Scribd
Upload
32 views10 pages

Relationship Between Interest Rate Spread and Profitability of Commercial Banks in Nepal

The document examines the relationship between interest rate spread and profitability of commercial banks in Nepal. It finds that interest rate spread has a direct impact on bank profitability, as higher interest rate spread is correlated with higher profitability measures like net profit margin, return on assets, and return on equity. The study is based on secondary data from two sample banks over 10 years and has limitations due to its small sample size.

Uploaded by

prajwolt0150
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
32 views10 pages

Relationship Between Interest Rate Spread and Profitability of Commercial Banks in Nepal

The document examines the relationship between interest rate spread and profitability of commercial banks in Nepal. It finds that interest rate spread has a direct impact on bank profitability, as higher interest rate spread is correlated with higher profitability measures like net profit margin, return on assets, and return on equity. The study is based on secondary data from two sample banks over 10 years and has limitations due to its small sample size.

Uploaded by

prajwolt0150
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 10

RELATIONSHIP BETWEEN

INTEREST RATE SPREAD AND


PROFITABILITY OF
COMMERCIAL BANKS IN
NEPAL
Prepared by: Poonam Kalu
T.U. Registration No: 7-2-25-1261-2016
Symbol No: 17036/16
Context Information
 Interest rate spread is the difference between interest
rate a bank pays to its depositor and the interest rate it
receives from loans to its customer.
 Profitability is ability of a company to use its resources

to generate revenue in excess of its resources.


 The commercial banks make profit by paying interest

to people who keep money there and higher rate of


interest to borrowers who borrows money from bank.
 In commercial banks, change in interest rate has

significant impact on profitability of banks.


Purpose of the Study
 To examine the existing trends of interest rate spread
and profitability position of commercial banks in
Nepal.
 To evaluate the relationship between interest rate

spread and profitability of commercial banks in Nepal.


 To access the effect of interest rate spread in

profitability.
Research Methodology
Research Design Descriptive Research Design

Population 27 Commercial Banks of Nepal

Sample 2 Commercial banks of Nepal


(Nepal SBI Bank and Everest Bank)

Sources of Data Secondary Sources

Data Analysis Tools Descriptive Statistics


Correlation
Regression
Limitation
 The study is based on secondary data so reliability is
based on reliability of published data.
 The sample of the study is small. So, the finding of the

study might not represent all the commercial banks in


Nepal and cannot be generalized.
 The study doesn’t cover all fiscal year.
Findings
 The weighted average IRS and variables of profitability
are observed to be in fluctuating trends.
 The average weighted IRS of all sample banks as per

GAAP and NFRS is 4.0764% and 4.4350%


respectively with average NPM of 17.9493% and
23.3288% for the observed period of 10 years from
2065/66 to 2075/76.
 Similarly, the ROA and ROE as per GAAP and NFRS

are observed to be 1.64% and 1.7888%, and 23.2986%


and 15.0250% respectively for the observed period.
 The study findings indicate that variables are
statistically significant to influencing the profitability
of banks as indicated by positive Pearson correlation
coefficients as per GAAP and NFRS except that for
ROE as per NFRS.
 Overall, it is found that when IRS increases, then the

profitability of banks also increases.


Conclusion and Action Implication
Conclusion
 The study concluded that interest rate spread has direct

impact in overall profitability of commercial banks in


Nepal.
 There exists a fluctuating trends of interest rate spread

and profitability of commercial banks.


 Banks have to maintain optimal interest rate spread to

attract both depositors and lenders.


Action Implications
 Optimum level of IRS should be determined by the
bank which will attract both depositors and debtors.
 Both lending rates and deposit rates are sensitive
factors for all the commercial banks, so banks must
determine these rates in a competitive way as per
NRB policy.
 Central banks should come up with different
regulations to determine the interest rate spreads in
banks.
 At the time of formulating policies regarding their
interest rate and spread rate, commercial banks
should also considered social responsibilities.
Thank You!

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy