1
CHAPTER-1
INTRODUCTION
Meaning of banking
The word "Bank" is derived from Italian word "Banco" which means a bench. In the past, the ancestor of modern banking system that were merchants, goldsmith and money lenders used to perform the monetary task sitting on the bench not in the market. So, "Banco" was used to denote monetary transactions.
Generally the bank refers to those institutions which are established under law for dealing with monetary transactions. It means those institutions are treated as banks which accept the deposit of public and grant loan to the needy person or businessmen or industrialists against security deposits. A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. The main method is via charging interest on capital it lends out to customers. The bank profits from the difference between level of interest it pays for deposits and other sources of fund and level of interest it charges in its lending activities. Besides this, bank is engaged in different types of activities such as exchange currency, joint venture, underwriting, bank guarantee, discounting bills etc.
Different economists have given definitions of bank. Definitions given by popular economists are given below:
According to Dr. H.L. Hart, "A bank is one who, in the ordinary course of his business, receives money which he pays by honoring cheque of persons from whom or whose account receives."
According to Kinsley, "Bank is an establishment to individuals, such advances of money as may be required and safely made and to which individuals entrust money when not required by them for use."
According to US law, "Any institution offering deposits subject to withdrawal on demand and making loans of a commercial or business nature is a bank."
Therefore, bank can be defined as a institution which deals with monetary transactions for the mobilization of idle money or deposits in productive sector which is essential for development of whole nation.
History of banking:
In the banking history of Nepal, Nepal Bank Ltd. is the first bank of Nepal which was established in 1994 B.S where only metallic coins were used as medium of exchange. After that, Nepal Rastra Bank was established in 2012 B.S with the objective of issuing paper currency, maintaining stability in exchange rate, mobilizing capital and developing banking sector in country. Accordingly, Rastriya Banijya Bank, Agriculture Development Bank and Nepal Industrial Development Bank were established. After the restoration of multiparty democracy in Nepal, government took liberal policy in the banking sector. As a result, a large number of commercial banks established in Nepal with the joint venture with foreign commercial banks. Nepal Arab Bank Ltd, Himalayan Bank, Bank of Kathmandu are some examples of such banks. As per the provision of liberal policy adopted in Nepal, bank can be established easily. On the permission of central bank, such bank can established at any time anywhere. At present there are 32 commercial banks in Nepal.
Table No. 1 Commercial banks in Nepal
Nepal Bank Limited
Rastriya Banijya Bank
Nabil Bank Limited
Nepal Investment Bank Ltd
Standard Chartered Bank
Himalayan Bank Ltd
Nepal SBI Bank Ltd
Nepal Bangladesh Bank Ltd
Everest Bank Ltd
Bank Of Kathmandu Ltd
NCC Bank Ltd
Lumbini Bank Ltd
NIC Bank Ltd
Machhapuchre Bank Ltd
Siddhartha Bank Ltd
Agriculture Bank Ltd
Global Bank Ltd
Citizen Bank International
Prime Commercial Bank Ltd
Bank Of Asia Nepal Ltd
Sunrise Bank Ltd
Grand Bank Nepal Limited
NMB Bank Ltd
Kist Bank Ltd
Janata Bank Nepal Ltd
Mega Bank Nepal Ltd
Commerz and Trust Bank Nepal Ltd
Civil Bank Ltd
Century Commercial Bank Limited
Sanima Bank Limited
Kumari Bank Ltd
Laxmi Bank Ltd
Basically basic functions of commercial banks are collecting various types of deposit facility, exchange of money, lending of money, remittance of money, letter of credit, guarantee, loans, foreign exchange etc. Commercial banks are profit oriented financial institution having certain rate of interest given to the depositors and also charged certain interest rate to the loan burrowers.
1.2.1 Background of EBL
Everest Bank Limited (EBL), one of the leading bank of Nepal commenced its operation in 1994.Its head office is situated in Lazimpat, Kathmandu Nepal which regulates all its branches. The bank has 45 branches, 55 ATM counters and 21 Revenue collection counters across the country. It has objective of extending professionalized and banking services through the country. EBL has joint venture partner with Punjab National Bank that is holding 20% equity in the bank and turned it around to a highly profitable bank .Punjab National Bank (PNB) is third largest bank in India which offers a wide variety of banking services.
This bank has been steadily growing in its size and operations. For its excellence in banking service, the bank has been confirmed with "Bank of the year 2006, Nepal" by the banker, a publication of financial times, London. Similarly, the bank bestowed with the "NICCI Excellence award" by Nepal India chamber of commerce for its spectacular performance under finance sector.
EBL has been expanding range of services to the customers .It has pioneered in extending various customer friendly products such as Home loan, Education Loan, equity loan, Vehicle loan, Loan Against Share, Loan Against Life Insurance Policy and Loan for professionals.EBL was one of the first bank to introduce ABBS in Nepal.EBL is also providing Remittance facility through which EBL customer can remit fund from Nepal to CBS branches of PNB India.
Drawing its strength from its joint venture partner, EBL has been steadily growing its size and operations. The bank is providing customer friendly services through a network of 27 branches across the nation. The main branch of EBL is situated in Baneshwor, Kathmandu. Furthermore, the bank has branches in Teku, pulchowk, Balaju, Lazimpat, Pokhara, Janakpur, Biratnagar amongst several other places/cities.
1.2.2 Objectives of EBL
EBL has the following objectives:
To evolve and position the bank as a progressive, cost effective & customer friendly bank providing comprehensive financial and other related services.
To be committed to excellence in servicing the public and also excelling in corporate values.
To provide excellent professional services & improve its position as a leader in the field of financial related services.
To build & maintain a team of motivated and committed workforce with high work ethics.
To use the latest technology aimed at customer satisfaction & act as an effective catalyst for socio-economic developments in the country.
1.2.3 Capital structure
Capital structure refers to the way a corporations finances its assets through combination of equity, debt, or hybrid securities. A firm's capital structure is then composition or structure of its liabilities. EBL's capital structure consists of following capital structure in the year 2068:-
Table no 3
Capital Structure of EBL
Particulars
Amount
% of total capital
Authorized capital
1250000000
37.53
Issued capital
1050000000
31.53
Paid up Capital
1030467300
30.94
Total
3330467300
Source: Annual Report 2010/2011
Figure no 1
Capital Structure of EBL
The above figure shows that the authorized capital is highest than others. It is 37.53% of total capital. Second is issued capital that is 31.53% of total capital. And third is paid of capital that is 30.94% of total capital.
1.3 Introduction of deposit mix
A deposit refers to an amount of money in cash or checks form or sent via wire transfer that is placed into bank account. It is main source of resources to meet the growing demand of the financial assistance. Higher the volume of deposits, higher will be the volume of investment which gives higher profit. The existence of commercial banks basically depends upon mobilization at deposit.
Types of deposit:-
Current Deposit:
In this account any amount can be deposited and withdrawn any time. No interest is given by the bank to accountholder under this account. So, this account is non interest bearing account.EBL offers various flexible payment methods to allow customers to distribute money directly to others. It also provide internet user login for this account in case of single signatory. EBL's Current account offers the following benefits to the accountholder:
Free monthly statement
Unlimited Withdrawal
Extended banking Hour
All branches of EBL are connected through ABBS which enables to withdraw and deposit cash from any of the branches
2) Saving deposit:-
This account can be opened with nominal amount. Limited amount can be deposited and withdrawn from the bank in the specified time. This account is held at an EBL bank maintained by a customer for the purpose of accumulating funds over a period of time while earning an interest. Interest rate is calculated on Daily Closing balance and payable on quarterly basis.EBL provides nominal rate of interest.EBL Saving Account provides following benefits:
Free Cheque books
Minimum Balance of NPR 500/- to open saving account in any branches
Free Statement on demand.
