DEPOSIT MANAGEMENT AND LENDING ACTIVITIES

OF NEPALESE COMMERCIAL BANKS

(With special reference to Everest Bank Limited, NABIL Bank Limited and
Nepal Bank Limited)

A Dissertation

Submitted by
Keshab Jaishi
Shankar Dev Campus
Exam Roll No.: 2470
Campus Roll No.: 2009
T.U. Regd. No.: 7-2-404-32-2012

Submitted to
Office of Dean
Faculty of Management
Tribhuwan University

In Partial Fulfillment of Requirement of the degree of

Masters of Business Studies (MBS)

Kathmandu, Nepal

December, 2020
 i

Certification of Authorship

I certify that the work in this thesis has not previously been submitted for a degree nor
has it been submitted as part of requirement for a degree except as fully
acknowledged within the text.

I also certify that the thesis has been written by me. Any help that I have received in
my research work and the preparation of the thesis itself has been acknowledged. In
addition, I certify that all information sources and literature used are indicated in the
reference section of the thesis.

………………….

Keshab Jaishi

December, 2020
 ii

REPORT OF RESEAECH COMMITTEE

Mr Keshab Jaishi has defended the thesis entitled Deposit Management and
Lending Activities of Nepalese Commercial Banks in Nepal successfully. The
research committee has registered the dissertation for further progress. It is
recommended to carry out the work as per suggestions and guidance of supervisior
Pitri Raj Adhikari .

Pitri Raj Adhikari Dissertation Proposal Defended Date

Position…………………………. ………………………………………

Signature………………………..

Asso. Prof. Dr. Kapil Khanal Dissertation vivia voce Date

Head of Research Committee ………………………………..

Signature………………………
 iii

APPROVIAL SHEET

We, the undersigned have examined the thesis entitled Deposit Management and Lending
Activities of Nepalese Commercial Banks in Nepal presented by Keshab Jaishi a candidate
for the degree of Master of Business Studies (MBS) semester and conducted the viva voice
examination of the candidate. We hereby certify that the thesis is worthy of acceptance.

………………………………….
Pitri Raj Adhikari
Dissertation supervisor

…………………………..
Internal Examiner

……………………………
External Examiner

…………………………..
Asso. Prof. Dr. Kapil Khanal
Chairperson, research committee

…………………………………
Prof. Dr. Keshav Raj Joshi
Campus Chief
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ACKNOWLEDGEMENTS

This thesis entitled Deposit Management and Lending Activities of Nepalese

Commercial Banks in Nepal for the partial fulfillment of the requirements for the
degree of Master of Business studies (MBS) is submitted to Shankar Dev Campus,
Putalisadak, Kathmandu, Nepal. This study has focused on deposit management and
lending activities in commercial banks. It took more than one year for this thesis to
take its current format during which I received generous support and encouragement
for the people. I am very much grateful to many academicians and senior for their
excellent commands and thoughtful suggestions. This endeavor would have not been
possible without the support and contribution of them.First I would like to convey
sincere thanks to Lecture Priti Raj Adhikari for regular inspiring guidance as a
supervisor of the thesis. I am grateful to the Shankar Dev Campus including whole
department family for their kind help for providing required materials. I am grateful to
my parents and elders for their loving.

Keshab Jaishi

Date………
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TABLE OF CONTENT

CERTIFICATON OF AUTHORSHIP………………………………………………...
i

REPORT OF RESEARCH COMMITTEE………….……………………………….ii

APPROVAL SHEET…………………………………………………………………iii

ACKNOWLEDGEMENTS................................................................................................iv

TABLE OF CONTENT.......................................................................................................v

LIST OF TABLES............................................................................................................vii

LIST OF ABBREVIATIONS..........................................................................................viii

ABSTRACT.......................................................................................................................ix

CHAPTER-I........................................................................................................................1

INTRODUCTION...............................................................................................................1

1.1 Background of the Study................................................................................................1

1.2 Problem Statement..........................................................................................................5
1.3 Objectives of the Study...................................................................................................8
1.4 Rationale of the Study.....................................................................................................8
1.5 Limitations of the Study..................................................................................................9
CHAPTER-II.....................................................................................................................10

LITERATURE REVIEW..................................................................................................10

2.1 Theoretical Review.......................................................................................................10

2.2 Empirical Review.........................................................................................................17
2.3 Research Gap................................................................................................................24
CHAPTER-III....................................................................................................................26

RESEARCH METHODOLOGY......................................................................................26

3.1 Research Design...........................................................................................................26

3.2 Population and Sample.................................................................................................26
3.3 Nature and Sources of Data..........................................................................................26
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3.4 Methods of data Analysis..............................................................................................27

CHAPTER-IV....................................................................................................................29

RESULT AND DISCUSSION..........................................................................................29

Results................................................................................................................................29

4.1 To examine th relationship between performing loan and non-performing loan of

selected sample bank ……………………………………………………………………..29
4.2 To exmine the Correlation co-efficisent of the concerned bank in term of non-
performing loan ratio,Performing loan ratio, loan loss provision ratio, sector wise lending
ratio and tital loan to total deposit ratio …………………………………………… 33
4.3 Analysis on trend position of lending management adopted by the sample bank in
Nepal..................................................................................................................................37
4.4 Discussion.....................................................................................................................42
CHAPTER V.....................................................................................................................44

SUMMARY AND CONCLUSION..................................................................................44

5.1 Summary.......................................................................................................................44
5.2 Conclusion....................................................................................................................45
5.3 Implications..................................................................................................................45
References..........................................................................................................................47

ANNEX1...........................................................................................................................52

ANNEX II..........................................................................................................................58

ANNEX III........................................................................................................................64
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LIST OF TABLES

Table No. Title Page

No.

