PROFITABILITY ANALYSIS OF AGRICULTURAL

DEVELOPMENT BANK LIMITED

A Project Work Report

Submitted BY:

RAHUL KUMAR MISHRA

T.U. Reg. no:2-7-15-1421-2020
Campus Roll No. 90/2077
Thakur Ram Multiple Campus

SUBMITTED TO:
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

Bachelor of Business Studies (BBS)

Birgunj, Nepal
May, 2025

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 DECLARATION

I hereby declare that the project work entitled " PROFITABILITY ANALYSIS OF
AGRICULTURAL DEVELOPMENT BANK LIMITED” submitted to the Faculty of
Management, Tribhuvan University, Kathmandu is an original piece of work under the
supervision of Mr. Sanjay Shrestha faculty member, Thakur Ram Multiple Campus,
Birgunj and is submitted in partial fulfillment of the requirements for the award of the
degree of Bachelor of Business Studies (BBS). This project work report has not been
submitted to any other university or institution for the award of any degree or diploma.

_____________
RAHUL KUMAR MISHRA
Date:

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 SUPERVISOR’S RECOMMENDATION

The project work report entitled “PROFITABILITY ANALYSIS OF

AGRICULTURAL DEVELOPMENT BANK LIMITED” submitted by RAHUL
KUMAR MISHRA Thakur Ram Multiple Campus, Birgunj is prepared under my
supervision as per the procedure and format requirement laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirement for the
award of the Degree of Bachelor of Business Studies (BBS). I, therefore recommend the
project work report for evaluation.

______________
Mr. Sanjay Shrestha
Thakur Ram Multiple Campus
Date:

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 ENDORSEMENT

We hereby endorse the project work entitled “PROFITABILITY ANALYSIS OF

AGRICULTURAL DEVELOPMENT BANK LIMITED’’ submitted by RAHUL

KUMAR MISHRA Thakur Ram Multiple Campus, Birgunj, in partial fulfillment for
requirements for award of the Bachelor of Business Studies (BBS) for external
evaluation.

_______________ ____________________
Mr. Sanjay Shrestha Dr. Baidh Nath Yadav
Supervisor Chairman,
Research Commeetee
Date: Date:

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 ACKNOWLEDGEMENT

This report entitles “PROFITABILITY ANALYSIS OF AGRICULTURAL

DEVELOPMENT BANK LIMITED” has been prepared as required by the central
Department of Management for Partial fulfillment of Bachelor of Business Studies
(B.B.S.) under TU.

First of all, I would like to express my deeply in debt to my report advisor Mr.

Sanjay Shrestha, supervisor, TRMC, for his in valuable suggestion and Guidance to

prepare the report. More fore, I express my appreciation and sincere gratitude to the

teachers TRMC and all the staffs of Himalayan bank limited. For their help and

continuous support during preparation of this report.

Finally, I am grateful to Dr Baidhyanath Yadav lecturer of TRMC Birgunj for

his direct and indirect support for the accomplishment of this report. Likewise, I am

thankful to all of my friends and relatives who help me heartfelt thanks to my friends for

his supportive hand for his computerizing the report.

Thanks!

Aalok Mandal Dhanuk

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 TABLE OF CONTENTS
Title page i
Declaration ii
Supervisor’s Recommendation iii
Endorsement iv
Acknowledgement v
Table of Contents vi
List of Tables vii
List of Figures viii
Abbreviations x

CHAPTER-I: INTRODUCTION 1
1.1 Background 1
1.2 Profile of Salapa Bikash Bank ltd 1
1.3 Objectives 2
1.4 Rationale 3
1. 5 Review 3
1.6 Methods 11
1.7 Limitations 17

CHAPTER-II: DATA PRESENTATION AND ANALYSIS 16

2.1 Introduction of Data Presentation 16
2.2 Importance of Data Analysis 16
2.3 Balance Sheet and Profit and Loss account 19

