CHAPTER: ONE
Introduction
1.1.1Meaning and Concept of Bank
The word ‘Bank’ is derived from the Italian word ‘Banco’ which means exchange of money sitting on the bench. Gradually, it became popular as ‘Bankery’ and ‘Banky’ in French English. It is said that banking activities were started around 2000 years ago.
A
bank is an institution, which deals with money, receiving it on deposit from
customer, honouring customer’s drawings against such deposit on demand,
collecting cheque for customers and lending or investing surplus deposits until
they are required for repayment. Generally an institution established by laws,
which deal with money and credit, is called bank. It is obvious that in common
sense, “an institution involved in monetary transaction is called bank”.
The development of the banking system is one of the grounds of economic development. In other words, there is no possibility of economic development of a country without the development of banking system. The development of bank is interwoven with the development of a person, society, and a nation.
“I believe in the fact that the bank are not merely purveyors of money, but also important sense; manufacturer of money”.
“Bank is manufacturer of credit and machine so facilitating exchange”.
“A bank is an establishment for the custody of money received from or on behalf of its customers, its essential duty is to pay their draft on it, its profit arises from its use of money left unemployed by them”.
Hence, bank means “a financial establishment for the deposit, loans, exchange or issue of money and for transmission of funds”.
In fact the present banking system is the result of development of many centuries. When we talk of wonderful scientific inventories, banking also comes to be as a wonder of the modern world. It would also be necessary to see as to how the banking has come to its present stage and what were the periods of hope and despair through which the bank system had to pass to come to its present stage.
1.1.2 Development & Historical Background of Bank
Certainly no comparison can be made between ancient and modern bank, yet it is necessary to know how the present banking system gradually developed. In ancient time goldsmith, businessmen and moneylenders used to perform the work of banking in every country.
Hence, Crowther has described the following people to be the ancestors of modern banks:
a)
The merchants,
b)
The moneylenders,
c)
The goldsmith.
Origin of Modern Banking:
- Use of bank note in
- Bank of
- Bank of
- Bank of
- Bank of
- Bank of
Historical Background of Bank in
The origin and growth of
bank in
The First Phase of Banking
Development in
Even
though the specific date of beginning of money and banking deals in
During
the reign of Ranodip Singh, an institution called “Tejarat” was established in
The Second Phase of Banking Development: -
Banking
in true sense was started after the incorporation of “Nepal Bank Limited” on 30th
kartik, 1994 B.S. Since its establishment it has been doing the function of
commercial bank.
Having the need of central bank in a country “Nepal Rastra Bank” was established on 14th Baisakh 2013 B.S. After its establishment, it issued the Nepali notes for the first time on 7th Falgun 2016 B.S.
“Rastriya Banijya Bank” was established as the second commercial bank on 2022 B.S. under Banijya Bank Act 2021.
With the objective of increasing the life standard of people who are involved in agriculture, “Agriculture Development Bank” was established on 7th Magh 2024 B.S.
The Third Phase of Banking Development:
The country can’t change its status by using only its own capital and without importing the new technology from foreign countries. So accordingly, law and policy have been enacted by the state to encourage foreign investment in banking sector. Thus, some banks in the country are opened on joint investment basis. They are:
- Nabil Bank established on 2041 B.S under the joint investment of Nepal Arab Bank Ltd.
- Nepal Investment Bank established on 2042 B.S under the investment of Indo Suez Bank.
- Himalayan Bank Ltd established on
2049 B.S with the participation of Habbi Bank of
- Standard Chartered Bank Ltd. established on 2043 B.S.
1.1.3 Need, Problems and Types of Bank
The development of any country can’t be imagined without the economic activities. The development of banking system is one of the grounds of economic development. Bank can be taken as a strongest means for the economic development.
