two
investments are not competitive but complementary. Highly developed institutions for
financial greatly facilitate real investment” (Bhattarai, 2004: 142). "Investment is the
commitment of funds to one or more assets that will be held over some future time
period. Investment is concerned with the management of an investor's wealth, which
is the sum of certain income and present value of all future income" (Jones, 1999: 33).
Investment is nothing but deploying our saving in manner that ensures safety of our
money & provides a sustained return to supplement our regular income (Delhi Stock
exchange 2002). The term investment covers a possible where there are devour
saving. If all the income & saving are consumed to solve the problems of hand to
month and to other basis needs then there is no existence of in investment are
interrelated.
2.1.2 Principle of Investment Policy
It is universally known fact that the most important problem in banking administration
is that ofinvesting its deposits and paid up capital in various forms of earning assets.
This is also known asportfolio policy. The bank’s portfolio being nothing but an
arranged and digested scheme of itsassets.
The funds of banks are generally invested either in those assets, which are non-
profitable, orthose, which are profitable. Non-profitable assets include cash reserve
and the dead stock andprofitable assets includes call money, investment, advances and
loan, cash credits, overdrafts,discounting of bills and acceptances etc.The guiding
principle of sound investment is as follows.
1. Safety:- Safety would be the first guiding principle of a bank, so far as its
advances and investment areconcerned, because the very existence of a bank
depends on the safety of its outstanding, whichshould never therefore be
sacrifice to the profit-earning capacity of its advances. This has ledpeople to
believe that a bank will never advance any loan, unless it is fully secured.
Such is nodoubt the ideal conception of banking, but as a result of its
competition from other banks, everybank has to grant a certain number of
loans to its customers against their personal security. Insuch cases, the bank
uses direction and never lends a sum obviously beyond its

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 customer’sresources. Consequently, to maintain a banking concern in sound
condition should be abovesuspicion. Scrupulous care should be taken that the
funds lent out are not subject to any risk ofbeing lost.
2. Liquidity:- While making advances and investments, the bank must see that
the money it is lending is notgoing to be locked up for a long time, which
would make its loans and advances less liquid andmore difficult to realize in
cases of emergency. A bank can afford to lend funds only for a shortperiod, as
its liabilities are either payable on demand or at short notice. If it makes
advances forlong term there is no likelihood of it being able to recall such
loans in time to meet the demandsof its depositors.
3. Diversification of Risk:- It is also necessary to remember that a prudent bank
must avoid investing all its funds in meetingthe needs of any one industry or
any one group of industries for considerations of self-interest aswell as the
larger public good. The imprudence on putting one’s own eggs into one basket
cannotbe too often reiterated. Therefore bank should invest their funds in
different field than investing insame field or sector.
4. Return:- Another important factor that it determines the decision of the bank
whether or not to grant loanor to make an Investment will depend upon the
answer to the question whether or not it will get afair return on its investment.
A bank always aims at securing maximum profits for its share-holders. The
difference between borrowings and lending rate constitutes the gross profit
and nobank ordinarily will think of an advance without a satisfaction margin
of profit.
5. Marketability:- The investments of the bank should be such as can be easily
sold and realized in cash readily.Loans given against commercial paper
representing goods in transit or against stocks and sharesof well-known
companies are easily realizable while loans given against immovable
propertycannot be easily realized. The bank must make sure that the securities,
in which he invests hisfunds, are easily saleable without appreciable loss.
6. Stability of Price:- The primary object of a bank in buying securities is not to
gain by a possible rise in their prices,which is the aim of a speculating dabbler.
Therefore the price of the securities should be liable towide fluctuations.
7. Stock Exchange Securities:- This consists of government securities as well as
securities of the joint stock companies. Thesesecurities are easily and quickly

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 realizable. As they are quoted on the stock exchanges so theirvalues can be
easily ascertained. In case of need, a bank can either sell them or pledge
themwithout any hesitation. But before accepting them, the bankers should see
that the shares of thecompanies are not partly paid, that sufficient margin has
been kept and they are negotiable.Speculative shares should not be accepted.
2.1.3 Features of Investment Policy
Income and profit of the financial institutions like commercial banks andfinancial
institutions depend upon its lending procedure, lending policyand mobilizing
collected fund through investing in different securities.The greater the credit created
by the bank the higher will be theprofitability. Some required features of sound
lending policy and fundmobilization is explained as under:
Safety and Security:- Financial institutions should inlets their deposit in
profitable andsecured sectors. They should not invest their fund in securities of
thosecompanies whose securities are too much depreciated and
fluctuatedbecause of risk of loss factors. They should accept those
securities,which are marketable, durable, profitable and high market price as
wellas stable. In this case MAST should be applied for the investment.
Where,
M = Marketability
A = Ascertain ability
S = Stability
T = Transferability
Legality:- Each and every financial institution follow the rules and
regulation of thecompany, government and various directions supplied
by Nepal RastraBank, Ministry of Finance and on while issuing
securities and mobilizingtheir fund. Illegal securities will bring out any
problems to the investors.Lastly, the reputation and goodwill of the
firm may be lost.
Liquidity:- Liquidity is the position of the firm to meet current or
short-termobligations. General public or customers deposit their
savings at thebanks in different accounts having full confidence of
repayment by thebanks whenever they require. To show a good current
position andmaintain the confidence, every firm must keep proper cash

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 balance withthem while investing in different securities and granting
loan for excessfund.
Profitability:- To maximize the return on investment and lending
position, financialinstitutions must invest their collected fund in proper
sectors. Finallythey can maximize their volume of wealth. Their return
depends uponthe interest rate, volume of loan its time period and
nature of investmenton different securities and sectors.
Tangibility:- A commercial bank should prefer tangible security to an
intangible one.Though it may be considered that tangible properly
doesn’t yield anincome a part from intangible securities, which have
lost their value dueto price level inflation.
Purpose of loan:- Banks and other financial institutions must examine
why loan isrequired to the customer. If customers do not use their
borrowings, theycan never repay and the financial institutions will
have heavy bad debts.So, they should collect detailed information
about the plan and schemeof the borrowing.
Diversification:- A firm can invest its deposit collection in various
securities to minimizethe risk. So, all the firms must diversify their
fund or make portfolioinvestment. Diversification helps to earn a good
return and minimize therisks and uncertainty. So, the firms are making
portfolio investment withdifferent securities of different companies.
Factors Affecting Investment Decisions
1. Return
Investments are made to earn returns. The return expectation can be
the amount received as interest, dividend received on stocks, capital
appreciation on assets and many more. Different investments have different
returns. Returns from an investment depend on its rating, liquidity and time
horizon of the investment. It is measured as Holding Period Return.
2. Risk
Savings becomes investment because of the risk factor. Risk is an inherent part of any
investment activity. Some of the risk associated with an investment can be –
A. Loss of capital
B. Delay in repayment of capital

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C. Non payment of Interest
D. Variability of returns
Different investment products have different risk. Government securities, bank
deposits have higher safety and negligible risk. Equity shares have higher risk on the
other end. It can give huge profit and at the same time has the potential to erode the
capital. Risk and return are directly related. Higher the risk taken, higher can be the
return, similarly low return comes with low risk. Basic risk measurement terms are :
Variance: It is the mean of squares of deviations of individual returns around their
average value.
Standard deviation: It is the square root of variance, the deviation of actual returns
from expected returns.·
Beta: This measures the volatility of return of an investment in relation to the market
return.

3. Safety
An investment is considered to be safe, if there is a certainty of return of capital
without any loss of the same. The safety on probable return is generally illustrated by
the ratings of the investment vehicles. A (AAA) bond signifies highest possibility of
return of capital with accrued benefits to the bond holder. This is a prime
characteristic of investments, as every investor invests to get back his/her capital
together with profit.
4. Liquidity
It is an important feature of any investment. The yield on any investment is to an
extent a function of liquidity. It can be defined as the property of an investment,
wherein it can be converted in cash on demand, without loss in value. Liquidity in
marketable assets are provided by the market, while non marketable assets like fixed
deposits cannot be liquidated in market but can be offered for premature repayment to
bank.
5. Tax efficiency
Some investments offer tax benefits, while others don't. An ideal
investment is that which offers tax efficient return commensurate to risk with safety
and liquidity. Tax benefits available to an investment can be any one of the following:
2.1.4 Investment Uncertainty (Risk)

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Every investment involves uncertainties that make future investment returns risky.
Some of thesources of uncertainty that contribute to investment risk are as follows.
1. Purchasing power Risk:- It is the variability of return an investor suffers
becauseof inflation. The rate of inflation is measuredby using a consumer
price indeed(CPI). The percentage change in the CPU is a widely
followedmeasure of the rate of inflation.
2. Bull-Bear Market Risk:- Bull-Bear market risk arises from the variability in
market return resulting from alternating bull andbear market forces. When a
security index rises fairly consistently form a low point called a trough,for a
period of time, this upward trend is called a bull market. The bull market ends
when the marketindex reaches a peak and starts a downward trend. The period
during which the market declines tothe next trough is called bear market.
3. Default Risk:- It is the portion of an investment’s total risk that results from
changes in the financial integrity of theinvestment. Default risk is the
variability of return that investors experience as a result of changes inthe
creditworthiness of a firm in which they invest. Investor losses from default
risk usually resultfrom security prices falling as the financial integrity of a
firm weakness. By the time an actualbankruptcy occurs, the market prices of
the troubled firm’s securities will already have declined tonear zero.
4. Liquidity Risk:- It is that portion of an assets total variability which results
from price discounts given or salescommissions paid in order to sell the asset
without delay. Perfectly liquid are highly marketable andsuffer no liquidation
costs. Liquid assets are not readily marketable – either price discounts must
begiven or sales commissions must be paid, or both of these costs must be
incurred by the seller.Hence, the more liquid an asset is, the larger the price
discounts and/or commissions which must begiven up by the seller in order to
affect a quick sale.
5. Callability Risk:- Some bonds and preferred stocks are issued with a
provision that allows the issuer to call them in forrepurchase. The portion of a
securities total variability of return that derives from the possibility thatthe
issue may be called is the callability risk. Callability risk command a risk
premium that comesthe form of a slightly higher average rate of return. This
additional return should increase as the riskthat the issue will be called
increases.