Unlimited withdrawal
3) Fixed deposit:
This account is managed to accept the deposit for fixed period of time providing higher rate of interest. The amount can be withdrawn from bank only after the expiry of time. If account holder needs amount before expiry of time, s/he can take loan against security deposit.
Benefits:
Attractive interest rate i.e. 10% or 2% above the deposit rate on actual usage.
Loan/Overdraft facility against FD allowed up to 90% of deposit amount.
1.4 Objective of the study
The main purpose of the study is to analyze, examine and interpret the deposit mix of EBL with the help of financial and non financial indicators .Some other major objectives are:-
To find the composition of deposit in EBL.
To find out share of fixed current and saving deposit out of the total deposit.
To identify the total deposit trend of public.
To provide conceptual framework of different deposit.
To provide suggestion and guideline to improve problems regarding deposit.
To know whether different kinds of deposit are in increasing or decreasing trends.
1.5 Limitation of the study
This study mainly focuses on only the deposit of Everest Bank Ltd. Therefore, overall position of EBL cannot be judged by this report.
This study has covered only 4 financial years from 2065 to 2068 B.S.
Due to time and cost constraints, it cannot cover all the dimension of the subject matter.
Validity of report fully depends on the information provided by concerned authorities.
Some of the data uses are of secondary type, which is available from bank and other sources of books.
Research Methodology
It is the heart of the project that provides the work plan and describes the activities undertaken for the completion of project. This project uses both financial and stastical tool for detail analyses on the project and it includes:-
Research design
Data collection procedure
Data analysis tools
2.1 Research Design
Research design is a master plan specifying the methods and procedures for collecting and analyzing the needed information. This serves as a framework for the study, guiding the collection and analysis of data, the research instruments to be utilized, and the sampling plan to be followed.
Here, this study is concerned on deposit mix of Everest Bank Limited. For the study, descriptive and analytical research methodology is used. Those methodologies involve gathering data that describes events and then organizes, tabulates, depicts and describes the data collection that reduce the data to manageable form.
2.2 Data collection Procedure
No matter what the basic design of a research study, it is necessary to collect accurate data to achieve useful results. For this reason, it is helpful to consider various sources of collecting data and the quality of information they produce. So, two sources of data collection techniques have been used them are:-
Primary data:
Primary data is original data collected for the first time. I have used primary sources i.e. interviews, questionnaires and observation to collect the primary data on EBL.
2.2.2 Secondary data:
Secondary data refers to the data that has been already gathered by others. I have used secondary sources too i.e. books, periodicals, published reports, data services through which data were collected. Besides them data were collected from Publication of NEPSE, financial statements of EBL and annual reports which were collected from Everest Bank's website, NEPSE and from SEBO.
CHAPTER 3
Data Analysis and Presentation
Data analysis is the process of developing answers to questions through the examination and interpretation of data. Its purpose is to change the data from an unprocessed form to an understandable presentation.
In this chapter, total deposit, deposit composition, saving to total deposit ratio, current deposit to total deposit ratio, fixed deposit to total deposit ratio and cash balance to total deposit ratio are presented to evaluate deposit mix of EBL. This chapter first explains methods of organizing data by tabulation and then placing that data in presentable form by using figures and tables.
3.1 Total deposit trend
Total deposit refers to total amount of deposit of public collected by bank under different accounts. It is essential to evaluate the overall performance of bank.
Table No.4
Total deposits of Everest Bank
(Rs in Crores)
Fiscal year
Total deposit of Everest Bank
Change in %
2065
2398
-
2066
3332
38.95%
2067
3693
10.83%
2068
4113
11.37%
2069
5000
21.57%
(Source: Annual report of Everest2065-2069)
Figure No 2
Total deposits of Everest Bank
In the above table, pie chart and trend, we see that the total deposits are in increasing order. In 2065 there were only 2398 crores of deposits. In 2066 the amount of total deposit is increased by 38.95%, which is Rs 3332 crores. Then, the deposit in 2067 was 3693 which shows that it was increased by 10.83%. After that, the deposit in 2068 reached 4113 which means an increase by 11.37%.Finally, in 2069 the deposit is 5000 i.e21.57%increase than previous year. It shows the consistent progress of the bank.