Needs of Bank:
- To relive people from financial exploitation
- To develop industry and commerce
- To develop economy
- To provide security to valuable goods and property
- To transfer fund
- To create employment and skilled entrepreneurship
- To develop habit of saving
- For monetization of economy
- To develop agriculture and backward areas
- To balance economic development as a whole
- To exchange and control foreign currency
- To provide loan at lower rate
- To provide long term loan
- For uplifting the poor people
The
world can’t run without bank and a single bank can’t perform all sorts of
functions. So, today banks are opened differently according to their nature,
which are as follows:
i) Central Bank: - Central bank is the supreme bank of the country. In case of
ii) Commercial Banks: - These banks are established to improve people’s economic welfare and facility, to provide loan to agriculture and commerce, and to offer banking services to people and country. E.g. of commercial banks are Nepal bank ltd, standard chartered bank, Nabil bank ltd, SBI bank ltd etc.
iii) Agriculture Development Bank: - Especially, agriculture banks are established with
the objective of developing agriculture sector. In
iv) Industrial Bank: - A bank, which provides loan on the basis of mid term and long term to establish industries and their expansion is called industrial bank.
v) Savings Bank: - A bank established with the objective of managing a huge amount of capital by collecting the little amount of money saved by the people of urban and village area is called saving banks.
vi) Exchange Bank: - No exchange bank separately is opened in
vii) Rural Development Bank: - A rural development bank is established with the objective
of uplifting the living standard of people of rural areas by encouraging them
to start the possible income generating occupation, by providing loan without
security and providing necessary training and banking service.
viii) Student Bank: - This bank is not opened in
ix) Merchant Bank: - A merchant bank may be considered as an institution which centers its operation on acceptance of credits and all form of export finance, medium term lending and syndication of loan, corporate financial advice, etc. Hence, traditionally the main business of merchant bank has been considered with the acceptance of credit for financing international trade and raising loans for oversea borrowers by new capital issues.
Problems of Banking in
Banks in
- Bank not free from corruption
- Political influencer upon banks
- Lack of effective control and supervision
- Lack of investment in productive sector
- Centralization and urbanization of bank
- Irregularity in distribution of loan
- Traditional approach in service of bank
- Lack of training to employees
- Over staffing
- To provide loan in less imaginary value than the real value of security.
Commercial bank plays an important role for the economic development of the country. Commercial bank is established to improve peoples economic standard and provide loan to the agriculture, industry and commerce. This bank also provides banking service to people and country.
“A commercial bank means a bank which deals in exchanging of currency, accepting deposit, giving loan and doing commercial transactions”.
Bank of Venice is the first
commercial bank.
- Accepting various types of deposits
- Lending money in various productive sector
- Letter of credit guarantee remittance, bills etc
1.1.5 Profile of Nabil Bank Ltd.
Twenty-two years ago when
there were limited banks conducted by His Majesty Government, it was very
difficult for an ordinary people to believe that bank can be established and
run by private sector also. Under such circumstances also Nabil Bank Limited
(Nabil) commenced its operation on 12th July 1984(29th Ashad 2041)
as the first joint venture bank in
Nabil Bank ltd. commenced
its operation as the first joint venture bank in
Nabil bank has the
official name, Nepal Arab Bank Limited till 31st December 2001.
Nabil is the pioneer in introducing many innovative products and marketing
concept in banking sector of
“The personal and professional success of the worker leads to the success of any organization”. By following this policy Nabil has achieved the position where it is today. That is why bank is always one step ahead in fulfilling customer’s wants. Customer’s satisfaction is its main objective. It is being stronger day by day.
Today it has more than 372
employees working in 18 branches. It is the first bank to issue and accept
credit card. Today, Nabil bank is in a state to fulfill all the economic needs
required by its customers. It is one of the best commercial bank of
“The banker” published by Financial Times London has rewarded Nabil Bank Limited as the “Bank of the year- 2004”.
Objective of Nabil Bank Ltd:
Nabil Bank, being a commercial bank, also considers some objective same as of other commercial bank. The main objective of Nabil Bank is to accept deposit from the people of all income groups, community and standard the living of general public. More precisely the objective can be classified as follows:
- To reimburse the expenses incurred in its expenses.
- To sanction the long term loan against collateral as land and building.
- To assist in the sale of share and debenture, acting as guarantor, underwriter for its clients.
- To deal in foreign exchange following the prevailing rules and policies.
- To deal with customer or provide loan to them under condition that safeguard the banks interest.
- To see whether the loan has been used properly and in right purpose.
- To provide loan on broad areas of industries and in the right purpose.
- To give value to projects proposal and requirement of the clients.
