CHAPTER-1
1.1 Introduction
1.1.1 Origin of the World Bank
The word bank was borrowed
in Middle English from Middle French banque, from Old Italian banca, from Old
High German bank, bank "bench, counter". Benches were used as desks
or exchange counters during the Renaissance by Florentine bankers, who used to
make their transactions atop desks covered by green tablecloths.
One of the oldest items found showing money-changing activity is a silver
Greek drachm coin from ancient Hellenic colony Trapezus on the Black Sea,
modern Trabzon, and c. 350–325 BC, presented in the British Museum in London.
The coin shows a banker's table laden with coins, a pun on the name of the
city. In fact, even today in Modern Greek the word Trapeza means both a table
and a bank (in everyday speech). [The everyday word used for "table"
is trapezi, a modern form of the archaic trapeza.
1.1.2 History of banking in the world
In the modern era, the story of "the
elite" commences with the development of the modern banking system in
Middle Ages Europe. At that time, disposable wealth was usually held in the
form of gold or silver bullion. For safety, such assets were kept in the safe
of the local goldsmith, he usually being the only individual who had a vault on
his premises. The goldsmith would issue a receipt for the deposit and, to
undertake financial transactions, the buyer would withdraw his gold and give it
to the seller, who would then deposit it again, frequently with the same
goldsmith. As this was a time-consuming process, it became common practice for
people to simply exchange smiths' receipts when conducting financial
transactions.
1.1.3 Banking in Nepal
The initiation of formal
banking system in Nepal commenced with the establishment in 1937 of Nepal Bank
Limited (NBL), the first Nepalese commercial bank, the country's central bank,
Nepal Rastra Bank (NRB) was established in 1956 by Act of 1955, after nearly
two decades of NBL having been in existence. A decade after the establishment
of NRB, Rastriya Banijya Bank (RBB), a commercial bank under the ownership of
His Majesty’s Government of Nepal (HMG/N) was established. Thereafter, HMG/N
adopted open and liberalized policies in the mid 1980s reflected by the
structural adjustment process, which included privatization, tariff
adjustments, liberalization of industrial licensing, easing of terms of foreign
investment and more liberal trade and foreign exchange regime was initiated.
With the adoption of liberalization policy, there has been rapid development of
the domestic financial system both in terms of number of financial institutions
and as ratio of financial assets to the GDP. As of July 2005, the number of
commercial banks has reached 17 and their branches numbered 375. A total of 60
finance companies and other Development Banks and numerous credit cooperatives
have also been established. Total financial assets in 2004/2005 reached around
54.09 percent of GDP and the M2/GDP ratio, which shows the financial sector
development or financial deepening increased from in 12.4 percent in 1975 to
50.9 percent in 2000.
In the context of banking
development, the 1980s saw a major structural change in financial sector
policies, regulations and institutional developments. HMG/N emphasized the role
of the private sector for the investment in the financial sector. The financial
sector liberalization, started already in the early eighties with the
liberalization of the interest rates, encompassed further deregulation of
interest rates, relaxation of entry barriers for domestic and foreign banks,
restructuring of public sector commercial banks and withdrawal of central bank
control over their portfolio management (Acharya et al, 2003). These policies
opened the doors for foreigners to enter into banking sector under joint
venture. Consequently, the third commercial bank in Nepal, or the first foreign
joint venture bank, was set up as Nepal Arab Bank Ltd (now called as NABIL Bank
Ltd). In 1984
1.1.4 Range of activities performed by Bank
Activities undertaken by
large banks include investment banking, corporate banking, private banking,
insurance, consumer finance, foreign exchange trading, commodity trading,
trading in equities, futures and options trading and money market trading.
1.1.5 Types of Banking
1. Retail
banking: dealing directly with individuals and small businesses;
2. Business
banking: providing services to mid-market business;
3. Corporate
banking: directed at large business entities;
4. Private
banking: providing wealth management services to high net worth individuals and
families;
5. Investment
banking: relating to activities on the financial markets.
1.1.6 In Context of Nepal
1. (Class:
A) Commercial Bank
2. (Class:
B) Development Bank
3. (Class:
C) Finance Companies
4. (Class:
D) Micro Credit Developments Banks
Most banks are
profit-making, private enterprises. However, some are owned by government, or
are non-profit organizations.
1.2 Background of the Study
Ratio analysis is a method
of analyzing data to determine the overall financial strength of a business.
Financial analysts take the information off the balance sheets and income
statements of a business and calculate ratios that can then be used to make assessments
of the operating ability and future prospects of that business. These ratios
are useful only when compared to other ratios, such as the comparable ratios of
similar businesses or the historical trend of a single business over several
business cycles. There are various ratios that measure a company's efficiency,
short-term strength, profitability, and solvency.
1.3 Background
of the Company
Nepal SBI Bank Ltd (NSBL).is one of the leading commercial bank in Nepal
established in 1993 as a subsidiary of State
Bank of India. It is the first Indo-Nepal joint venture in the financial sector sponsored by three
institutional promoters, namely State Bank of India(SBI), Employees Provident Fund and Agricultural
Development Bank of Nepal through a
Memorandum of Understanding signed on 17 July 1992. NSBL was incorporated as Public Limited
Company at the Office of the
Company Registrar on 28 April 1993 under Regn. No. 17-049/50 with an Authorized
Capital of Rs.12 Crores and was licensed by Nepal Rastra Bank on 6 July 1993 under license No. NRB/l.Pa./7/2049/50. Nepal Rastra Bank granted fresh license to NSBL classifying it as an
"A" class licensed institution on 26 April 2006 under license no.
NRB/I.Pra.Ka.7/062/63.
Nepal SBI Bank Ltd. is a subsidiary of
State Bank of India which has 55 percent of ownership and rest is held by
Employee Provident Fund (15%) and general public (30%). In terms of the
Technical Services Agreement between SBI and the NSBL, the former provides
management support to the bank through its expatriate officers including
Managing Director who is also the CEO of the Bank. Central Management Committee
consisting of the Managing Director, Chief Operating Officer, Chief Financial
Officer and Chief Credit Officer oversee the overall banking operations in the
Bank. The Bank was established in July 1993 & is now having 538 Nepalese
employees working in 50 branches, 6 extension counters, 2 Regional Offices
& the Corporate Office.
NSBL was awarded with “Best Commercial Bank”
Boss top 10 business excellence award in 2008-09.
1.4 Statement of the Problem
Adaptation of the new
technology may not be possible for everyone to adapt because many people are
concerned towards manual way of doing the activities
Despite of prevailing economic
recession, JVBs operating in Nepal to perform well in terms of their work
efficiency and profitability. However, they are also facing problems in
generating an adequate return on their investment and role of banking sector has
been further increased for the upliftment of the country’s economy from the
present condition. They must attempt to find the potential areas of profitable
investments in order to get themselves and the nation away from the economic
turmoil. Several commercial banks have been established in Nepal within a short
period of time.
Following are the major
problems areas that have been identified for the purpose of this research:
1. What
is the present condition in terms of liquidity, profitability?
2. What
more new changes could arise which will be beneficial to NSBL?
1.5 Objective of the Study
The main objective of this
study will aim to evaluate the performance of the company by using ratios as a
yardstick to measure the efficiency of the company. It will also aim to
understand the liquidity, profitability and efficiency positions of the company
during the study period. This study also objectives to evaluate and analyze
various facts of the financial performance of the company, and to make
comparisons between these ratios during different periods. The basic objectives of this study will
be as follows:
1.
To study the financial data’s
of last 3 years of Nepal SBI Bank ltd.
2.
To determine
profitability ratio and liquidity ratio.
3.
To evaluate the financial
performance of Nepal SBI Bank Ltd.
4.
To analyze the capital
structure of the company with the help of leverage ratio.
5. To
offer appropriate suggestions for the better performance of the organization.
1.6 Significance of the study
Regarding the economic
structure of the company, the banks do not have sufficient investment
opportunity rapidly increasing financial intuition is creating threats of bank.
This study attempts to find out cause of failure and success of bank using the
various statistical tools. This will create awareness about utilization of the
scare resource and help them the productivity of their fund and market value of
their investment. This study will be useful to the following stakeholders:
1. to
the investor i.e. Shareholders
2. to
the management of banks (Management Committee)
3. to
the policy maker (while formulating the policy regarding commercial banks)
This study is also
significant to the researcher:
1. To
get the depth knowledge of banks
2. To
get valuable findings of research
CHAPTER-2
Research Methodology
2.1 Research Design
This study will follow
descriptive and exploratory research methodology and to fulfill the objective
of the study.