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 6. Convertibility Risk:- Convertibility risk is that portion of the total variability
of return from a convertible bond or aconvertible preferred stock that reflects
the possibility that the investment may be converted into theissuer’s common
stock.
7. Political Risk:- The portion of an asset’s total variability of return cased by
changes in the political environment thataffect the asset’s market value.
Whether the changes that cause political risk are sought by politicalor by
economic interests, the resulting variability of return is called political risk.
8. Industry Risk:- An industry may be viewed as a group of companies that
compete with each other in a market ofhomogenous product. Industry risk is
that portion of an investment’s total variability of returncaused by events that
affect the products and firms that make up an industry. The stage of
theindustry’s life cycle, international tariffs and/or quotas on the products
produces by an industry,product or industry related taxes; industry wide labour
union problems, environmental restrictions,raw material availability, and
similar factors interact and affect all the firms in an industrysimultaneously.
As a result of these commonalities, the process of the securities issued by
competingfirms tends to rise and fall together.
2.1.5 Investment Portfolio
A portfolio is usually defined as a combination of assets. It is a collection of
securities. Portfoliomeans the lists of holding in securities owned by an investor or
institution. A portfolio is a collectionof investment securities. Example, if any
company of or a person holds some stocks of Nepal Investment Bank Ltd., some
ofBottlers Nepal Co., some of Radisson Hotel and some of Standard Chartered Bank
Llimited, than theinvestment portfolio consists of the stocks of these four different
companies. Portfolios analysisconsiders the determination of future risk; and return is
a weighted average of the expected return ofthe individual securities.
Portfolio theory deals with the selection of optimal portfolio i.e. the portfolio that
provides thehighest possible return for any specified degree of risk or the lowest
possible risk for any specifiedrate of return. Portfolio theory has been developed for
the financial assets. Thus making investmentfrom the selected optimal portfolio i.e.
the portfolio that provides the highest rate of return with leastpossible amount of risk
is the real investment portfolio.

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“A portfolio simply represents the practice among the investors of having their funds
in more thanone asset. The combination of investment assets is called a portfolio”
(Weston, J.F. and Brigham, E.F. 1982).
An investor who has been paying someone or actively manages his or her portfolio
has every right toinsist on knowing what sort of performance was obtained. Such
information can be used to altereither the constraint placed on the manager, the
investment objective given to the manager, to theamount of money allocated to
manager. Perhaps more importantly, by evaluating performance inspecified ways a
client can forcefully communicate his\her interest to the investment manager andin all
likelihood, affect the way in which his or her portfolio is managed in the future.
Moreover, aninvestment manager, by evaluating his or her own performance, can
identify sources of strengths orweakness.
Legal Provision related to investment policy of commercial banks
Banks and Financial Institutions Regulation Department NRB (Directives No.
8/070)following Directives have been issued with regard to investment of financial
resourcesof a licensed institution having exercised the powers conferred by Section 79
of the NepalRastra Bank Act, 2002.
1. Implementation of Investment Policy and Procedures upon
ApprovalThe licensed institutions shall implement the policies and
procedures regarding theinvestment in Government of Nepal
securities, Nepal Rastra Bank bonds, and othercorporate bodies' share
and debentures only upon the approval of investment policy
andprocedures by the Board of Directors.
2. Provision for Investment in Government of Nepal Securities and
Nepal RastraBank Bonds. There shall be no restriction as to
investment by the licensed institutions in thesecurities of Government
of Nepal and Nepal Rastra Bank bonds.
3. Provisions for Investment in Shares and Debenture of Corporate
Bodies

Licensed Institutions shall invest only in the shares and debentures
of corporatebodies listed in the Nepal Stock Exchange after the
public issues of shares.Provided that, where the investment has
been made in the shares and debenturesof corporate bodies which

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 are not listed in the stock exchange, and if such listingis not
completed within one year from the date of investment, a
provision ofequivalent to the whole amount of such investment be
provided and credited toInvestment Adjustment Reserve by
creating such reserve fund. The outstandingamount in such
Reserve shall not be utilized for any other purpose till the
saidshares and securities of the corporate body are listed. With
respect to investment in newly opened corporate body that where
suchcompany is not listed in stock exchange within two years
from the date ofoperation or investment being made, a provision
of equivalent to the wholeamount of such investment be provided
and credited to Investment AdjustmentReserve.

While carrying out projects such as land development, land
purchase and housingconstruction for residential purpose and sale
and management of such houses andland pursuant to clause (ad)
of sub-Section (2) of Section 47 of the Banks andFinancial
Institutions Act, 2006 by the class "B" licensed institutions and
pursuantto clause (u) of sub-Section (3) of the same Section of the
same Act, licensedinstitution shall not invest more than twenty-
five percent of the core capital ofimmediately preceding month.

While investing in housing construction and land development by
a licensedinstitution, it may invest an amount not exceeding ten
percent of the core capitalmaintained immediately preceding
month. If found to have been invested morethan the limit, the core
capital shall be maintained having deducted the amountequal to
the exceeded investment from the core capital. While making
suchinvestment, investment shall be made only in the building
construction and landdevelopment companies that have been
incorporated as public companies.

Licensed institutions may invest in shares and securities of any
one corporatebody up to 10 percent of its core capital maintained
at immediately precedingtrimester and not exceeding the
cumulative amount of such investment in all thecompanies by
more than 30 percent of its core capital. Similarly, while

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 investingin shares and debentures of corporate bodies by a
licensed institution, investmentshall be made not exceeding 10
percent of the paid up capital of the institution inwhich the
investment is being made and not exceeding 25 percent of the
same incase of investment made in class "D" institutions. Any
amount of investment madein excess of this limit, for the purpose
of calculation of the capital fund, shall bededucted from the Core
capital fund.

Chairperson/member of a parent company shall not be allowed to
be thechairperson or number of the subsidiary company. In case of
Directors who areDirectors in the subsidiary company prior to
issuance of these Directives on May10, 2010, he/she shall have to
move from it before the upcoming first generalmeeting of the
parent company or within one year of issuance of this
directive,whichever is earlier.
4. Provision for Review of Investment Portfolios

Licensed institutions shall review its investment portfolios on
half-yearly basis. Withrespect to such review, a statement from
the Internal Auditor of the licensed institutioncertifying that the
investments are made according to the existing investment policy
andaccording to this Directives be obtained and `shall also be
approved by the managementof the institution within 1 (one)
month from the close of the half yearly period. A copyof the
approval of the management of the institution shall be submitted
within Falgun15 (end of February) and Bhadra 15 (end of August)
of each fiscal year to this Bank'sBank and Financial Institutions
Regulation Department and concerned SupervisionDepartment.
5. Valuation of Shares and Debentures

The investments of the licensed institutions in shares and
debentures shall be separatedcompany wise according to
Directives Form No. 8.1, 8.2 and 8.3. It shall be shown inits assets
having evaluated it semiannually based on the purchase price or
the marketprice, whichever is lesser.Provided that, where the
market price of any company's shares or debenture falls belowthe

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 cost price, the difference amount has to be debited to the Profit
and Loss Accountand credited to provision for loss in investment
account.

Moreover, while evaluating investment, it shall have to be
evaluated according to theprovision made in Points 2 and 2.B.3
(Investment Policy) of Directives No. 4/067 andthe details thereof
shall be prepared in the format of Nepal Rastra Bank Directive
formNo. 8.2.
6. Provisions Relating to Purchase/Investment in Fixed Assets
(House/Land) For OwnPurpose

The banks of financial institutions incorporated and in operation
under the B to F1Ashall be allowed to purchase/invest in the fixed
assets. (house/land) for the self purposein the case they meet the
following terms and conditions:

Entire pre-operating expenses of the bank/financial institution is
written off.

The first general meeting is completed upon issue of shares to
general public asrefund to in the Memorandum of
Association/Articles of Association.

The institution is in profit at the time of purchase of the property.

The capital fund is adequate according to the Directives issued by
this Bank.Moreover, in case of purchase of investment in the fixed
assets without meetingthe said terms and conditions; the amount
equivalent to that to be deducted whilecalculating the core capital
fund.
7. Additional Arrangement Regarding Investment

Licensed institutions shall not invest in any shares, securities and
hybrid capitalinstruments issued by any other institution of "A",
"B" and "C" class licensed bythis Bank.Provided that, this clause is
not applicable in case of share investment in class "D"institution
and income of share investment with approval from this Bank.

The core capital maintained in the Directives relating to investment
means, thecore capital maintained at the immediately preceding
trimester except specificallystated otherwise.