1.1.6 Economic Performance of Nabil Bank Ltd.
Nabil
Bank is the most successful joint venture organization in
Capital Structure of Nabil Bank:
Table no. 1
|
1. Authorised Capital Rs. 500000000 |
|
2. Issued Capital Rs.491654400 |
|
3. Paid Up Capital Rs. 491654400 |
|
(4916544sharesof Rs.100 each) |
The Share Holding of Nabil Bank Ltd is as Follows:
Table no. 2
|
N.B. (International) limited, |
|
Nepalese Public
30% |
|
Nepal Industrial Development
Corporation 10% |
|
Rastriya Beema Sanstha 9.67% |
|
|
|
Total 100% |
Board of Directors of Nabil Bank Ltd.
The following are the board of directors of Nabil Bank Ltd.:
Chairman : Mr. Satyendra Pyara Shrestha
Director : Mr. Supriya Gupta.
Director : Mr. Abdul Awal Mentu
Director : Mr. Milan
Bikram Shah
Alternate Director : Mr. J. P Kanoria
Source: Book Published By Nabil Bank Ltd.
1.2. Review of Literature
1.2.1 Concept of Lending
Lending is a type of investment. It is employment of funds with the aim of achieving additional income or grounds in value. The essential quality of lending is that it involves ‘waiting for a reward’. Lending is the primary function of every financial institution. To generate profit a financial institution has to lend the amount it receives through different means of deposit. Earning from investment contribute significantly in the income of the bank. But, in lending there is a certain percent possibility of uncertain future.
Lending is the inevitable component
of bank operation. The success of the bank depends upon the earning of such
loans and advances. At the same time the cause of failure of most of the banks
is also due to the shrinkage in the value of their investment. Therefore loan
is must risky and sensitive investment. To protect the banks from such credit
risk the selection of profitable and viable projects is the important job of
commercial bank. The concepts of lending are: -
i) Economic Concept: - According to economist’s definition, investment is not addition to capital stock. In other words, it is procurement of real assets such as land and building, plant and machinery and inventory.
ii) General Concept: - According to general point of view lending is employment of money for procurement of commodity. In general concept there is no consideration about risk and return
iii) Financial Concept: - According to financial concept lending is contract on piece of paper. The e.g. are lending related to financial instruments such as bonds, debentures, common stocks, prepared stock and warrant. In financial investment there is involvement of risk and return.
Why do Bank Lend?
Lending is the primary function of every financial institution. It lends for the purpose of earning profit. Without investment a bank cannot gain profit. The bank can’t be successful unless it earns profit. A bank is a commercial organisation established to generate profit after consumer service. Therefore after the establishment of bank it collects many deposits get the deposits from the current, saving and fixed deposit account. In this way, the bank apart from the amount deposited from such account, collects the capital by selling its shares. Thus, a great capital fund is formed in bank from different sources .It is not better to keep such capital funds in active. The bank should be able to clear the policy of its investment by making a deep study on the subject that which sector would be the most trust worthy and dependable to invest the amount collected in bank. There are certain criteria or principles of a good investment policy, which are as follows: -
The bank should follow the principle
of safety of fund because most of the money used and transacted by bank belongs
to others. The physical safety of fund is necessary while using, transacting or
lending the money. The bank must be careful about recovery of money lend.
It should also follow the principle
of diversity so that it could advance its loan to a large number of business
people or industries and also to minimize the default risk. This principle is
associated with portfolio management of bank investment.
Each and every investment made by commercial bank must be profitable. It should focus its own sectors in which it can earn much profit. The bank should not keep its means and materials inactive. However, the lending rates of the bank may depend on the market situation bank rate, competitive situation, central direction etc. As far as possible a bank should make an investment in such a sector, which is entitled to the community. By increasing the investment to tax immunized sector bank can achieve its goal.
Liquidity is the ability of the bank to convert the deposit in the cash to satisfy the depositor. Lack of liquidity means the existence of bank is danger. The bank should not only be assured about the refund of loan but it should be assured about the timely refund too. Liquidity indicate the repayment of loan with interest by borrower on due date. Hence, liquidity principle indicate about the concentration on short term investment which are comparatively liquid than long term investment.
The bank should invest its fund in those stocks and securities of which the prices are stable. On the contrary, if the bank invests its fund in such securities whose prices fluctuate widely then it may suffer heavy loss. The bank should lend its fund in such securities, which can be easily sold in the market at the time of emergency. The bank should invest its surplus fund in priority sector, which is related to agriculture sector, cottage and small-scale industry sector. Similarly, bank should invest its fund in export business.