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 2.4 Loan provision 21
2.5 Net Interest Income 21
2.6 Investment Position 22
2.7 Deposit Position 22
2.8 Share Capital Position 23
2.9 Total Deposit Liabilities 23
2.10 Cash and Bank balance to Total Deposit Ratio 24
2.11 Cash and Bank balance to Current Assets Ratio 25
2.12 Investment on Government Securities to Current Assets Ratio 26
2.13 Loan and Advances to Total Deposit Ratio 26
2.14 Total Investment to Total Deposit Ratio
27
2.15 Loan and Advances to Total Working Fund Ratio 27
2.16 Investment on Government Securities to Total Working Fund Ratio 28
2.17 Investment on Share & Debenture to Working Fund Ratio 28
2.19 Return on Loan and Advances Ratio 29

2.19 Total Interest Paid to Total Working Fund Ratio 30

2.20 Credit Risk Ratio 30

CHAPTER – III: CONCLUSION 33

3.1 Summary 33
3 .2 Conclusion 34
Bibliography

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 LIST OF TABLES

TABLES PAGES

Balance Sheet and Profit and Loss account 19

Loan provision 21
Net Interest Income 21
Investment Position 22
Deposit Position 22
Share Capital Position 23
Total Deposit Liabilities 23
Cash and Bank balance to Total Deposit Ratio 24
Cash and Bank balance to Current Assets Ratio 25
Investment on Government Securities to Current Assets Ratio 26
Loan and Advances to Total Deposit Ratio 26
Total Investment to Total Deposit Ratio 27
Loan and Advances to Total Working Fund Ratio 27
Investment on Government Securities to Total Working Fund Ratio 28
Investment on Share & Debenture to Working Fund Ratio 28
Return on Loan and Advances Ratio 29
Total Interest Paid to Total Working Fund Ratio 30
Credit Risk Ratio 30

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 Abbreviations

ABBS Any Branch Banking System

A/C Account
AD After death of Christ
ANOVA Analysis of Variance
ATM Automated Teller Machine
BS Bikram Sambat
etc Etcetera
F/Y Fiscal Year
IMF International Monetary Fund
LC Letter of Credit
MBS Masters in Business Studies
NBL Nepal Bank Limited
NGO Non Government Organization
SBL Siddhart Bank Ltd.
NPR Nepalese Rupees
NRB Nepal Rastra Bank
RBB Rastriya Banijya Bank
SBI State Bank of India
SWIFT Society for Worldwide Interbank Financial
Telecommunication
TU Tribhuvan University
US United State

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 Chapter I

1. Introduction
1.1 Background of the study
Due to the fact that banks use huge amount of external financial sources in their business
models (amount of these sources reached more than 95 %), it is necessary to adjust this
area by some legislative framework. This legislative framework consisting primarily of
the regulatory agreements of Basel III sets legal rules which govern the capital adequacy
of banks. Therefore following rules have to be followed for establishing of the effective
loans portfolio of commercial banks. The aim of this article is to quantify capital
requirements of the designed portfolios with corporate loans using selected approaches of
credit risk management with variable types of collaterals. Next aim was to show
possibilities how to potential mitigates capital requirements in the case of transition on
sophisticated methods of credit risk management.
The problem of credit risk management, as well as carrying out a quantitative assessment
and analysis of the credit risk and rating of borrowers, is relevant to all banks involved in
lending to individuals and legal entities. In general, when commercial banks grant loans
to individuals and legal entities, the credit risk involved is characterized by the following
quantitative parameters: risk as the probability of the borrower’s failure to repay the loan;
acceptable risk; average risk; possible losses given loan default; the average value of
losses; the maximum allowable losses; the number of loans given by the bank; the
possible number of different loans the bank can give; the number of problem loans.
Banks are exposed to different types of risks, which affect the performance and activity
of these banks, since the primary goal of the banking management is to maximize the
shareholders wealth, so in achieving this goal banks’ managers should assess the cash
flows and the assumed risks as a result of directing its financial resources in different
areas of utilization. The importance of credit risk management in banks is due to its
ability in affecting the banks financial performance, existence and growth. In the words

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of the Basel Committee (1999), increases in credit risk raise the marginal cost of debt and
equity, which in turn increase the cost of funds for the bank. Further, credit extension
enhances the ability of investors to exploit desired profitable ventures and is an avenue
through which banks create credit (Kargi, 2011).
Principally, the credit risk of a bank is the possibility of loss arising from non-repayment
of interest and the principle, or both, or non-realization of securities on the loans
(Kithinji, 2010).