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2.2 Review of related studies
2.2.1 Review of Books
Frank K. R. (2005),“Investment Analysis Management” has defined the term
investment, “Investment is the current commitment of funds for a period of time to
obtain a future flow of funds that will compensate the investment unit for the time the
funds are committed for the expected rate of inflation & also for the uncertainly
involved in the future flow of fund. (Investment, Japan: the Oryden Press, CBS
Publisher Ltd.)
From the above definition, it is clear that an investment means to trade a know rupee
amount for some expected future steam of payment or benefits that will exceed
currently outlay by an amount that will compensate the investor for the time of
uncertainly involved in expected future cash flows. This investment is the most
important function of commercial banks. It is very challenging task for commercial
banks. So, a bank has to be very cautions while investing their funds in various
sectors. The success of a bank heavily depends upon the proper management of its
investable funds.
William and J. C. (2005),“Investment Policy and its Management” Investment in its
broadening sense means the sacrifice of current dollars for future dollars. Two
different attributes are generally involved: time and risk. The sacrifice takes place in
the present and its magnitude is generally uncertain.
• Real Investment: Generally, if involves some kind of tangible assets such as:
land, machinery & factories.
• Financial Investment: Involves contract has written on price of paper such as:
common stocks & bonds.
Pandey, I. M. (2006),“Investment Decision” in investment analysis, cash flow is
more important than accounting profit. It may also be pointed out that investment
decision affects the firm's value. The firm's value will increase if investments are
profitable and add to the shareholder's wealth. Thus, investment should be evaluated
on the basis of criteria, which is compatible with the objectives of the shareholder's
fund maximization. An investment will add to the shareholder's wealth if it yields
benefit in excess of the minimum benefits as per the opportunity cost of capital.
Chancy, J. M. & Moses, E. A. (2008),“Investment Analysis” focuses on the
individual investment. They states, it is important that the investor set the appropriate

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investment objectives & the accompanying investment horizon. In addition, in
developing investment strategies to achieve the objectives, the investor must
understand the tax conservancies and expected risk & return associated with the
various investment alternatives per haves most importantly the investor should
recognize that achieving & investment objective involves the creation of a portfolio of
assets and not a collection of individual assets. They further states that, individual
assets may be very risk. Combining these assets into a portfolio of other assets may
actually reduce the risk of the overall risk.
2.2.2 Review of Journal and Articles
Pradhan (2003), in his research paper “Role of Saving, Investment & Capital
Formation in Economic Development of Nepal” has studied about the strong role &
impact of saving, investment & capital formation on economic development of Nepal.
This study is based on secondary data only. The necessary data on saving, investment,
capital formation and gross domestic product has been collected for the period of
1974/75 to 2000/01. The role & impact of saving, investment and capital formation on
economic development were analyzed by using various regression models. The
regression equation used in this study have been estimated at current prices as well as
in real term with the entire study period divided into different sub-period.
The results presented in this paper suggest that in all cases GOP is significantly
associated with saving. Investment and capital formation both at current prices and in
real terms. The result of the empirical analysis led to three important conclusions:
first, saving, investment & capital formation have positive impact on economic
development. Second, the current values & past values of saving, investment &
capital formation have positive impact on economic development but the current
values have the largest impact. Third, there is a strong role played by saving & capital
formation on economic development while weak role-played by investment.
World BankEncyclopedia (2005),states that investment promotes economic growth
and contributes to anation’s wealth. When people deposit money in a saving account
in bank. For example, the bankmay invest by lending the fund of various business
companies. These firms, in return, may inventthe money in new factories and
equipment to increase their production. In addition to borrowingfrom the banks, most
companies issue stocks and bonds that they sell to investors to raise capitalneeded for
business expansion. Government also issues bonds to obtain funds to invest in
suchprojects as the construction of dams, roads and schools. All such investment by

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individuals,business and govt. involves a present sacrifice of income to get an
expected future benefits. As aresult, investment raises a nation’s standard of living.
Joshi (2007), in the article ‘Rural saving mobilization in Nepal’ states that the ability
to save and the incentive to save are the two major determinants of saving. The
incentive to save as reflected in NRB real interest rate policy can be stretched for with
profit. It is highly probable that the further increase in the growth rate of financial
saving can be materialized if a flexible policy is pursued to keep real interest rate at a
positive level. Eventually the deposit expansion is to be bounded constrained by the
low saving ability of the people as indicated by stagnant per capital GDP over the past
decade.
Kayastha (2010) in her article “Lending Operation of Commercial Banks of Nepal
and its Impact on GDP” has made an analysis of contribution of commercial banks,
lending to the Gross Domestic Product (GDP) of Nepal. She has set hypothesis that
there has been positive impact of lending of commercial banks to the GDP, in
research methodology; she has considered GDP as the dependent variable and various
sector of lending like agriculture, industrial, commercial service and general social
sectors as independent variables. A multiple regression techniques have been applied
to analyze the contribution.
The analysis shows that the entire variable except service sector lending has positive
impact on GDP. Thus, in the conclusion she had accepted the hypothesis i.e. there has
been positive impact on GDP and also she has accepted the hypothesis i.e. there has
been positive impact by the lending of Commercial Banks in various investment.
2.2.3 Review of Unpublished Thesis
Dhungana (2007), his research, “A Comparative Study on Investment Policy of
Nepal,Bangladesh Bank and Other Joint Venture Banks”, tries to compare the
Investment policy ofNBBL with HBL and NSBL.
His Main Objectives:
• To study the growth ratios of loan and advance and investment to total deposit
andnetprofit of NBBL on comparison with HBL and NSBL.
• To analyze the relationship between loan and advance and total investment
with otherfinancial variable of NBBL and compare with HBL and NSBL.
• To examine the profitability position and credit risk ratios and interest risk
ratios.

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His Majors Findings:
• NBBL has not good deposit collection, it hasn't made enoughcash and bank
balance and it has made negligible amount of investment in
governmentsecurities.
• The Asset management ratios were highly variable which reveals NBBL has
not followedstable policy.
• NBBL’s ratio of OBS operation to loan and Advances lower than that of HBL
but its ratio isgreater than that of NSBL.
• The profitability position on NBBL is comparatively not better than that of
HBL but betterthan that of NSBL
• The credit risk ratios and interest risk ratios of NBBL is higher than that of
HBL and NSBL
• Banks profitability is solely depends on Interest charged by a bank but the
high interest raterisk of NBBL shows that bank is failure to maintain this.
• Trend of deposit collection, lending, Investment and net profit were not better
than HBL butbetter than NSBI.
His Majors Recommendations:
• To increasing liquidity position of NBBL and making more investment in
governmentsecurities.
• To implement a sound collection policy nd more mobilization of interest
bearing assets.
• To have effective portfolio management, to have liberal lending policy and to
upgrade thebanking facility.
Sanjel (2008),has carried out a research work on the topic “Analysis of Investment
Policy of Commercial Bank”. The main objective of the present study is to analyze
the liquidity position as well as theinvestment policy adopted by NBBL, HBL and
SCBNL and comparison of such betweenthemselves. Presently the bankers are facing
a huge tension of liquidity and this is not agood signal toward the performance of the
banks. The study focuses whether it isbackward or forward in investing its fund
efficiently in industry average. The specificobjectives of the study were given below.
• To evaluate the liquidity, assets management, efficiency and profitability of
HBL,NBBL and SCBNL
• To analyze the deposit utilization trend of the HBL, NBBL and SCBNL.

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 • To analyze the relationship between total investment with other
financialvariables of HBL, NBBL and SCBNL and comparison between them.
• To recommend the package of workable suggestions and possible guidelines
toimprove investment policy of HBL, NBBL and SCBNL based on the finding
ofthe study.
Based on this study, her major findings were;
• The mean ratio & CV of current ratio of SCBNL is satisfactory. Only
theSCBNL seems capable of paying current obligations. The ratio of
HBLseems improving but the NBBL ' trend is deteriorating.
• The mean ratio & CV of cash and bank balance to total deposit ratio ofHBL is
higher. Higher ratio of HBL shows that it is able to serve thedemand of its
customers i.e. it is operating at the lower risk. The meanratio of SCBNL and
NBBL are lower than HBL but seems satisfactory.On the basis of CV it can be
conducted that the ratio of SCBNL and NBBL are more consistent than that of
HBL.
• The mean ratio and CV of cash and bank balance to current assets ratio ofHBL
in higher. NBBL takes place after HBL. SCBNL is also satisfactoryposition
and has more consistent on the ratios. The ability of HBL to makethe quick
payment of its customer deposits on the basis of its most liquidassets i.e. cash
& bank balance is higher.
• The mean ratio & CV of investment in government securities to currentassets
ratio of SCBNL has been found higher and more consistent.SCBNL has better
position, HBL has average and NBBL from the point ofview of investment in
government securities is poor.
Shrestha (2009), in her study “A Comparative Study on Investment Policy of Joint
Venture Banks” has studied primarily of four commercial banks i.e. Himalayan Bank
Ltd., Nepal SBI Bank Ltd., and Everest Bank Ltd. & Bank of Kathmandu Ltd. The
main objectives of her studies were as follows.
• To compare, analysis & evaluate the investment policy of these four
commercial banks.
• To evaluate, liquidity, activity & portfolio ratios of these banks.
• To find out the deposit collection & the effectiveness of fund mobilization.
The Conclusion of the research study is as follows:

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Shrestha (2010),has carried out a research work on the topic “Impact of Investment
on Economic Development”. The main objective of this study attempts to assessthe
role and impact of investment on economic development of the country.
The main objectives of this study were as follows:
• To analyze the present position of commercial banks regarding investment
policy.
• To analyze investment trend and their projection of selected commercial
banks.
• To identify investment sector of selected commercial banks.
• To assess the impact of investment policy on performance.
• To make the suggestion, recommendation of the study.