Lending Alternative:
There are number of alternative available for a bank to lend its capital. However they are classified into two broad groups: -
i) Financial Assets: - Financial assets
include convertibles, warrants, rights, options, commodity futures and
financial futures, options on future, options on individual common stocks, etc.
ii) Real Assets: - Real assets are non-financial assets. They include alternative like real estate, precious metals, collectibles, machines, diamonds, prints, fine arts, numismatic coins, etc.
1.2.2 Process of Lending in Commercial Banks
A loan applicant whether an institution or individual who comes to the bank passes through very careful eyes of bank officials. It passes through many tastes and inquiries. The approval of loan passes through following process:-
1) Evaluation of 5 c’s: - It includes evaluation of 5 c’s of the borrower as under:
i) Character: -
The bank evaluates the personal character and behaviour of the person who comes
in the bank with loan application. Such person may be an individual, a manager,
or an authorized person of the company. The bank studies whether the person has
good character with the intension to pay the loan, whether he/she is the person with criminal nature or not etc. If the
person is of criminal nature the application may not be accepted by bank.
ii) Collateral: - The security proposed for a loan may be of many types like land, buildings, machinery, a commercial paper or gold ornaments. The banker has to release the fact that the security is only a cushion in the condition of borrowers’ failure to repay the loan. Therefore security is not only the measuring road in selecting a genuine borrower.
iii) Capital: - It refers to borrowers own fund invested in the business. It would indicate the borrowers’ stake in the business and the extent to which a bank may depend upon the borrowers for payment of loan. Capacity and Capital are very much interrelated.
iv) Capacity of borrowers: - it indicates the ability of borrowers to employ the fund in profitably and repay the loan. Ability can be judged from the past result of the business like-
- When he/she started the business?
- Has he/she the required knowledge to start the
business?
- Is he/she well established in the business?
- What is the popularity of their product in the
market?
v) Credit information: - A commercial bank must find out the credit information of the person or business firm who comes to request for loan. Such information may be received from other banks, financial institution and business concern related with the past dealing of the applicant. There is a system of sharing credit information of different clients among financial institution.
2) Processing the application:
i) Submitting the application: - The
applicant will have to complete all the formalities before submitting the
application to the bank. The loan applicant must be supported by the project
proposal, financial statement of the past period, certificate of incorporation,
etc.
ii) Interview of Applicant: - It is important to investigate the genuine of the project, technical and financial feasibility and repayment scheme of the applicant. The interview of the applicant may be directed to investigate the loan purpose of the applicant, loan amount demanded, repayment source, repayment schedule, history of business and banking relationship previously.
iii) Credit analysis: - It is the evaluation of the 5 c’s of the applicant i.e. Capital, collateral, capacity, character and credit.
iv) Types of loan: - Loan may be of various types like, social loan, business loan, primary sector loan, industrial loan, etc. So during the course of loan approval the bank should have to decide about the type of loan the applicant wants to borrow.
v) Determination of loan amount: - The
loan amount should match with the project need of the applicant.
vi) Determination of return: - The loan amount has got inherent cost as it is obtained from shareholder, depositor or creditor. The analysis should be made to calculate total return and compare whether it meets banks expectation or not.
vii) Preparation of necessary documents: - After completing all the investigation work a bank needs to prepare a legal document necessary for the agreement between bank and the borrowers. After the completion of necessary documents the bank enters into the agreement with borrowers finalizing the loan approval process.
1.2.3 Objective of the Study
The general objective of
the study is to fulfill the partial requirement for the degree of BBA, provided
by faculty of management,
- To know how the bank carry out its lending procedures.
- To identify the trends of investment in Nabil Bank Ltd.
- To know what types of tools and techniques the bank employ for effective credit creation and recovery of loan.
- To know different types of credit service the bank offers to its clients.
- To recommend possible and effective technique which the bank can adopt for the betterment of its services.
- The importances of fieldwork are: -
- To get first hand and actual knowledge about working style of organisation or in other words, we can say that to give practical knowledge about the organisation.
- To develop communication skill of the student, this may be helpful in their carrier path.
- To gain knowledge about the investment policy of Nabil Bank Ltd.
- To train students for administrative and managerial functions.
- To make student capable for sorting out the problems.
- The study has been undertaken to meet the partial fulfillment of the requirement as the part of our study at the college and it is purely an academic exercise. It has thus naturally been constricted by the time and the budgetary limits.