1.2. Profile of Salapa Bikas Bank Limited

Salapa Bikas Bank was incorporated in 2069/04/01 under the Bank and Financial
Institutions Act, 2063 (Amended 2073).The bank was licensed as a regional bank
covering geographical area of Khotang district.The name of the bank has been derived
from SalapaPokhari, the famous lake for its sacred and spiritual value among the local
communities. The promoters of the bank are from different walks of life.
VISION
To contribute in building prosperous nation via prosperous local communities by
providing financial intermediary.
MISSION
To provide effective financial intermediary to the clients through modern banking and
micro finance schemes; to instill entrepreneurship skills among the target people by
integrating local and indigenous resources, culture and technologies.
GOALS
To enhance financial literacy, develop saving culture and invest the savings and funds in
productive sectors. Playing keyrole preserve and promote local indigenous technologies
and resources by addressing the specialties in the geographical areas. To explore new and
possible sectors and prospects for employment and income generation and assist to invest
to the areas explored. To attempt encourage people in generating self-employment in
order to uplifting the standard of living. To attempt making human resource more
resourceful and responsible for the organization sustainability.

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 OBJECTIVES
To attract the potential clients through effective returns and prompt service delivery. To
assess the credit profiles professionally for the maximum financial security. To organize
regular trainings and development programs for enhancing the capacity and performance
the employees. To fulfill corporate social responsibility by conducting different programs
in coordination with local authorizes. To maintain equilibrium among the stakeholders of
the bank. To abide by the NRB guidelines, directives and circulars.

1.3. Statement of the problem

The study is conducted to obtain overall view of credit management of the Salapa bikas
Bank Limited. It is one of the most important and complicated functions performed by
the bank. Each bank has credit department and loan administration to conduct, monitor
and supervise credit operation. The administration of a particular loan ends when it is
recovered. But the process never ends until the bank exists.
It can be concluded that effective and persistent investment towards the most benefiting
sector is one of the prerequisites for the development of the nation. The quality and return
of the investment depends upon the existing credit policy and its proper implementation.
Thus, how far these things are applied in the banks and financial institutions and whether
the existing credit policy is suitable as per the requirement of the country becomes a
prominent issue in the present context.
The problem of the study is to analyze and examine how far the present investment
policy and procedure of joint venture bank is effective in encouraging relationship
between investment policy and industrial development of the country. The problems
being studied are presented in the following research questions:
 What are the impacts of CDR on ROA of Salapa bikas bank in Nepal?
 How does it influence CAR on profitability of Salapa bikas bank in Nepal?
 How does it impact NPLR on ROA of Salapa bikas bank in Nepal?

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 1.4. Objectives of the study
The main objective is to familiarize with the overall credit management practice in the
Salapa bikas Bank Limited. The specific objectives can be outlined as under:
 To analyze the impact of Credit Deposit Ratio (CDR) on Return on Assets (ROA) of
Salapa bikas bank in Nepal..
 To identify the effect of Capital Adequacy Ratio (CAR) on Return on Assets (ROA) of
Salapa bikas banks in Nepal..
 To find out the impact of Non-Performing Loan Ratio (NPLR) on ROA of Salapa bikas
banks in Nepal..

1.5. Rationale of the study

Developing banking sector is considered as successful area in financial sector of Nepal.
In today’s context, development banks have to be more organic and sincere to establish
better creditability position due to vast competing among them. The present concept deals
with how development banks managed credit position and how do it affect to the
organizational effectiveness. Present study is very important form the point of view of
bank management. The main strategy of every development bank is to establish her better
creditability position, which has directly impacted the financial performance of and
organization besides, it helps to build positive attitude and perception on customers that
help to make the organizational success in terms of better transaction, better turnover, and
better profitability most of the earlier researches were focused on financial performance
of bank but few researches were focused on creditability position of bank. From view
point of bank credit is the most important in and sincere area. Thus, the present study is
very important in viewing and organization performance or position in terms of
creditability.