The major findings of this study were;

• Mean ratio of HBL investment to total commercial banks investment is
10.64% which isextremely higher than that of other banks to total commercial
banks.
• NSBL has invested most of their fund in government securities than other
banks. LikewiseNIBL. HBL, SCBNL and NIBL has started to invest in other
sector from FY 2062.
• All thebanks has invested fewer funds to share and capital of other company.
The commercialbanks mostly invest on government securities, NRB bond and
share and debentures of othercompany.
• The mean ratio of Investment of Total deposit of HBL is 31.60% which is
higher than otherbanks.
• BOKL has use its more fund on share and debenture of other companiesthan
other banks. SCBNL has 0.11% which is less ratio of investment on share and
debentureof other companies than other banks. It means SCBNL less invest
its fund on share anddebenture.
• Growth ratio of deposits of SCBNL is 31.31% which is higher than that other
banks and HBLhas 8.72% which is lower growth ratio of deposit. All the
banks are increasing their deposit.
Lamsal (2011) has carried out a research work on the topic “Mobilization of Deposit
& Investment of Nabil Bank Limited” The major objective of the study is to analyze

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the deposit and investment position of NABIL bank and the other specific objectives
were as follows.
• To explore the deposit and investment trend of NABIL.
• To assess the impact of interest rate on deposit collection by the NABIL.
• To examine the relationship between deposit and investment of NABIL.
• To compare the performance of deposit and investment of NABIL.
The major findings of this study were as follows.
• The current deposit, saving deposit, and margin deposit are in fluctuating trend
over the study period and the call deposit and fixed deposit are in increasing
trend over the study period.
• The total deposit of NABIL is in increasing trend in FY 2062/063 the total
deposit is Rs. 19347.39 million and then increase by 20.65% in the fiscal year
2063/064, 32.73% in FY 2064/065, 17.02% in FY 2065/066 and 24.26% in
FY 2066/067.
• Current deposit to total deposit ratio is in fluctuating trend the highest CD to
TD ratio is 17.03% in FY 2066/067 and the lowest ratio is 14.55% in the FY
2064/065. The saving deposit to total deposit ratio is in decreasing trend, the
highest SD to TD ratio is 45.33% in FY 2062/63 and the lowest ratio is
29.33% in FY 2066/067.
• The fixed deposit to total deposit ratio is in increasing trend except FY
2066/067. The highest FD to TD ratio is 33.99% in the FY 2066/067 and the
lowest ratio is 17.83% in the FY 2062/063. The mean value of CD to TD, SD
to TD and FD to TD are 20.90, 54.95 and 15.90 respectively and standard
deviation is 4.15, 11.55 and 6.99 respectively.
Khatri (2012) has carried out a research work on the topic “Mobilization of
Deposit and Investment ofNabil Bank Limited”. The purpose of the study will be to
examine the relationship between the amountof total deposit and amount of total
credit granted by Nabil. The main objectives of the study are;
• To examine how far the interest rates of deposits have positive
relationshipwith the deposit collection of Nabil Bank.
• To see the impact of interest rate of loan on the credit extended by NabilBank.
• To study the increasing and decreasing trend of deposit mobilization ofNabil
Bank.

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 • To compare the performance of deposit and investment of Nabil.

The major findings of this study are;

• The analysis reveals that the banks attraction toward saving deposit seems
tobe satisfactory. But it is not stable increasing in percentage during the
studyperiod. It is continuous to increasing in the last of the study period.
• The changes in percentage in all deposits are in increasing trend. But last ofthe
study period it is little fluctuate.The analysis reveals that the banks attraction
towards total deposit seems tobe satisfactory. Though the percentage changes
are not stable, the change inratio is in average.In case of percentage change in
credit amount, the bank's attraction towardscredit amount is satisfactory.
• The growth ratio of total deposit of Nabil by analysis of 15 years period
is13.48%. It means the bank is able to maintain 13.48% growth rate. This
ratiomeasures the capacity of the bank to maintain the percentage of total
deposit.Since the growth ratio of total deposit is 13.48%, the bank must
improve itsdeposit collection in high growth ratio.Similarly the growth ratio of
total credit is 17%. So the bank seems in strongcondition to increase the total
credit than the total deposit growth rate.
• The total deposit has found in increasing trend. The total deposit of Nabilwill
be Rs. 17544.74 lakhs in the 2009, if other things remains same.Similarly the
credit also found in increasing trend. The amount of total credit will be Rs.
10408.03 lakhs in 2009.if other factors remains the constant.
• Bank's deposit collection is satisfactory but due to lack of
investingopportunities it is unable to use its funds. Bank considers various
possible factors while making lending. Such as:safety and security,
profitability, feasibility of project available of resourcesdiversification,
legality etc.Lending process is lengthy because it takes longtime to get loan
from thebank.Manager generally visits to the investor once a year to get
information aboutthe business.This is very helpful to the investors.
2.3 Research Gap
Since so many years the study has been done on the topic investment policy analysis.
Most of the studies are related with investment and deposit. They mainly focus on the
data available. However, such specialstudy related to investment policyanalysis has

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been limited. In this study, theresearcher has attempted to evaluate the effectiveness
of investment policy of Nepalese commercial bank, in order to know somehow about
the practical experience of investment policyanalysis. So thisstudy will be fruitful to
those interested persons, students, scholars,stakeholder,civil society,teachers,
businessmen and government for academically as well as policy perspective.
The purpose of the research work is quite different from the studies made by the
above persons (related to commercial bank). This study focus on effectiveness of
investment policy analysis of NIBL and NABIL Bank Limited. Different financial &
statistical tools have been used in this study among them, investment portfolio, ratio
analysis, trend analysis, correlation are the strong tools. So, this study is a different
than previous studies. It may be one of them research study of investment policy in
few research work with reference to NIBL and NABIL Bank. This study tires to
indicate the effectiveness of investment policy of concerned banks.

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 CHAPTER - III
RESEARCH METHODOLOGY

Research methodology refers to the various sequential steps to be adopted by a

researcher in studying a problem with certain objectives in view. (C.R. Kothari, 1989)
in other words, research methodology describes the method & process applied in the
entire aspect of the study. It is a way to solve the research problem systematically &
scientifically. A fact research methodology is much vague than research methods i.e.
research method is just a part of research methodology. It considers the logic behind
the use of the methods in the context of research study & explains why a particular
method or techniques are used. Thus, research methodology is concerned about not
only the different types of methods used but also about various other facts like what
data have been collected, what are the purpose & problem of research etc. So, to set
up the research methodology that has been adopted for the study is mentioned in this
chapter, which deals with the research design, sources of data, data collection,
population & sample, processing & tabulating procedures.
3.1 Research Design
Research design means an overall framework for the activities to be taken during the
course of a research study. It enables the way of research providing the tools &
techniques for the data collection & analysis & sampling plan to be followed.
Generally research design describes the general plan for collecting analyzing &
evaluating data after identifying. It is an integrated system that guides the researcher
in formulating, implementing & controlling the study conceived so as to obtain
answers to research questions & to control variance. Both analytical & descriptive
methods have been used to attain the overall objectives. Firstly, it specifies the
sources & type of information relevant to research question, secondly it specifies; the
data. Thus, a research design specifies various methods & procedures for acquiring
the information including from which sources & by what procedure it is obtained.
3.2 Sources of Data
The study is mainly based on secondary data, secondary data are those data that are
collected by someone else or used already & made available to other in the form of
published statistics such as annual reports, periodicals, newspapers, magazines etc.

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once a primary data is used; it loses its originality & becomes secondary. This study is
mainly depends on the use of secondary data that consists of annual reports of the
concern banks. However besides the annual reports various other sources of data have
also been used for the purpose of the study plan documents, newspaper, magazine,
economic journals, NRB reports etc.
Data are collected from concern banks, NepalRastra Bank, NEPSE, SEBON and
various libraries.Likewise,the micro-level data have beenderived the different
libraries, such as Shanker Dev campus, Nepal commerce campus, TUcentral
libraryetc. Furthermore, several data andinformation were gathered from periodicals,
economic journals and the other published andunpublished reports. Informal interview
with the authorities of related institutions are also theother sources of data.
3.3 Population & Sample
Population or universe refers to the industries of the same-nature of its service &
product. It is the collection or the aggregate of objects or the set of results of an
operation. On the other hand sample means the representative parts of population
selected from it with the objectives of investigating its properties. Thus, a sample is
just a portion of the population selected with a view to draw conclusions about the
population under study. There are 30 commercial banks in Nepal according to NRB .
Out of these, two bank is selected to analyz investment pattarn of commercial banks.
The annual financial report is the population of the study.It is quite difficult to adopt
the whole population in this study, sample of the 5 years financial statements are take
for the study.
• NIBL Bank Limited
• NABIL Bank Limited

3.4 Data Analysis Procedure

To achieve the objectives of the study, the collected data are categorized; tabulated,
processed & analyzed using different financial tools like ratio analysis, growth ratio
along with statistical tools like mean, standard deviation, coefficient of variation, Karl
Pearson's coefficient of correlation, trend analysis are adopted in the study. Calculated
results are tabulated under different headings according to the objectives and compare
with each other & their significance carried out to interpret the result.
3.5 Data Analysis Tools

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Data analysis refers to the analyzing the data
data in order to determine the inherent facts
or meanings from the tabulated data, presentation & analysis of data is the care of the
research work. Data that has been collected are first presented in systematic manner in
tabular forms & then analyzed by applying
applying different financial & statistical tools to
achieve the objectives of the study. The tools applied in this study are as follows.
3.5.1 Financial Tools
Financial tools particularly for the analysis as well as the interpretation of financial
data. Thesetools
tools can be engaged to procure the precise knowledge of a business,
which are fruitful foranalyzing the strength and weakness of the investment policies
and strategies. Thus,following financial tools are used to achieve the study goal.
Financial Ratios
A numerical or quantitative relationship between two items or variables of the
financialstatement is known as ratioanalysis. In other words, two accounting figures
expressedmathematically is termed as financial ratio. Ratio analysis is used to
compare a firm’sfinancial
sfinancial and status of that of other firms or to itself on time
(Gitman;1988 :275).Since thisstudy is particularly focused on portfolio analysis of
commercial banks, only few ratiosrelated to the investment of commercial banks are
adapted in the study.
1 Total Investment to Total Deposit Ratio:-
Ratio Investment is one of the major
credits generated to earn income. It implies the utilization offirm
offirm’s deposit on
investment in government securities. This ratio is obtained by dividing
totalinvestmentt by total deposit as expressed below.

Total Investment to Total Deposit Ratio=

2 Loan and Advances to Total Deposit Ratio:
Ratio - This ratio is calculated
to find out how successfully the selected banksare utilizing their total
collections or deposits on loan and advances forthe purpose of earning
profit. Greater ratio shows the better utilization oftotal deposits.