- The study only gives brief information about the subject i.e. lending procedure of Nabil Bank Ltd.
- Due to short duration of the study period the more observation of the organization could not be done. So, the data was collected randomly and the theoretical aspect regarding the topic is done with the help of books.
1.2.6 Methodology
Research Design:
Research design helps to collect quantum of accurate data economically, but there is various types of research design. Here, is applied descriptive and analytical research design as it deals with the descriptive of the situation and interpretation of data.
Source of data:
To conduct this survey, it needs various kinds of data related to investment policy. Thus, this policy is based on primary and secondary data.
Ø Primary Data: - Those type of data, which is collected by own intellectual power, field observation questioning etc.
Ø Secondary Data: - The data, which is collected by the help of other people, professors, students, book, library, articles, reports, journal etc. The historical background is collected from Nepal Stock Market and website of Nabil Bank Ltd., balance sheet, off balance has been analysed from the annual reports of various fiscal year of the Nabil Bank Ltd.
Data Interpretation and Analysis
2.1 Lending Condition of Nabil Bank Ltd.
Lending is the primary function of every financial institution. To generate profit financial institution has to lend the amount it receives through different means of deposits. Lending is the inevitable component of bank operation. The success of bank depends upon the earning from such loans and advances.
We study in detail, about the credit and lending procedure of Nabil Bank Ltd. as follows:
The credit department of Nabil Bank Ltd can be divided into:
i) Credit service division: - It takes application, does feasibility study, makes final
detail to provide loan to the customers.
ii) Credit control division: - This division checks whether the loan is repaid on schedule time or not. It also checks borrowed position.
On general basis we can say that the credit department of Nabil Bank Ltd carries all the functions related to credit. This department basically carries the following functions:
- Collects information,
- Analyzes the information,
- Makes final document to provide loan,
- Checks whether the loan is repaid,
- Checks whether the interest is paid timely,
- Makes timely review of on customer’s current position.
- Assignment of marketable securities (bonds, shares or stocks).
- Assignment of cash balances and savings.
- Assignments of cash surrender value of life assurance policies, or just the life cover.
- Pledge of title documents covering merchandise /goods in a warehouse, or in transit. Such title document may be warehouse receipts bills of lading.
- Real state mortgages.
- Assignments of account receivable and/or inventory.
- Chattel mortgages (i.e. debentures) over equipment or inventory items.
i) Short Term Loan: - Nabil Bank ltd provides short-term loan, which has maturity of one to five years. There are major five types of short term loan facilitating in Nabil Bank Ltd. They are:
- Arrange overdrafts and lines of credits.
- Time and demand loan.
- Discount of trade bills.
- Banker’s acceptances and acceptance of financing
- Loan financing arrangements in international trade.
- Normal term loan
- Stand by term loan
- Revolving credit /advance
- Consumer loan
- Real estate loan
- With holding tax loan
- Staff loan
- Syndicate loan
- Offshore loan.
While granting loans the bank charges the following loan related fees:
i) Commitment fee: - This fee commences
as soon as the bank has granted a commitment to a customer whether or not all
the documentation has been completed at that time. This fee applies to all terms
of faciliting having standby or revolving period.
ii) Facility fee: - This fee is charged against the average commitment for a revolving credit stand by term loan on a per annum basis. Facility fees are commonly charged on a selective basis, collection of such fees being flexible.
iii) Front end fees: - These fees are usually related to term facilities and are payable at the origination of the facility. There are two categories of front-end fees, they are:
- Arrangement fees
- Pricing fees.
iv) Fee in lieu of supporting balances: - The pricing of commercial loan often involves an arrangement by the borrower to keep a certain level of demand deposit balances with bank and in return, he receives the banks assurance that he can borrow up to a certain amount during the period at a predetermined rate or interest, normally linked to the prime rate.
v) Fees for balance deficiency: - This
fee is to compensate Nabil Bank for the short fall when customers’ actual
balances are below the compensating balance requirement either for a short term
or long term facility. Since compensating balances provide an important
component of the banks earnings it is necessary for the significant balance
deficiencies to be identified and corrected.