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 1.6. Brief review of the literature
Review of literature is a critical analysis of published sources, or literature, on a
particular topic. It is an assessment of the literature and provides a summary,
classification, comparison, and evaluation. In our level it can be incorporated into an
article, a research or report. The main purpose of literature review is to find out what
works have been done in the area of research problem under the study and what has not
be done in the field of the research study undertaken. For review study the researcher
uses different books, reports, journals and research study published by various
institutions, unpublished dissertations submitted by master level students have been
reviewed. It is divided into two headings:
 Conceptual review
 Review of related studies

1.7. Research Methodology

Research in common parlance refers to a search for knowledge. The Webster
International Dictionary gives a very inclusive definition of research as a careful critical
inquiry or examination in seeking facts and principles: diligent investigation in order to
ascertain something. It may be understood as a science of studying how research is done
scientifically. In it, we study the various steps that are generally adopted by a researcher,
studying his research problem among with the logic behind them. Research methodology
helps us to find out accuracy, validity and suitability. The justification on the present
study cannot be obtained without help of proper research methodology. In this research,
where we have to delve into the financial condition of Salapa Bikas Bank Limited.

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 1.8. Limitation of Study
The limitation of this study is given below:
 This report presents the current five years data only as the requirement of the study.
 This project report is mainly focusing on the three ratio and very less to the other ratios.
 This report is almost based on the secondary data except interview which has been main
source of primary data.
 As there was a short span of time, the study had to be completed within the specified
period of time.

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 CHAPTER - II

2. DATA PRESENTATION AND ANAYSIS

2.1 Introduction
This chapter deals with the presentation, analysis and interpretation of relevant data of
MBBL in order to fulfill the objectives of this study. The purpose of this chapter is to
introduce the mechanics of data analysis and interpretation. Calculated financial ratios
are analyzed and evaluated after their interpretation is made. The calculated secondary
data have analyzed and presented in table form. For this purpose, analysis and
interpretation are categorized into two headings. The analysis of study findings of the
investigation on the effect of Credit risk management on Profitability of three (3)
commercial banks in Nepal between the years 2010 to 2019. In the study variables which
were included are Return on Assets (ROA), Capital Adequacy Ratio (CAR), Cash
Reserve Ratio (CRR) and Credit Deposit ratio (CDR). This chapter analyses the variables
involved in the study. They are analysis of financial and statistical tools.

2.1.1 Analysis of Financial Tools

Under this topic various financial ratios are calculated to evaluate and analyze the
performance of the sample banks. Study of all types of ratios is not done. Only those
ratios that are important from the point of view of the fund mobilization and investment
are calculated. The important ratios that are studied for this purpose are given below.

2.1.2 Ratio Analysis

Ratio Analysis enables the business owner/manager to spot trends in a business and to
compare its performance and condition with the average performance of similar business
in the same industry. To do this compare own ratios with the average of business similar
to owns and compare own ratios for several successive years, watching especially for any
unfavorable trends that may be starting. Ratio analysis may provide the all important

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early warning indications that allow us to solve business problems before our business is
destroyed by them.

2.1.3 ROA (Net profit/total assets)

Return on assets (ROA) is an indicator of how profitable a company is relative to its
total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings.ROA is displayed as a
percentage; the higher the ROA is the better. Return on assets (ROA) is an indicator of
how well a company utilizes its assets in terms of profitability.
ROA is calculated by dividing a company’s net income by total assets. As a formula, it's
expressed as:
Net Profit
Returnon Assets
Total Assets

Table 2.1.3
Return on Assets of Salapa Bikash Bank in %
Year Salapa Bikash
Bank Ltd
2011 1.18%
2012 1.66%
2013 0.89%
2014 1.39%
2015 1.46%
2016 1.55%
2017 1.78%
2018 1.86%
2019 1.85%
2020 2.07%