Loan and AdvancestoTotal Deposit =

3.5.2 Statistical Tools
Statistical tools are used to analyze the relationship
relationship between two or more variables
and to find how these variables are related. In this study, following statistical tools are
used.

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1. Arithmetic Mean or Average:
Average -The
The mean or average value is a single value
within the range of the data that is used to represent all the values in the series.
Since an average is somewhere within the range of the data, it is also called a
measure of central value. It is calculated by;

Mean =
Where,
= Arithmetic Mean

= Sum of values of all items, and,

N = Number of items
2. Standard Deviation:-
Deviation The standard deviation is the measure that is most often
used to describe variability in data distributions. It can be thought of as a
rough measure of the average amount by which observations deviate on either
side of the mean. Denoted by Greek letter’s
letter’s (read as sigma), standard
deviation is extremely useful for judging the representatives of the mean.
Standard deviation is calculated as;

Standard deviation =
Where,
ો = Standard deviation

= Sum of squares of the deviations

measured from arithmetic average.
N = Number of items
3. Coefficient
oefficient of Correlation:
Correlation - Correlation is a statistical tool design to measure
the degree of association between two or more variables. In other word if the
changes in one variable affects the changes in other variable, then the variable
are said to be co--related
related when it is used to measure the relationship between
two variables, then it is called simple correlation. The coefficient of
correlation measures the degree of relationship between two sets of figures.
Among the various methods of finding out coefficient
coefficient of correlation, Karl
Pearson's method is applied in the study.The result of coefficient of correlation

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 is always lie between +1 and -1.The
1.The formula for the calculation of coefficient
of correlation between X and Y is given below.

r=
Where,
r = Correlation coefficient

= X₁ -

= X₂-
Under this topic, Karl Pearson's correlation coefficient is used to measure the degree
of relationship between the following variables.
• Coefficient of correlation between Total Deposit
Deposit and Total Investment
• Coefficient of correlation between Total Investment and Net Profit.
The interpretation of calculated value of correlation coefficient by following way.
• If r = 0, then there is no correlation between variables.
• If r > 0, then there is positive correlation between variables.
• If r < 0, then there is negative relation between variables.
• If r = +1, then there is perfect positive correlation.
• If r = -1,
- then there is perfect negative correlation.
4. Least Square Linear Trend Analysis:-
An Trend analysis has been a very useful
and commonly applied statistical tool to forecast thefuture events in
quantitative terms. On the basis of tendencies in the dependent variables inthe
past periods, the future trend is predicted. This analysis takes the historical
data as thebasis of forecasting. This method of forecasting the future trend is
based on theassumptions that the past tendencies of the variable are repeated
in the future or the pastevents affect the future events significantlyThe fut
future
trend is forecasted by using the following formula.
formula
Y = a + bx
Where,
here,
Y = the dependent variable
a = the origin i. e. arithmetic mean
b = the slope coefficient i. e. rate of change

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 X= the independent variable
5. Assessment of the Sample Correlation Coefficient:
Coeffi - For this study, tt-test
for significance of an observed and sample correlation coefficient is used.
Set up Hypothesis
(H₀); ρ = 0 i.e. There is no correlation between the considered
Null hypothesis (H
variables.
(H ρ ≠ 0 i.e. There is significant correlation between
Alternative Hypothesis (H₁);
the considered variables.
Test statistic under H₀;
H

t= ×
Where,
r = Sample correlation between two variables
r² = Sample correlation Coefficient
n = No of Pair of observations
Level of significance: Level of significance ∝ = 5%
Critical Value: Tabulated or critical value of t at ∝ % level of significance for
(n - 2) degree of freedom obtain from‘t’ tables.
Decision: If calculated‘t’ is less than or equal to tabulated value of ‘t’ it falls
in the accepted region and the null hypothesis is accepted and if calculated ‘t’
is greater than tabulated ‘t’ null hypothesis is rejected.

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 CHAPTER- FOUR
PRESENTATION AND ANALYSIS OF DATA
This chapter deals with the analysis and interpretation of data according to the
research methodology to attain of the study. During analysis, data gathered from
various sources have been inserted in tabular form. Using financial and statistical
tools the data have been analyzed and they are used to evaluate the investment policy
of Nepalese commercial banks. With the help of analysis of ratio, and other statically
tools has been analyzed and interpreted. So that, the strength and weakness of this
organization and historical performance and present financial condition can be
determined by this analysis. The financial tools included graphical presentation as
well as trend analysis or regression analysis between some variables. The major
variables like assets, liability, sales, debt, and equity are taken for the analysis.
Moreover, the variables affecting to the financial performance is also considered in
the study. The analysis is made through the data presentations and various financial
tools reflecting the relationship among variables affecting investment pattern of
commercial banks.
4.1 Analysis of Deposit and investment of sampled banks
Deposits are the main sources of resources to meet growing demands of financial
existence. The existence of commercial banks basically depends upon the
mobilization of deposits. It is important that commercial bank’s deposit is the main
sources of investment of the commercial banks. The growth of bank depends
primarily upon the growth of its deposit and its proper utilization of the sector of
investment. The commercial banks may function well when they have enough
deposit. Higher the volume of deposit, higher will be the volume of lending and
investment which again creates higher volume of profit.
Investments are made in assets. Assets generally are two types: real assets (Land,
Building,Factories etc) and financial assets (Stock, Bonds, T-Bills etc). These two
types of investment arenot competitive but complementary, highly developed
institution for financial investment greatlyfacilitating real investment (Bhattari, 2005).

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 Table: 4.1
Deposit and investment position of NIBL & NABIL
Year NIBL NABIL
Total Deposit Investment Total Deposit Investment
2008/09 46698.10 7399.81 46340.70 4275.53
2009/10 50094.72 8635.53 54905.68 6178.53
2010/11 50138.12 7423.11 63506.10 13081.21
2011/12 57010.60 10438.48 67325.36 14055.80
2012/13 62428.85 11434.95 74563.11 20071.4
Source: annual report of sampled banks
Figure: 4.1
Presentation of deposit position

Above Table and Figure shows the deposit and investment position of NIBL and
NABIL. The total deposit of NIBL in 2008/09 is Rs.46698.10million
Rs. in this period the
deposit collection of NABIL is Rs 46340.70.. above data shows the deposit and
investment of sampled banks are increasing trend. Above figure trend also shows the
deposit and investment of sampled banks are increasing trend.

4.2 Investment
nt Pattern of NIBL
Investment usually means the sacrifice of the current money for future money. The
sacrificetakes place in the present and the reward comes later, if at all, and the

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magnitude is generallyuncertain. However, Shrestha (2003) describes investment as
utilization of saving forsomething that is expected to produce profit or benefits.
Investment is employment of fundsto achieve added income or growth in value. It
involves the commitment of resources put offfrom current consumption with hope of
capitalizing some benefits in future. It includes bothreal asset and financial asset .Real
asset investment denotes the tangible assets like building,land, machinery, factory and
the like. On the other hand, financial asset investment indicatespapers representing an
indirect claim to real asset held by someone else. Nevertheless, realasset is less liquid
than financial asset.
“Investment is any vehicle into which funds can be placed with the expectation that
willpreserve or increase in value and generated positive returns.” (Gitman &
Joehnk,1998:263)
“Investment is the current commitment of funds for a period of time to derive a future
flowof funds that will compensate the investing unit for the time funds are committed,
for theexpected rate of inflation and also for uncertainty involved in the future flow of
thefunds.”(Frank & Reilly; 1995:267)
The above definitions infer that an investment is the allocation and mobilization of
funds fora certain time period to acquire some extra benefit or extra attachment with
mobilized fund.

Table: 4.2
Investment Pattern of NIBL
Sector 2008/09 2009/10 2010/11 2011/12 2012/13
Nepal Govt. T-bills 2531.3 3911.85 3564.60 5282.96 5896.43
Nepal Govt. Saving Bonds - 290.0 730.0 886.53 920.12
Local licensed Institutions - 370.0 361.59 87.90 134.75
Foreign Banks 4807.54 4000.3 2695.95 4009.24 4299.67
Corporate Share 64.27 66.65 72.91 174.41 183.40
Corporate Debentures & Bonds - - - - -

Total Investment 7403.11 8638.83 7425.06 10441.04 11438.37

Less: Provisions 3.3 3.3 1.95 2.55 3.42
Net Investments 7399.81 8635.53 7432.11 10438.49 11434.95
Source: annual report of NIBL 2009 to2013

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 Figure: 4.2
Trend Line of Investment of NIBL

From the above table shows the investment pattern of NIBL bank. NIBL bank invest
his collection of deposit in different type i.e Nepal Government
Government treasury bills, Nepal
government other securities, foreign Bank, and corporate share. The NIBL invest the
high amount in the Nepal govt. treasury bills. The investment trend in treasure bills is
in fluctuating trend over the study period.
The second
ond highest investment sector of NIBL is foreign banks, and Nepal
government saving bonds. the amounted invested in foreign banks are Rs. 4807.54,
4000.3, 2695.95, 10441.04,
10441.04 4299.67million
million respectively in each year. The trend of
investment in foreign bank is in Fluctuating each year.
Table: 4.3
Investment Pattern of NABIL
Sector 2008/09 2009/10 2010/11 2011/12 2012/13
Nepal Govt. T-bills
bills 664.63 1222.47 6489.95 4494.59 6687.12.
Nepal Govt. Saving Bonds - - - - -
Nepal Govt. Other Securities 1753.80 1078.99 2255.28 3505.38 4978.09
Local licensed Institutions 22.50 65.70 305.35 1080.45 1542.8
Foreign Bonds - - 178.1 220.28 340.16
Foreign Banks 1391.68 3706.94 3661.74 4578.66 6276.20