Before the final approval of the submitted proposal a bank
management under goes very careful evaluation of the proposal. Different
aspects of appraisal may be technical, financial, commercial and managerial.
i) Technical Appraisal: - The bank judges the proposal on the basis of its technical aspects. Technicality of the project must be considered on the basis of available technical resources. Such technical resources may be grouped location of the projects, technology to be adopted, technical competency; legal competency etc. Location of the project must be accessible to its prospective customers. Technology indicates the process or method of operation adopted by the project. Technical competency indicate competency of manpower and machinery to be used in the projects. While evaluating the projects a bank also considers its legal aspects. Whether the project is legally competent or not must be identified.
ii) Financial Appraisal: - Considering the technical feasibility of a project its financial feasibility should also be taken into account. The bank considers only those projects which are financially viable and within the reach of investor. The financial feasibility includes cost of the projects, productivity and profitability, cash flow statement etc. The bank should analyze the expected productivity and profitability of the project. The productivity of the project should be co-related with the fund invested and its profitability is directly related with its volume of operation.
iii) Commercial Feasibility of the Projects: - While accepting the loan application the bank will analyze the commercial viability of the projects which includes present and future prospects of the projects, credit policy of the projects, legal aspects of the projects etc. The bank will evaluate the proposal on the basis of quality and type of the customer, projected total turnover and profit generating capacity of the project. The bank will also evaluate the project on the basis of its credit terms, repayment schedule and the condition affecting the collection in future. The presence and strength of the competitor in the market must be analysed by the bank. In this regard the bank may evaluate the case of a new and an old project separately.
iv) Managerial Feasibility of the Projects: - Finally the bank will evaluate the managerial competency of the management who is handling the projects. Managerial efficiency of a concern is equally responsible for the success of the project. It includes competency of the management, qualification of management team, philosophy of the projects, experience and honesty of management. An experienced and honest manager is found to be successful in most situations. Therefore bank also evaluates the management on the basis of the experience and honesty record of the people involve in it. Qualified person in the management indicates towards the success of the projects.
2.4 Data Presentation and Analysis
Facts and figures related to
Investment of Nabil Bank Ltd.
Table: 3
Analyzing the above extract of Balance sheet of Nabil Bank Ltd, we can clearly see that its overall investment is quite fluctuating in the year 2004/05 but we can see the overall investment increasing the current year i.e. in the year 2005/06.
The investment in HMG security is decreasing than in the year 2004/05 but it has increased in the current year. Investment in Mutual Fund is seemed to be constant in all the three fiscal years. The banks investment has also covered the area of company’s share. We can observe that investment in company share is increasing year after year. Likewise there is no investment on bonds and debentures in the fiscal year 2003/04 but there was an investment of Rs.415,724,180 in the fiscal year 2004/05 but the investment has decreased to Rs.76,629,082 in the current fiscal year. Investment in other sectors has also decreased in the fiscal year 2004/05 but it has increased in the year 2005/06.
As a whole we can say that although the investment of Nabil Bank is decreasing in the fiscal year 2004/05 but the overall investment in the current fiscal year 2005/06 is quiet good and is seemed to be increasing.
Major Problems in Lending:
- The formal sector of financing is very much collateral based. Without satisfying collateral, they do not give loans and advances. So, there is a high chance that the individual having entrepreneur’s skill may be driven away.
- Because the bank is not able to collect loans and advances at its maturity date, the loan loss provisions are increasing over time.
- The immediate effect of new provision relating to liquidity, capital adequacy, and reserves to cover possible loan loss will have negative effect on the net profit of the institution.
- Nepalese markets are small but now the number of financial institution is large in number. So, in such situation Nabil bank ltd has to compete by offering maximum interest rate on deposit to customers. It has also to compete with several other commercial banks.
- For Nabil Bank Ltd it has become very difficult to find new lending avenues, to make duly recovery of loan, to increase its lending due to economic sluggishness in the country owing to a severe political instability in the country and devasting terrorists attacks that have created havoc in the global economy.
- The credit service offered by the Nabil Bank to its customer is accessible and reasonable too. Bank provides credit under various heads and against various types of collateral.
- Nabil Bank invests mainly in three types of loans. They are; short term, middle term and long term. Other types of loan provided by the banks are consumer loan, real estate loan, staff loan, syndicate loan, off shore loan etc.
- The collateral used in personal and commercial lending are Assignment of marketable securities, cash balances and savings, pledge of title documents covering merchandise in warehouse or in transit, real estate mortgage etc.