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2.1.4 NPLR (Non-performing loan /total loan)
Banks depend on borrowers to maintain their scheduled loan repayments as a major
source of revenue. When a borrower has not made regular payments for at least 90
days, the loan is considered a nonperforming loan, or NPL. The nonperforming loan
ratio, better known as the NPL ratio, is the ratio of the amount of nonperforming
loans in a bank's loan portfolio to the total amount of outstanding loans the bank
holds. The NPL ratio measures the effectiveness of a bank in receiving repayments on
its loans. A nonperforming loan (NPL) is a loan in which the borrower is in default due
to the fact that they have not made the scheduled payments for a specified period.
Although the exact elements of nonperforming status can vary depending on the
specific loan's terms, "no payment" is usually defined as zero payments of either
principal or interest. The specified period also varies, depending on the industry and the
type of loan. Generally, however, the period is 90 days or 180 days.
The calculation method for the NPL ratio is simple: Divide the NPL total by the total
amount of outstanding loans in the bank's portfolio. The ratio can also be expressed as
a percentage of the bank's nonperforming loans.

Table 2.1.4
Non-performing Loan Ratio of Salapa Bikash Bank in %
Year Salapa Bikash
Bank Ltd
2010-11 0.04%
2011-12 0.479%
2012-13 0.027%
2013-14 0.017%
2014-15 0.070%
2015-16 0.019%
2016-17 0.010%
2017-18 0.03%

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 2018-19 0.08%
2019-20 0.45%

According to table no. 2.1.4, conclusively, the relationship between risk management
and profitability will be summarized in this paragraph. Profit is the ultimate goal of
commercial banks so that all strategies designed and activities performed are meant to
realize this grand objective (Ongore & Kusa, 2013, p. 239). Improving financial
performance requires improved functions and activities of commercial banks
(Nimalathasan, 2008, p. 141). However, when a bank increases and maximizes its profit,
it must either increase risk or lower its operating cost (Ruziqa, 2013, p. 94). Koch and
MacDonald (2000) argue that a bank’s profitability will generally vary directly with the
riskiness of its portfolio and operations. As a result, in order to increase the return, banks
need to know which risk factors have greater impact on profitability which eventually
leads to bank financial performance. And as we mentioned in previous section, credit
risk is the most significant factors for commercial banks. This means the probability
where the credit risk influences the profitability is large. According to Tafri et al. (2009,
p. 1), 44 risk management is important both for banks and policy makers because a
strong banking system can promote financial stability of a country and increase
economy’s resilience in facing economy crisis. Therefore, the study and measure of
effect of risk management to bank’s profitability are crucial for financial institutions

2.1.5 CDR (Total credit/total deposit)

The credit deposit ratio also known as Loan deposit ratio is a financial ratio that
measures the value of bank’s loans to the value of its deposits. The credit deposit ratio
helps an investor understand the liquidity position of the bank. The deposits tell us how
much of money is received from customers by way of deposits. And the loans tell us
how much such deposits are given by way of a loan to the customers. So, when this ratio
is 100%, it technically means that for every one rupee of deposit received, one rupee of

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loan is given. The important thing to note over here is that deposits are a liability in
bank’s books (as it has to be returned back to the customers who hold them) and loans
are an asset.
The credit deposit ratio is typically used to assess a bank’s liquidity. It is given by the
following formula:

Total Credit
Credit Deposit Ratio
Total Deposit

Table 2.1.5
Credit Deposit Ratio of Salapa Bikash Bank in %
Year Salapa Bikash
Bank Ltd
2010 89.33%
2011 101.25%
2012 86.25%
2013 85.72%
2014 82.90%
2015 83.97%
2016 88.10%
2017 89.03%
2018 87.45%
2019 90.42%

According to table no. 2.2, CD ratio of Salapa Bikash Bank Ltd. Standing at 89.33%,
101.25%, 86.25%, 85.72%, 82.90%, 83.97%, 88.10%, 89.03%, 90.42% of F/Y 2010,
2011, 2012, 2013, 2014, 2015, 2016, 2017, 2019 respectively except for F/Y 2018, has
higher CD.