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 Corporate Share 27.36 27.56 192.49 201.28 246.28
Corporate Debentures & Bonds 415.72 76.62 - - -
Other Investment 2.26 2.35 2.9 3.0 3.63
Total Investment 4277.95 6180.66 13085.77 14083.67 20074.1
Less: Provisions 2.43 2.13 4.6 2.8 2.61
Net Investments 4275.53 6178.53 13081.21 14055.8 20071.4
Source: annual report of NABIL 2009 to 2013

Figure: 4.3
Trend Line of Investment of NABIL

From the above table shows the investment pattern of NABIL bank. NABIL bank
invest his collection of deposit in different type i.e Nepal Government treasury bills,
Nepal government other securities, foreign Bank, and corporate
corporate share. The NABIL
invest the high amount in the Nepal govt. treasury bills. The investment trend in
treasure bills is in fluctuating trend over the study period.
The other main investment sector of NABIL bank is foreign banks, and Nepal
government saving bonds. The trend of investment in foreign bank is in Fluctuating
each year.
4.3 Analysis of Credit Position
4.3.1 Credit position of NIBL

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The total credit is the loan and advance and investment. Loan is the sum of themoney
that will be repay by the borrower. Investment is defined simply to be thesacrifice of
current consumption for future consumption whose future objective isto increase
future wealth.The
The general public gets attracted to take loan and advances from the
bank if the interest rate is lower. The bank provides loan to the general public for
different purposes like industry, trade, commerce etc
Table: 4.4
Credit Position of NIBL
Year Loan & Advance Investment Total Credit
(a) (b) (a+b)
2008/09 12776.21 7399.81 20176.02
2009/10 17286.43 8635.53 25921.96
2010/11 40318.31 7423.11 47741.42
2011/12 41095.51 10438.48 51533.99
2012/13 46400.05 11434.95 57835.0
Source: annual report of NIBL
Figure: 4.4
Trend Line of Credit of NIBL

The above table shows the overall credit position of NIBL. The components of total
credit are loan and advance and investment, loan and advance is in increasing trend in
hole five year. The investment is increasing except year 2010/11. And the overall

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position of total credit is increasing trend over the study period. Total credit is the sum
of both two loan and advance and investment then the following two year total credit
is increasing. From the above figure we conclude that the loan and advance,
investment and the total of credit all are fluctuating trend.
4.3.2 Credit position of NABIL
The total credit is the loan and advance and investment. Loan is the sum of themoney
that will be repay by the borrower. Investment is defined simply to be thesacrifice of
current consumption for future consumption whose future objective isto increase
future wealth.The general public gets attracted to take loan and advances from the
bank if the interest rate is lower. The bank provides loan to the general public for
different purposes like industry, trade, commerce etc.
Table: 4.5
Credit Position of NABIL
Year Loan & Advance Investment Total Credit
(a) (b) (a+b)
2008/09 11058.17 4275.53 15333.7
2009/10 12922.54 6178.53 19101.07
2010/11 38034.10 13081.21 51115.31
2011/12 41605.68 14055.80 55661.48
2012/13 46369.83 20071.4 66441.23
Source: annual report of NABIL
The above table shows the overall credit position of NABIL bank. The components of
total credit are loan and advance and investment, loan and advance is in increasing
trend in hole five year. It is Rs 15333.7, 19101.07, 51115.31, 55661.48, and 66441.23
million.Total credit is the sum of both two loan and advance and investment.. From
than the amount of total credit is slightly increase trend. From the above figure we
conclude that the loan and advance, investment and the total credit all are increasing
trend.

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 Figure: 4.5
Trend Line of Credit of NABIL

4.4 Ratio Analysis

Financial statements reports both on firms position at a point in time and on its
operations over some past period. However, the real value of financial statements lies
in the fact that can be used to help predict future earnings and dividends. From an
investor`s standpoint, predicting is what financial statement analysis is useful is all
about, while from management`s standpoint, financial statement analysis is useful
both to help anticipative future cconditions
onditions and, more important, as a starting point for
planning actions that will improve the firm`s future performance.
4.4.1 Credit Deposit Ratio
The total credit is the loan and advance and investment. Loan is the sum of themoney
that will be repay by the
he borrower. Investment is defined simply to be thesacrifice of
current consumption for future consumption whose future objective isto increase
future wealth.

Credit deposit ratio (CD Ratio) =

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 Table: 4.6
Computation of CD Ratio
NIBL NABIL
Year Total Total Ratio Total Total Ratio
Credit Deposit % Credit Deposit %
2008/09 20176.02 46698.10 43.21 15333.7 46340.70 33.08
2009/10 25921.96 50094.72 51.75 19101.07 54905.68 34.78
2010/11 47741.42 50138.12 95.22 51115.31 63506.10 80.48
2011/12 51533.99 57010.60 90.39 55661.48 67325.36 82.67
2012/13 57835.0 62428.85 92.64 66441.23 74563.11 89.10
Average 62.20 53.35
Source: annual report of sampled banks
Figure: 4.6
Trend Line of Credit Deposit Ratio

From above table,, it can be said that there is a greater relationship betweendeposits
and credit. Increase in deposits leads to increase inthe
in loan and advance, but immense
increase in the deposits leads to a little bitincrease
bitincrease in loan and advance. The above
analysis shows that more than 62.20%
% of thedeposited amount has been succeeded to
mobilize the resources. Its satisfactory of the investment position of the NIBL bank.
And the average ratio of NABIL is 53.35%.it showss that more than 53.35% of deposit
is successes to investment.

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4.4.2 Loans and advances to Total deposit Ratio
Loan and advance consists of loans, advance, bills purchase and bills discounted.
These are the major area of fund mobilization
mobilization. The first part,, Loans and Advances is
morecrucial and also bears more risk than Investments but also gives the higher
return. Whereas, thesecond half, Investments has lesser risk and gives lower return in
compare to Loans and Advances.Loans and Advances and Investment to
to Total
deposit ratio indicate the firm
firm’s fund mobilizingpower in gross. It is in calculated by
following formula:

Loan and advanced to total deposit ratio =

Table: 4.7
Loans and advances to Total deposit Ratio
NIBL NABIL
Year Loan & Total Ratio Loan & Total Ratio
Advances Deposit % Advances Deposit %
2008/09 12776.21 46698.10 27.36 11058.17 46340.70 23.86
2009/10 17286.43 50094.72 34.51 12922.54 54905.68 23.54
2010/11 40318.31 50138.12 80.41 38034.10 63506.10 59.89
2011/12 41095.51 57010.60 72.08 41605.68 67325.36 61.80
2012/13 46400.05 62428.85 74.32 46369.83 74563.11 62.19
Source: annual report of sampled banks
From above table, describe the loan and advances and total deposit of sampled banks.
The loan and advance of NIBL is increasing every year. The highest amount of loan
and adv is Rs 46400.05 million. Same while the loan and adv of NABIL bank also
increasing trend. it can be said that there is a greater relationship betweendeposits and
loan and advances.. Increase in deposits leads to increase inthe
in loan and advance, but
immense increase in the deposits leads to a little bitincrease in loan and advance.

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 Figure: 4.7
Trend Line of loan & advance to deposit Ratio

4.4.3 Total deposit to investment Ratio

Investment to Total deposit ratio indicate the firm’ss fund mobilizingpower in gross.
It is in calculated by following formula:

Investment to total deposit ratio =

Table: 4.8
Deposit to investment Ratio
NIBL NABIL
Year Total Total Ratio Total Total Ratio
Investment Deposit % Investment Deposit %
2008/09 7399.81 46698.10 15.84 4275.53 46340.70 9.23
2009/10 8635.53 50094.72 17.23 6178.53 54905.68 11.25
2010/11 7423.11 50138.12 14.80 13081.21 63506.10 20.59
2011/12 10438.48 57010.60 18.31 14055.80 67325.36 20.87
2012/13 11434.95 62428.85 18.32 20071.4 74563.11 26.91
Source: annual report of sampled banks

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 Figure: 4.8
Trend Line of investment to deposit Ratio

From above table, shows the relationship betweendeposit and investment.

investment Increase in
deposits leads to increase inthe
in investment.
4.4.4. Total deposit to Net profit ratio
Total deposit to net profit ratio indicate the firm’ss fund mobilizingpower
mobilizingpowerand its
achievement of target profit.
profit It is in calculated by following formula:

Net profit to total deposit ratio =

Table: 4.9
Deposit to Net profit Ratio
NIBL NABIL
Year Net Profit Total Ratio Net Profit Total Ratio
Deposit % Deposit %
2008/09 900.62 46698.10 0.0193 1021.62 46340.70 0.0220
2009/10 1265.95 50094.72 0.0253 1344.18 54905.68 0.0245
2010/11 1176.64 50138.12 0.0235 1700.38 63506.10 0.0268
2011/12 1039.28 57010.60 0.0182 1693.49 67325.36 0.0252
2012/13 1995.03 62428.85 0.0320 2226.68 74563.11 0.0299
Source: annual report of sampled banks

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 Figure: 4.9
Trend Line of deposit to net profit Ratio

4.4.5. Net profit to investment ratio

Total investment to net profit ratio indicate the firm’ss fund mobilizingpower
mobilizingpowerand its
achievement of target profit.
profit It is in calculated by following formula:

Net profit to investment ratio =

Table: 4.10
Investment to Net profit Ratio
NIBL NABIL
Year Net Profit Total Ratio Net Profit Total Ratio
Investment % Investment %
2008/09 900.62 7399.81 12.17 1021.62 4275.53 23.89
2009/10 1265.95 8635.53 14.66 1344.18 6178.53 21.75
2010/11 1176.64 7423.11 15.85 1700.38 13081.21 12.99
2011/12 1039.28 10438.48 9.95 1693.49 14055.80 12.04
2012/13 1995.03 11434.95 17.45 2226.68 20071.4 11.09
Source: annual report of sampled banks

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 Figure: 4.10
Trend Line of Investment to net profit Ratio

4.5 Correlation Analysis

To find out the correlation between two continuous variables,, Karl Pearson
Pearson’sco-
efficient of correlation (r) is used. One of the very convenient and useful way of
interpreting the value of coefficient ofcorrelation(r) between the two variables is
coefficient of determination, which is denotedby r². It explains the total variation in
dependent variable is explained by independentvariable.
independentvari
The significance of coefficient of correlation (r) is tested with the help of ‘t’ test. If
calculated ‘t’ is less than or equal to tabulated value of ‘t’ it falls in the accepted
region and null hypothesis is accepted or ‘r’ is not significant, if calculated
calculated ‘t’ is
greater than tabulated ‘t’ null hypothesis is rejected or ‘r’ is significant of correlation
in the population.
4.5.1 Correlation between Deposit and Investment
Coefficient of correlation measures the degree of relationship between two var
variables,
Total Deposit & Investment is independent variable ( ) and P isdependent variable
( ). The purpose of computing is to find out the relationship between Total deposit
and investment is going to same direction or opposite direction.