- While granting the loan various kinds of fee are charged such as commitment fee, facility fee, front-end fee, fee in lieu of supporting balances, fees for balance deficiency etc.
Summary, Conclusion
and Recommendation
Nepal
is economically backward in terms of all economic measures i.e. money, supply
and demand, gross domestic profit, gross net profit, per capita income, and
industrial development. Therefore since early 90’s
As we know that commercial bank has
to play major roles in the development of the country. The peculiar need to the
country has led to emergence of the investment policy in the sphere of banking
system in
Nabil bank Ltd formerly Nepal Arab
Bank Ltd, is a first joint venture commercial Bank in
Being the member of SWIFT, it facilitates
efficient and speedy fund transfer and messaging towards its valued customers.
Nabil Bank also plays developing role not only in urban areas but also in rural
areas. Along with this it provides loan for the agriculture, cottage, and small
industry and many more.
This field study
is divided into three chapters namely:
- Introduction,
- Data interpretation and analysis,
- Summary, conclusion and recommendation.
In second chapter, Data interpretation and analysis is done. Here, lending condition of Nabil bank and the problem of lending and the method how Nabil Bank accepts the project is discussed.
In third chapter, summary and conclusion and recommendation are done.
Conclusion:
Before lending, the bank should
follow certain factors like objectives, expected return, taxes and investment
horizon strategies. The credit service offered by the bank to the customer is
accessible and is reasonable too. Bank provides credit under various heads and
against various types of collateral. Collateral used in personal and commercial
lending are; Assignment of marketable securities, cash balances and savings,
pledge of title documents covering merchandise in warehouse or in transit, real
estate mortgage etc.
The bank provides mainly these types of loan:
Short term loan which have a maturity period of 1 to 5 years and are of various types like arrange overdraft and line of credit, time and demand loan, discount of trade bills loan financing in international trade.
Medium term loan, are a debt with maturity between one and twelve years. It may be normal term loans, stand by term loans, revolving credit/advance.
The bank also provides long-term loan to commercial lenders with a maturity of over thirteen year.
While granting the loans various kinds of fee are charged by the banks. They may be commitment fee, facility fee, and front end fees.
3.2 Recommendations
Lending plays a pivot role in the health of every financial institution. The overall success of every financial institution depends on how good the credit department of its institution is working on. However, it doesn’t mean that all other services provided by the bank are worthless. They all are important; the only point is of degree of importance. If we compare service provided by the bank with our body then, credit service is compatible with the backbone or the heart without which no body can live. Just providing as much credit services as the bank can, is not good. The timely and the duly payment of interest and installment by the debtor is utmost one. While lending any type of credit facility to any type of customer, may it be person, a company or a partnership a bank should be conscious enough, to be as much secured as it can. But, today is the era of competation. Many banks are emerging like the emergence of mushroom. So, the bank should also take into attention the intense competation. The bank should never forget that the success of their debtor is their success.
On the basis of the analysis made above the following recommendation is made: -
- There should be coordination between NRB, Nabil Bank and other commercial banks so as to deliver credit and other supporting services smoothly. The joint effort can be made to carry out in making any decision like change in interest rate, lending policy, investment policy etc.
- Bank should try to attract more customers. It must not forget that there are many other banks offering similar types of facilities. Bank should therefore always try to be innovative, co-operative and competitive.
- Nabil Bank should open their branches in rural areas as well. It has opened only in semi-urban areas, which has left the rural people deprived of normal banking services.
- The process of lending of credit should be simple and easy. No customers prefer the bank if it takes a large amount of time. But the bank should carefully analyze the position of debtor before providing any services.
- It should focus on the development of modern technology and studying the problems and obstacles of customers
- Commercial Bank Act 2031 B.S.
- Banking &Insurance, Principle and Practice; Dilli Raj Bhandari
- Modern Banking; R.S. Sayers.
- Money and Banking; Horace White.
- Principle of Banking and Insurance; Leaf Walter.
- Journals:
ii. Credit Course, Book Published By Nabil Bank Ltd.
7. www.nabil bank ltd .com
APPENDIX:
TABLE NO: 4
|
NABIL BANK Ltd |
|
Profit
And Loss A/C |
|
For The Fiscal Year 2060/61, 2061/62, 2062/63  |
|
NABIL
BANK Ltd. |
|
Balance Sheet For the Fiscal Year 2060/61, 2061/62, &2062/63 |