2.2 Sampling Design
Nowadays, a number of
commercial banks are emerging rapidly. Some have established and others are in
the process of establishment. Here, all the commercial banks consist of study
population and Nepal SBI Bank Limited will be randomly selected as the sample
for the present study. And only latest three years financial statements will be
analyzed.
2.3 Sources of Data
The base of the study is
primary and secondary data of Nepal SBI Bank Limited. The measure sources of
data will be the internal records collected from the office records. The
primary data will be obtained from the different departments like MSD, CSD,
Cash, and etc. Likewise the secondary data will be obtain from different books,
journals and with the help of Internet.
2.4 Tools for Analysis
To evaluate the present
condition and performance of a company, the financial analyst needs certain
Standard. The standard frequently used is a ratio or index relating two pieces
of financial data to each other. Analysis and interpretation of various ratios
should give experienced and skilled analyst a better understanding of the
present condition and performance of the firm, than they will obtain from
analysis of the financial data alone.
Out of the various
techniques, selection of a technique or combination of the techniques depends
on the purpose of analysis. Different techniques reveal different facts
associated with the business, so some or all the following major techniques
will be used for the analysis depending on the purpose and availability of the
materials demanded by the techniques. Techniques will be used such as
profitability ratio and liquidity ratio.
2.5 Limitations of the Study
1. Estimation
based on work order based will be available data.
2. The
collected data will not be 100% accurate.
3. Lack
of Time
4. Due
to reason of privacy of the organization, this study will not obtain some
valuable information
5. This
study will cover only the latest three fiscal year from 20068/69 to 2070/71
6. The
study will be carry out at Biratnagar branch only as the ratio analysis will be
done considering all the branches of Nepal SBI Bank Limited existing in Nepal
including Head office by using secondary source of data available in internet.
2.6 Organization of study
Banking
and Organizational Information (Chapter
I)
It includes banking information (size,
characteristics, market share and outlook).It also includes Bank information
(history, milestones, vision and mission statement, product profile, competitors,
share market position, achievements, SWOT analysis, future prospects etc.).
Project design and study (Chapter II)
It should include a brief introduction of
the study, the statement of the problem or the issue, the objectives of the
study, the methodology being used (such as data collection methods, sampling
design, statistical techniques) and the limitations of the study.
Data Analysis and Interpretation (Chapter III)
It includes the data, after collection, has to be processed, analyzed,
and interpreted, in accordance with the outline laid down. Processing involves
editing, classification and tabulation of data. Analysis includes computation
of certain measures along with searching for patterns of relationship that
exist among data-groups. This is done with the purpose of summarizing the
collected data and organizing these in such a manner that they answer the
research questions. After analyzing the data, the next step is interpretation,
which refers to the task of drawing the inferences from the collected facts.
Thus, the Chapter III should mention about the data processing, data analysis
and interpretation.
Findings (Chapter IV)
It includes the findings from the data analysis
and interpretation should be mentioned in this Chapter. The findings can be mentioned
paragraph wise or point wise. However, it is recommended to state the findings
point-wise.
Suggestions and Conclusion (Chapter V)
This Chapter should include the recommendations and suggestions based on
the study conducted. A conclusion is mandatory.
2.7 Gaant chart
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GAANT CHART
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Activities
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Date
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23-Feb
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19-Apr
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25-Apr
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28-Apr
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6-May
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14-May
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25-May
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15-Jun
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25-Jun
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27-Jun
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5-Jul
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Class Commences
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Topic Orientataion
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Topic Submission
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Guide Allocation
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Proposal Submission
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Proposal Presentation
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Progress Presentation
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Progress Presentation
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First Draft
Submission
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Viva Presentation
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Final Submission
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2.8 BIBLIOGRAPHY
E- References
Books
Ø
Lal
Jawahar (2010). Accounting for
Management. Himalaya Publishing House
Ø
Pillai
R.S.N and Bagavathi (2009). Management
Accounting. Chand S. & Co.
Ø
Maheshwari
S.N (2009). Management Accounting & Financial
Control. Chand S. & Sons
Ø
Kothari
(2009) , Research Methodology: Methods
and Techniques, New Age International Publishers
Ø
Thanulingom.
N (2007), Research Methodology,
Himalaya Publishing House
Ø
James
C. Vanhorne. (2000). Fundamentals of
Financial Management. New Delhi: Prentice Hall Books