3.2 Deposit Composition of Everest Bank
Deposit composition of EBL comprises of current, margin, saving, fixed, call and other deposits. It has been presented in the following table:-
Table no 8
Deposit composition of Everest Bank
(Rs in lakh)
Types of deposit
2065
2066
2067
2068
2069
Current
24923
48599
41733
47912
60982
Margin
2214
2920
3759
4100
4517
Saving
118839
147823
133600
130391
172693
Fixed
64462
70500
104403
150619
130075
Call
27807
62940
84128
75501
129522
Other
1518
447
1699
2756
2272
Total
239763
333229
369323
411279
500061
(Source: Annual report of Everest Bank 2065-2069)
Figure no 3
Deposit composition of Everest Bank
From the above table and graph we can see the position of different deposits of EBL. We can clearly see that the saving deposit is in increasing trend in 2065 and 2066 but it has been decreased in 2067 & 2068 and again increased in 2069.Current deposit and fixed deposit on other hand is in increasing trend in every year from 2065 to 2069.The other deposits that are margin, call and other deposits are also in increasing trend every year.
3.3 Saving Deposit to Total Deposit Ratio
It is calculated to find out the proportion of saving deposit with respect to total deposit. It can be calculated by the following formula:
(Saving deposit/Total deposit)100
Table no. 9
Saving Deposit to Total Deposit Ratio
(Rs in lakh)
Fiscal year
Saving deposit
Total deposit
% of saving deposit
%change in saving deposit
2065
118839
239763
49.57
-
2066
147823
333229
44.36
24.39
2067
133600
369323
36.17
-9.62
2068
130391
411279
31.70
-2.4
2069
172693
500061
34.53
8.93
(Source: Annual reports of Everest Bank 2065-2069)
Figure no 4
Saving Deposit to Total Deposit Ratio
The above table, chart and graph show the composition of saving deposits to total deposits. It shows the decreasing trend of saving deposit in 2067, 2068 and increasing trend in 2066 &2069.In the year 2066 the saving deposit was Rs 147823 which was 44.36% of total deposits and it was increased by 24.39%in comparison to 2065. After that, it got declined. In 2067 it was decreased by 9.62% which was 36.17% of total deposit and in 2068 it was decreased by 2.4% which was 31.70% of total deposit. But in 2069 it was increased by 8.93%and this deposit reached to 172693.
3.4 Current Deposit to Total Deposit Ratio
It is calculated to find out the proportion of current deposit with respect to total deposits. It can be calculated by the following formula:-
(Current Deposit/Total Deposit)100
Table no 10
Current Deposit to Total Deposit Ratio
(Rs in lakh)
Year
Current Deposit
Total Deposit
percentage%
2065
24923
239763
10.39
2066
48599
333229
14.58
2067
41733
369323
11.30
2068
47912
411279
11.65
2069
60982
500061
12.19%
(Source: Annual reports of Everest Bank 2065-2069)
Figure No 5
Current Deposit to Total Deposit Ratio
The above table, chart and graph show the change in current deposit amount in respect to total deposit. In 2065, the percentage of current deposit to total deposit was 10.39% which was increased to 14.58 in 2066 but it was decreased in 2067 & 2068 i.e.to 11.30% and 11.65%. Again, it got increased in 2069 and reached to 60982 lakhs.Current deposits have been steadily decreasing due to the diversion of current accounts to the other accounts.