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 Table: 4.11
Correlation between Deposit
Dep and investment
Name of the Correlation t-Value
Result
Company (r) r² Calculated Tabulated

NIBL 0.9625 0.9265 4.43 2.201 Significant

NABIL 0.9802 0.9607 7.23 2.776 Significant

Source: Appendix

The above table describes the relationship between total deposit and investment of
NIBL and NABIL Bank, during the period of the study the coefficient of correlation
(r) between total deposit and investment of NIBL & NABIL is0.9625 and 0.9802
respectively.
y. This figure shows the positive association between total deposit and
investment. It means total deposit and investment both move towards same direction.
The coefficient of determination (r2) is 0.9267 & 9607. It shows that 92.65% and
96.07% of the variation in the dependent variable (i.e. deposit) is explained by the
independent variable (i.e. investment). The calculated value of ‘t’ is more than the
tabulated value of ‘t’ (i.e. 4.43> 2.201) therefore true value of ‘r’ is significant. It
reveals that there is significant relationship between the total deposit and investment.
4.5.2 Correlation between loan & Adv and Investment
Coefficient of correlation measures the degree of relationship between two variab
variables,
loan & advances and deposit.
deposit Total deposit is independent variable ( ) and loan and
advances isdependent variable ( ). The purpose of computing is to find out the
relationship between loan & advances and deposit.
Table: 4.12
Correlation between loan & Adv and Investment
Name of the Correlation t-Value
Result
Company (r) r² Calculated Tabulated

NIBL 0.6396 0.4091 3.07 2.201 Significant

NABIL 0.9615 0.9245 8.82 2.776 Significant

Source: Appendix

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The above table describes the relationship between loan and advances and Investment
of NIBL and NABIL, during the period of the study the coefficient of correlation (r) is
0.6396 and 9615. This figure shows the positive relation between loan and advances
and investment. It means loan and advances and investment both move towards same
ction. The coefficient of determination (r2) is 0.4091 and 0.9245, It shows that
direction.
40.91% and 92.45% of the variation in the dependent variable (i.e. loan) is explained
by the independent variable (i.e. investment). The calculated value of ‘t’ is more than
he tabulated value of ‘t’ (i.e. 3.07> 2.201) therefore true value of ‘r’ is significant. It
the
reveals that there is significant relationship between the loan and advances and
investment.
4.5.3 Correlation between Investment and net profit
Coefficient of correlation
elation measures the degree of relationship between two
variables,investment
investment and net profit.
profit Investment is independent variable ( ) and net
profit isdependent variable ( ). The purpose of computing is to find out the
relationship investment and net profit.
Table: 4.13
Correlation between Investment and net profit
Name of the Correlation t-Value
Result
Company (r) r² Calculated Tabulated

NIBL 0.7036 0.4951 4.32 2.201 Significant

NABIL 0.9833 0.9669 7.36 2.776 Significant

Source: Appendix
The above table describes the relationship between investment and net profit of NIBL
and NABIL, during the period of the study the coefficient of correlation (r) is 0.7036
and 0.9833. This figure shows the positive relation between investment and net profit.
It means investment and net profit both move towards same direction. The coefficient
of determination (r2) is 0.4951 and 0.9669, It shows that 49.51% and 96.69% oof the
variation in the dependent variable (i.e. investment) is explained by the independent
variable (i.e. investment).
4.6 Trend Analysis
Trend Analysis is one of the statistical tools which is used to determine the
improvement or deterioration of its financial
financial situation. Trend analysis informs about

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the expected future values of various variables. The Least square method has been
adopted to measure the trend behaviors of these selected Banks. This method is
widely used in practices. The formula of least square method for the straight line is
represented by the following formula.
Yc = a + bX
Where,
Yc = Trend Values
a = Y intercept or the computed trend figure of the Y variable, when X = 0
b = Slope of the trend line of the amount of change in Y variable that is
associated with change in 1 unit in X variable.
X = Variable that represent time i.e. time variable
The value of the constants a and b can be determined by solving the following
two normal equations.

∑ Y = Na + b∑ X ……………...(i)
∑ XY = a ∑ X + b∑ X …………(ii)
Where, N = number of years
But for simplification, if the time variable is measured as a deviation form its
mean i.e. mid-point is taken as the origin, the negative value in the first half of the

series balance out the positive values in the second half so that ( ∑ X = 0).
The values of constant a and b can easily be determined by using following
formula.
∑Y
a= N
∑ XY
2
b= X
4.6.1 Trend Analysis of investment of NIBL
Under this topic, an effort has been made to calculate the trend value of investment of
sample banks with comparatively under nine years study period and project the trend
for next five years. The following table describes the trend values of investment of
sampled banks for five years.

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 Table: 4.14
Trend Value of investment Amount
(Rs. In Millions)

Fiscal year Actual value Trend value

2008/09 7399.81 7091.74
2009/10 8635.53 8079.06
2010/11 7423.11 9066.38
2011/12 10438.48 10053.70
2012/13 11434.95 11041.02
2013/14 - 12028.34
2014/15 - 13015.66
2015/16 - 14002.98
2016/17 - 14990.30
2017/18 - 15977.62
Mean (a) 9066.38
Rate of Change (b) 987.32
Trend Line (y) Y = 9066.38 + 987.32X
Source: Appendix
The above table 4.13 shows that the trend line of investment of NIBL is increasing
trend. ‘Y’ has shown the trend value of Investment. Since, the calculated value of ‘b’
is positive of all sample banks; it is found that the bank’s is increasing with time.
Comparatively the slope of equation of NIBL is high and its trend line is sloping
upward rapidly.From above table trend value of deposit of sampled banks trend line
shown in the following graphical table. It shows that the trend line of NIBL is move
upward than.

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 Figure: 4.11
Trend line of investment of NIBL

4.6.2 Trend Analysis of investment of NABIL

Under this topic, an effort has been made to calculate the trend value of investment of
sample banks with comparatively under nine years study period and project the trend
for next five years. The following table describes the trend values of investment of
sampled banks for five years.

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 Table: 4.15
Trend Value of investment Amount
(Rs. In Millions)

Fiscal year Actual value Trend value

2008/09 4275.53 3638.69
2009/10 6178.53 7585.59
2010/11 13081.21 11532.49
2011/12 14055.80 15479.39
2012/13 20071.4 19426.29
2013/14 - 23373.19
2014/15 - 27320.1
2015/16 - 31266.9
2016/17 - 35213.89
2017/18 - 39160.79
Mean (a) 11532.49
Rate of Change (b) 3946.9
Trend Line (y) Y = 11532.49 + 3946.9X
Source: Appendix
The above table 4.15 shows that the trend line of investment is increasing trend. ‘Y’
has shown the trend value of investment. Since, the calculated value of ‘b’ is positive
of all sample banks; it is found that the bank’s investment is increasing with time.
From above mentioned table trend value investment of sampled banks trend line
shown in the following graphical table. It shows that the trend line of NABIL is move
upward than.

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 Figure: 4.12
Trend line of investment of NABIL

4.7 Major findings of the study

• Above Table and Figure shows the deposit and investment position of
NIBL and NABIL. The total deposit of NIBL in 2008/09 is Rs.
46698.10 million in this period the deposit collection of NA
NABIL is Rs
46340.70.. above data shows the deposit and investment of sampled
banks are increasing trend. Above figure trend also shows the deposit
and investment of sampled banks are increasing trend.
• From the above table shows the investment pattern of NIBL
NIB bank.
NIBL bank invest his collection of deposit in different type i.e Nepal
Government treasury bills, Nepal government other securities, foreign
Bank, and corporate share. The NIBL invest the high amount in the
Nepal govt. treasury bills. The investment
investment trend in treasure bills is in
fluctuating trend over the study period.
• The second highest investment sector of NIBL is foreign banks, and
Nepal government saving bonds. the amounted invested in foreign
banks are Rs. 4807.54, 4000.3, 2695.95, 10441.04, 42
4299.67million
respectively in each year. The trend of investment in foreign bank is in
Fluctuating each year.