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2.1.6 CAR (Capital Adequacy Ratio)
Capital adequacy ultimately determines how well bank can deal with uncertainties. This
ratio protects depositors and promotes the stability and efficiencies of commercial
banks. Capital adequacy ratios take into account the most important financial risks
foreign ex-change, credit, and interest rate risks—by assigning risk weightings to the
institution's assets. Capital adequacy is one of the major components of CAMEL model.
It is used to find out the bank’s ability to meet operational losses. It protects bank from
going to bankrupt and to maintain the confidence of the depositors in the bank. Sound
capital base enable the bank to maximize profit whereas poor capital base give birth too
many defects (Bhandari, 2003; Kleff & Weber, 2008). In order to measure capital
adequacy, bank capital is divided into Tier I and Tier II. Tier I (core/primary) capital is
the summation of paid-up capital, share premium, nonredeemable preference share,
general reserve fund, accumulated profit, capital redemption reserve, capital adjustment
fund, and other free reserve. Amount of the goodwill, fictitious assets, and investment in
the financial instruments issued by an organized organization in excess to the limit
specified by NRB should be reduced to obtain core capital. Similarly, Tier II
(supplementary) capital is the summation of general loan loss provision, assets
revaluation reserve, hybrid capital instruments, subordinated term loan, exchange
equalization reserve, excess loan loss provision, and investment adjustment reserve
(NRB, 2019). It can be calculated by following formula:

Tier 1 Capital+Tier 2Capital

CAR
Risk Weighted Assets

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 Table 2.1.6
Year Salapa Bikash
Bank Ltd
2010 16.51%
2011 28.41%
2012 20.74%
2013 14.87%
2014 12.54%
2015 11.08%
2016 12.36%
2017 15.57%
2018 12.41%
2019 13.19%

Commercial banks (Class A) need to maintain CAR 11% based on Capital Adequacy
Framework, 2015, whereas Development banks and Finance companies (Class B and
Class C) need to maintain CAR 10% based on Capital Adequacy Framework, 2007
(Updated July 2008) December 2020 Janapriya Journal of Interdisciplinary Studies 59
Financial Performance Analysis of Nepalese Financial Institutions in the Framework of
CAMEL (NRB, 2019). Core capital ratio (CCR), capital adequacy ratio, (CAR), debt
equity ratio etc. can be used to examine capital adequacy. In this study capital adequacy
ratio, CAR (total capital as a percentage of risk weighted assets) is used to examine the
capital adequacy position of BFIs. In the above table we can see that Kumari bank was
unable to maintain the ratio in the year 2010 and 2011 which shows it did not have
enough capital in those respective years. Nabil bank has the lowest CAR in year 2015
which is 10.84%. On the other hand, Sanima bank has exceptionally maintained its CAR

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throughout the span of ten years. It has highest CAR in year 2011 which 28.41% which
shows it has sound capital to enable its operational activities.
2.2 Data Analysis

The analysis of study findings of the investigation on the effect of Credit risk
management on Profitability of Three (3) Commercial banks in Nepal between the years
2011 to 2020. In the study variables which were included are Return on Assets (ROA),
Cash Reserve Ratio (CRR), Credit Deposit Ratio (CDR) and Capital Adequacy Ratio
(CAR). This chapter analyses the variables involved in the study.

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 CHAPTER - III
3. CONSLUSION AND RECOMMENDATIONS
3.1 Conclusion
Sample banks have sufficient liquidity. It shows that bank has not got investment sectors
to utilize their liquid money. Now, in Nepal, many banks and other financial institutions
are functioning to collect deposits and invest money somewhere in invest able sectors.
Therefore, monetization has been increased since liberalization policy taken by the
government. Heavy remittance has also help to increase the amount of deposits in bank.
On the other hand, due to political crisis, economic sectors have been fully damaged.
Most of the projects have been withdrawn due to security problem. Therefore, bank has
maximum liquidity due to lack of safety investment sectors.
Due to economic crisis in the country, credit takers are not getting good return from their
investment sectors. On that situation, credit customers do not return money of the bank in
the stipulated time period, therefore, the non-performing credit of the bank increases. As
the non-performing credit increases, bank should increase its provision for credit loss.
Credit related financial indicators demonstrate the quite poor situation in banks.
Therefore, Financial Sector Reform Program is below the level and still much needs to
be done. It can also be concluded that there has been almost similar procedures and
policies while granting the loan, not much change from its conventional methods.

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3.2 Recommendations
The present study can be a valuable piece of research works in credit management. It
explored the existing situation and identified the various components for further
improvement in credit management. Secondary sources of information are used for
fulfilling the objectives. Based in the findings of the study, the researcher recommended
highlighting the guidelines to put forward for further improvement.
Corporate structure of bank plays key role in the effective loan management. Being loan
a risky asset, efforts should be made to have proper control in every steps of loan
management. The banks should establish separate department for credit appraisal,
documentation, disbursement, inspection and recovery of loan which have possibility of
finding mistakes of one department by the others so that the effectiveness can be
achieved.
 Loan must be given if the banker is satisfied that the borrower can repay money
from the cash flow generated from operating activities. However, the banks want
to ensure that their loan is repaired even in case of failure of business. To prevent
banks from such happenings, the bank take collateral is disposed for the recovery
of loan. Therefore, the bank should take proper valuation of collateral so that the
bank at least will be able to recover its principle and interest amount in case of
failure of the borrower to repay the loan.
 Lack of proper financial analysis of the borrower by the banks, is one of the
major cause behind increasing NPA of Nepalese commercial banks. Therefore,
proper financial analysis should be performed before giving loan to the borrower.
 Competition is increasing day by day in banking industry. Again complete
foreign bank can be established after 2013 BS. So the bank should adopt efficient
and modern management concept to make their activities quick and moving there
by fulfilling the growing demand of current financial services.
 Nepal Rastra Bank should regulate all the deposit accepting financial institution
under the supervision and regulatory activity so that general people can feel the
security of their deposits.

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 Banks may go for detail market research, which will help them in knowing what
their competitors are offering to their clients. This will enable them to have an
edge over their competitors and increase their credit management pie by offering
better products and services.
 Cash and bank balance of sample banks is high. Bank's efficiency should be
increased to satisfy the depositors at low level of cash and bank balance. Unused
cash and bank balance do not provide return to the bank. Therefore, some
percentage of the cash and bank balance should be invested somewhere in
profitable sectors.
 Bank should regularly follow the credit customer to confirm that whether the
customers have utilized their credit for same purpose or not, committed at the
time of taking credit from the bank.
 Bank should carefully examine the principle of safety as well as sources of
repayment, capital structure and credit worthiness of a borrower before providing
loans. In other word, credit and risk must be evaluated by considering well-
known five C’s of credit viz. character, capacity, capital, collateral and condition
so that the bank is able to mobilize and utilize the resources.
 The economic Liberalization policy adopted by Government of Nepal has created
environment of cutthroat competition even in the banking sector. In this context,
sample banks are suggested to formulate and implement some sound and
effective financial and non-financial strategies to minimize their operational
expenses to meet required level of profitability.
 The loss incurred by sample banks has decreased significantly after the
implementation of financial sector reform programmed but at the same time the
volume of non- performing assets is increasing. This indicates that credit
management is not sufficient. So the bank’s management should generate the real
profit through credit disbursement.
 Due to poor credit administration, the credit recovery process is slow as well as
legal process in the recovery of credit is lengthy and ineffective. Clear-cut

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 objective and policy of the credit management is lacking so that non-performing
credit is going upward. To get better result in the coming future, bank should
reduce the volume of non-performing credit.
 The banks should adopt efficient and modern management concept to make their
activities quick and moving there by fulfilling the growing demand of current
financial services.
 Total deposit is not correlated with the loan and advances. This is very serious
matter and the main reason is the case of over liquidity that the bank has
maintained so far. Thus, the bank should mobilize the deposit and try to bring the
correlation between total deposit and loan and advance in an appropriate level.

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