3.5 Fixed deposit to total deposit
It is calculated to find out the proportion of fixed deposit with respect to total deposits. It can be calculated by the following formula:-
(Fixed Deposit/Total Deposit)*100
Table No 11
Fixed Deposit to Total Deposit Ratio
(Rs in lakhs)
Year
Fixed deposit
Total deposit
Percentage
2065
64462
239763
26.89
2066
70500
333229
21.16
2067
104403
369323
28.27
2068
150619
411279
36.62
2069
130075
500061
26.01
(Source: Annual reports of Everest Bank 2065-2069)
Figure No 6
Fixed Deposit to Total Deposit Ratio
In the above table and chart we can see the percentage of fixed deposit to the total deposit was 26.89% & 21.16% in 2065 and 2066 which increased to 28.27% & 36.62% in 2067 and 2068 respectively. But it was decreased in 2069 which was 26.01%of total deposit .It shows the increasing volume of fixed deposit during last fiscal year's which is due to the increase in interest rate.
3.6 Cash Balance to Total Deposit Ratio
Cash balance consists of cash on hand, foreign cash on hand, cheques and other cash items which represents the greater ability to meet the deposits. This ratio can be calculated by the following formula:
Cash Balance/Total Deposit * 100
Table no 12
Cash Balance to Total Deposit Ratio
(Rs. In lakh)
Year
Cash balance
Total deposit
Percentage %
2065
26679
239763
11.13
2066
61644
333229
18.50
2067
78188
369323
21.17
2068
61228
411279
14.89
2069
103633
500061
20.72
(Source: Annual reports of Everest Bank 2065-2069)
Figure no 7
Cash Balance to Total Deposit Ratio
From the above table chart and graph, we can see cash and bank balance on 2065,2066 and2067were increasing in trend which were 11.13%,18.50% and 21.17% of total deposit but in 2068 it got declined and reached to 14.89% of total deposit. Again in 2069 it was increased which was 20.72% of total deposit. From this analysis it can be concluded that cash and bank position of Everest bank is in declining state. For further increasement, EBL can invest in productive sectors like short term marketable security, treasury bills etc to improve its situation.
Mathematical analysis
In this report various accounting, financial and statistical tools have been used to analyze the collected data and interpret the results obtained. The various tools used are:-
Arithmetic mean
Standard deviation
Coefficient of variation
3.7 Arithmetic mean
This statistical tool is used in this study to find the arithmetic average of the variable. Arithmetic mean is the figure we get when the total of all the values in a distribution is divided by the number of values in the distribution. It is used in this study to calculate the average value of current, saving and fixed deposit and interpret it.
Mathematically, =
Where, =Mean
= Sum total of all observations
N=Total number of observations
3.8 Standard deviation
Standard deviation is often powerful and helpful measure of dispersion. It is positive square root of the average of the deviations of the measurement from their means. It is denoted by It is used in this study to measure the size of deviations of current, fixed and saving deposit from the average.
Mathematically, =
Where N = no. of observation
=Deviation from exact arithmetic mean
3.9 Coefficient of Variation
It is a relative measure of dispersion based on the standard deviation. In order to compare the variability between two sets of data, coefficient of variation can be used as a useful method. In this study, it is used to find the variation of the current, fixed and saving deposits.
Mathematically, C.V=
Where,=standard deviation
=Mean
Table no
Calculation of mean, S.D & C.V. of the saving deposit
Year
x
(x
2065
1188
-218.2
47611.24
2066
1478
71.8
5155.24
2067
1336
-70.2
4928.04
2068
1303
-103.2
1050.24
2069
1726
319.8
102272.04
Total
7031
170616.8
Where X=saving deposits in crores
=
=
= 1406.2
=
=
=206.53
C.V=
=
=14.69%
Table no
Calculation of mean, S.D & C.V Of fixed deposit
Year
X
(x
2065
644
-395.8
156657.64
2066
705
-334.8
112091.04
2067
1044
4.2
17.64
2068
1506
466.2
217342.44
2069
1300
260.2
67704.04
Total
5199
553812.8
Where X= fixed deposit in crores
=
=
= 1039.8
=
= /4
= 372.09
C.V=
=
=35.11%
Table no
Calculation of mean, SD & C.V of current deposit
Year
X
(x
2065
249
-198.8
39521.44
2066
485
37.2
1383.84
2067
417
-30.8
948.64
2068
479
31.2
973.44
2069
609
161.2
25985.44
Total
2239
68812.8
Where X=current deposits in crores
=
=
= 447.8
=
= /4
=131.16
C.V=
=
=29.29%
3.10 Major findings
The major findings of the study which covers a period of 5 years (2065 to 2069) are as follows:-
The average deposit of saving, fixed and current account from 2065 to 2069 are 14062, 1039.8 and 447.8 respectively. It shows in an average, deposit in saving account is higher than in other accounts.