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• From the above table shows the investment pattern of NABIL bank.
NABIL bank invest his collection of deposit in different type i.e Nepal
Government treasury bills, Nepal government other securities, foreign
Bank, and corporate share. The NABIL invest the high amount in the
Nepal govt. treasury bills. The investment trend in treasure bills is in
fluctuating trend over the study period.
• The other main investment sector of NABIL bank is foreign banks, and
Nepal government saving bonds. The trend of investment in foreign
bank is in Fluctuating each year.
• The above table shows the overall credit position of NIBL. The
components of total credit are loan and advance and investment, loan
and advance is in increasing trend in hole five year. The investment is
increasing except year 2010/11. And the overall position of total credit
is increasing trend over the study period. Total credit is the sum of both
two loan and advance and investment then the following two year total
credit is increasing. From the above figure we conclude that the loan
and advance, investment and the total of credit all are fluctuating trend.
• The above table shows the overall credit position of NABIL bank. The
components of total credit are loan and advance and investment, loan
and advance is in increasing trend in hole five year. It is Rs 15333.7,
19101.07, 51115.31, 55661.48, and 66441.23 million.Total credit is the
sum of both two loan and advance and investment.. From than the
amount of total credit is slightly increase trend. From the above figure
we conclude that the loan and advance, investment and the total credit
all are increasing trend.
• From above table, it can be said that there is a greater relationship
betweendeposits and credit. Increase in deposits leads to increase inthe
loan and advance, but immense increase in the deposits leads to a little
bitincrease in loan and advance. The above analysis shows that more
than 62.20% of thedeposited amount has been succeeded to mobilize
the resources. Its satisfactory of the investment position of the NIBL
bank. And the average ratio of NABIL is 53.35%.it shows that more
than 53.35% of deposit is successes to investment.

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• From above table, describe the loan and advances and total deposit of sampled
banks. The loan and advance of NIBL is increasing every year. The highest
amount of loan and adv is Rs 46400.05 million. Same while the loan and adv
of NABIL bank also increasing trend. it can be said that there is a greater
relationship betweendeposits and loan and advances. Increase in deposits leads
to increase inthe loan and advance, but immense increase in the deposits leads
to a little bitincrease in loan and advance.
• From the above table analysis that the growth ratio of deposit of NIBL
is only 7.59% under the period of study the growth ratio of investment
is 11.94%. It shows that the bank is utilizing the collected deposit as
per the growth of total deposit. So, it can be concluded that the bank
seems in better condition to increase the growth ration of investment.
• From the above table analysis, it is found that the growth ratio of total
deposit and investment of NABIL during the period of study is 11.4%.
The growth ratio of investment is 15.26% under the period of study
which is better in compared to the growth ratio of investment i.e.
15.26%. It shows that the bank is utilizing the collected deposit as per
the growth of investment. So, it can be concluded that the bank seems
in better condition to increase the growth ration of investment.
• The above table describes the relationship between total deposit and
investment of NIBL and NABIL Bank, during the period of the study the
coefficient of correlation (r) between total deposit and investment of NIBL &
NABIL is 0.9625 and 0.9802 respectively. This figure shows the positive
association between total deposit and investment. It means total deposit and
investment both move towards same direction. The coefficient of
determination (r2) is 0.9267 & 9607. It shows that 92.65% and 96.07% of the
variation in the dependent variable (i.e. deposit) is explained by the
independent variable (i.e. investment). The calculated value of ‘t’ is more than
the tabulated value of ‘t’ (i.e. 4.43> 2.201) therefore true value of ‘r’ is
significant. It reveals that there is significant relationship between the total
deposit and investment.
• The above table describes the relationship between loan and advances and
Investment of NIBL and NABIL, during the period of the study the coefficient

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of correlation (r) is 0.6396 and 9615. This figure shows the positive relation
between loan and advances and investment. It means loan and advances and
investment both move towards same direction. The coefficient of
determination (r2) is 0.4091 and 0.9245, It shows that 40.91% and 92.45% of
the variation in the dependent variable (i.e. loan) is explained by the
independent variable (i.e. investment). The calculated value of ‘t’ is more than
the tabulated value of ‘t’ (i.e. 3.07 > 2.201) therefore true value of ‘r’ is
significant. It reveals that there is significant relationship between the loan and
advances and investment.
• The above table 4.13 shows that the trend line of investment of NIBL
is increasing trend. ‘Y’ has shown the trend value of Investment. Since,
the calculated value of ‘b’ is positive of all sample banks; it is found
that the bank’s is increasing with time. Comparatively the slope of
equation of NIBL is high and its trend line is sloping upward
rapidly.From above table trend value of deposit of sampled banks trend
line shown in the following graphical table. It shows that the trend line
of NIBL is move upward than.
• The above table 4.14 shows that the trend line of investment is
increasing trend. ‘Y’ has shown the trend value of investment. Since,
the calculated value of ‘b’ is positive of all sample banks; it is found
that the bank’s investment is increasing with time. From above
mentioned table trend value investment of sampled banks trend line
shown in the following graphical table. It shows that the trend line of
NABIL is move upward than.

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 CHAPTER – FIVE
SUMMARY, CONCLUSION & RECOMMENDATION
In this chapter, summary and conclusion of the research as well as recommendations
arepresented separately. After summarizing and concluding the research,
recommendationsare suggested for the effective deposit mobilization of Nepalese
Commercial Banks. Theresearcher has tried to give suggestions and recommendations
to the commercial banksbased on this research.
5.1 Summary
The problem of economic development of a developing country is a problem ofreal
growth. Only considering real factor can’t solve this problem, because,nowadays
financial and monitoring factors have a tremendous effect on the growthprocess. For
the development of the country’s economy, sound and co-ordinatefiscal and monetary
policy plays an important role even in underdevelopedcountry like Nepal. For this, the
role of commercial banks becomes crucial in thetask of capital formation, which is, no
doubt, a key variable in the economicdevelopment of a country. Scattered resources
hold no meaning unless and untilthey are mobilize and utilize efficiently in some
productive sectors.
Investment policy analysis is one of the key tools for financial decision and assist in
makingplan before using sophisticated forecasting and budgeting procedure. The
value of thisapproach is the quantitative relation, which can be used to diagnose
strengths andweakness in a bank performance. Such analysis is considerable things
for the bank’scommon stock holders, investors, bondholders and others. The objective
of the study is to find out the trend of deposit, investment, loan & advance and net
profit of sample banks with in five year study period, to access the investment
portfolio of sample banks, to find out relationship between total investments, deposit,
loan & advance and net profit of sample banks and to analyze the utilization of
available fund of sample banks.
5.2 Conclusion
It can be concluded from the observance and analysis of above data the sample banks
should move as per the direction given by the central bank. Bankshould have
optimum policy to collect the deposit in various accounts. Deposit isthe major organ
of commercial banks to live in the industry. Higher the deposithigher will be the
chance of the mobilization of working fund and profit there too.Bank should invest in

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different sector very carefully, while advancing loanbecause loan is the blood of
commercial banks for survival. If commercial banksdo not apply sound investment
policy it will be in great trouble in future to collectit in time. Hence the possibility of
bankruptcy there too. Bank should invest theirfund in various portfolios after the deep
study of the project to be safe from beingbankruptcy. If banks concentrate the
investment in few organizations, there is highchance of default risk. Diversifications
are indeed need to all the business housesbut it has seen immense importance to
commercial banks. Diversification ofinvestment is very much important to
commercial bank than other business housesbecause banks use the money to other
people for the benefit of its own. And lastlyis can be said that banks are important
for the nation. It helps in the capitalformation to the nations, which is the most
important element for the economicgrowth of the country.
In conclusion, it can be said that central banks are required to direct the commercial
banks. Commercial banks should move as per the direction given by the central bank.
Banks should have optimum policy to collect the deposit in various accounts. Deposit
is the major organ of commercial bank to live in the industry. Higher the deposit
Higher will be the chance of mobilization of working fund and profit thereto. Banks
should not invest their fund haphazardly. It should be careful while advancing loan
because loan is the blood of the commercial banks for survival. If commercial banks
does not apply sound investment policy it will be in great trouble in future to collect it
in time, hence the possibility of bankruptcy thereto. Banks should invest their fund in
various portfolios after the deep study of the project to be safe from being bankruptcy.
If banks concentrate the investment in few organizations there is a high chance of
default risk. Diversification is needed to all the business houses but it has seen
immense importance to commercial banks hence, the commercial banks should
implement the investment policy considering the directives issued by NRB.
Commercial banks should not cross the boundary level set by central bank to make
investment policy. In overall, it can be concluded that the role of NRB in investment
policy of commercial bank has both positive and negative impacts.
Under this research study, different financial and statistical tools are used to measure
the investment policy of the selected banks. It is found that both selected banks have
strong financial performance but comparatively NABIL is in better position among
the Despite of social contribution HBL has higher profit earnings. It is concluded that
sampled bank.

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5.3 Recommendation
• Suggestionsare the output of the whole study. It helps to take corrective action
in theactivities in future. Different analyses are done to arrive at this step. On
the basis of aboveanalysis and findings of the study following suggestions and
recommendations may bereferred to overcome weakness, inefficiency to
investment policy and for correctiveaction for the concern authorities and
other researchers.
• Diversification of investment is highly suggested to the selected bank as they
have given priority to invest in government securities only. Both of the banks
seem risk avoider as they have invested highest amount in risk free securities.
Higher the risk Higher will be the profit. Hence, sample banks are
recommended to diversify their investment in NRB bond, govt. non-financial
institution, other non-financial institution etc.
• To be a successful banker a bank must utilize depositor’s money as loan and
advances. Loan and advances is the largest item of the bank in the asset side of
balance sheet, which is risky and more profitable too.
• Total investment made by the selected bank is in fluctuating trend. So both
bank must seek new places or sectors for investment, with potentiality of high
return and low risk and should make rational investment.
• The banks should find out new areas/sectors for investing collecteddeposits
from which it can generate maximum profit. In context of presentscenario of
the country, health and education can be considered as the bestsector for
investment, which are more secure and can generate a reasonableprofit.
• Majority of commercial banks have been found to be profit oriented ignoring
their socialresponsibility, which is not a proper strategy to sustain in long run.
So all the banks aresuggested to render their serves even in the rural areas
providing special loans to thedeprived and priority sectors, which might
further intensify the goodwill of the banks infuture.

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Websites
www.nrb.org.np
www.nibl.com.np
www.nabil.com.np

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