The standard deviation of saving, current and fixed accounts from 2065 to 2069 are 206.53, 372.09 and 131.1 respectively. It shows that there is higher deviation in the current account.
The coefficient of variation of saving, current and fixed account from 2065 to 2069 is 14.69%, 35.11% and 29.29%. It shows that there is greater variation in current account and less variation in saving account.
Therefore, here is uniform and consistent deposit in the saving account.
CHAPTER-4
SUMMARY, CONCLUSION AND RECOMMENDATION
4.1 Summary
Financial sector in Nepal comprises of commercial banks and other financial institutions like development banks, finance companies, cooperatives etc. Everest Bank LTD (EBL) established in 1994 is one of the commercial bank which started its operation with an objective of providing excellent professional services and improves its position as a leader in the field of financial related services. This bank is a joint venture partner with Punjab National Bank (PNB) of India. As the bank has just completed sixteen years of operation, it has achieved so many successes in the way of its operation.
Everest Bank mainly collects the deposit under the account of fixed, saving, current and others. They are the main source of raising capital for bank. According to the latest data of 2069 of EBL, the total deposit is 500061 lakh. Among the total deposit the current deposit is 60982 lakh i.e. 12.19% of total deposit whereas saving deposit is 172693 lakh i.e. 34.53% of total deposit. But fixed deposit is 130075 lakh i.e. 26.01% of total deposit. This shows that saving deposit occupies the larger portion.
EBL is at consistent progress over the five years which can be known by the increase in deposits every year. Due to its improvement, it is gradually expanding its branches. In the same way, the bank has been facing various challenges that has arised in the market and has been able to give best performance in the market.
4.2 Conclusion
The trend analysis shows that the deposit of EBL is in increasing trend. This shows that there is consistent progress of the bank.
The share of saving deposits is more than of fixed, current, margin, call and other deposits in EBL.
The saving deposit was increased in 2066 by 24.39% and it gradually decreased in 2067 and 2068 by 9.62% and 2.4%.But in 2069, it was increased by 8.93%.So, saving deposit is in increasing trend.
The current deposit was increased in 2066 by 94.99% but it was decreased in 2067 by 14.13%. After that, it gradually increased in 2068 and 2069by 14.81% and 27.28% respectively. So, current deposit is in increasing trend.
The fixed deposit was increased in 2066, 2067 and 2068 by 9.37%, 48.08% and 44.27% respectively. But in 2069 it was decreased by 13.64%.So, fixed deposit is in decreasing trend.
The cash balance was increased in 2066 and 2067 by 38.93% and 10.83% respectively. But in 2069 it was decreased by 21.69% and again in 2069 it was increased by 69.26%.So, cash balance is in increasing trend.
By the analysis of deposit we can conclude that bank is able to utilize its deposit a great extent.
4.3 Recommendation
With reference with finding and analysis, following recommendation are suggested to overcome the weakness of the organization. They are:
Bank should invest deposits in various sectors and provide loan and advances to its customers so as to increase deposits, as it is the major sources of fund.
The bank may increase its deposits by introducing a number of attractive deposit mobilizing schemes.
The formalities should be simplified so that the client feels easy in the process of cash deposit.
The situation of motivation should be created to the depositors to encourage them for depositing under different accounts.
The interest rate plays an important role in controlling the fluctuation of deposits; therefore bank should be careful while determining the interest rate.
The members of EBL should co ordinate and make good understanding with the customers. That is the best way of deposit collection.