4.1 Loan and Advance to Total Deposit Ratio 28

4.2 Production Loan to Total Loan Ratio 20

4.3 Consumer Loan to Total Loan Ratio 30

4.4 Agriculture loan to Total Loan Ratio 31

4.5 Non – Performing loan to Total Loan Ratio 32

4.6 Performing loan to Non- performing Loan Ratio 33

4.7 Co-efficient of correlation between total deposit and loan of EBL 34

4.8 Co-efficient of correlation between total deposit and loan of NABIL 35

4.9 Co-efficient of correlation between total deposit and loan of NBL 37

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LIST OF ABBREVIATIONS

BORROW Borrowing
DEP Deposit
EBL Everest Bank Limited
INT Interest Rate
INVEST Investment
LIQ Liquidity
LEND Lending
NBL Nepal Bank Limited
NRB Nepal Rastra Bank
RBB Rastriya Baninjya Bank
TU Tribhuwan University
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ABSTRACT

Today banking business is diversified from traditional approaches to individual

approach. With the shift in customer preference from deposits in banks to investments,
ever increasing competition and number of banking facilities to customers at their
doorstep, there is tendency that the profit margins of the banks are divided and
declined. Now-days almost all banks in Nepal have started retail banking products and
value added services along with their traditional banking products. Commercial banks
are the most important savings, mobilization and financial resource allocation
institutions. Consequently, these roles make them an important phenomenon in
economic growth and development. In performing this role, it must be realized that
banks have the potential scope and prospects for mobilizing financial resources and
allocating them to productive investments. Therefore, no matter the sources of the
generation of income or the economic policies of the country, commercial banks
would be interested in giving out loans and advances to their numerous customers
bearing in mind, the three principles guiding their operations which are profitability,
liquidity and solvency. Lending which may be on short, medium or long-term basis is
one of the services that commercial banks do render to their customers. In other
words, banks do grant loans and advances to individuals, business organizations as
well as government in order to enable them embark on investment and development
activities as a mean of aiding their growth in particular or contributing toward the
economic development of a country in general .The main objectives of the study are to
analyze the lending management adopted by the sample bank with view to provide
workable suggestion. Therefore, the main objective of the study is to find out the
lending management position of the sample banks, to analyze the Performing loan and
Non-Performing loan of the selected sample banks, to evaluate the significant
relationship between commercial banks’ lending and bank's-specific factors and To
analyze the position of the concerned bank in term of non-performing loan ratio, C/D
ratio, loan loss provision ratio and non-performing to performing ratio.The result
shows that the coefficient of correlation between deposit to loan and advances in case
of Everest Bank Limited are -0.26. This indicates that there is a negative relationship
between deposit and loan advances.
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CHAPTER-I

INTRODUCTION

1.1 Background of the Study

Lending which may be on short, medium or long-term basis is one of the services that
commercial banks do render to their customers. In other words, banks do grant loans
and advances to individuals, business organizations as well as government in order to
enable them embark on investment and development activities as a mean of aiding
their growth in particular or contributing toward the economic development of a
country in general (Huzinga, 2015).

Lending behavior of the bank can be defined as the preferences and choices of bank
while making loans and advances. In other words, bank lending behavior is the
selection of bank’s investment on loans and advances on the account of constraints
given by regulators, opportunities or threats provided by macroeconomic factors and
the preferences of customers. To appropriately form the lending decision, banks
should consider many relevant factors that are likely to determine the borrower’s
ability and willingness to repay. The main factors that they should consider are the
risk associated with the borrower and the bank-borrower relationship. The risk factor
could well be most important in that even if the borrower has a good relationship with
the bank and the willingness to pay but it does not have the capacity to pay, the bank
will not receive its interest or principal. Therefore, the risk of borrowers, i.e. the
ability to meet future payment obligations should be evaluated carefully (Beck, 2016).

Thompson (2014) examined that banks well set their lending rate according to a
certain “mark-up” relative to the deposit rate. Accordingly, one of the important
factors determining lending interest rate is considered as the cost of funding, which is
a function of the composition of liabilities and the costs of raising the different
liabilities. Hutchison (2011) examined that policymakers announce that there is to be
an adjustment to the interest rate, banks actually adjust their lending rates unevenly;
that is, there may be a tendency for them to raise their lending rates much more
rapidly when market interest rates are rising, as compared to the speed at which they
are prepared to lower their lending rates when the market rate is declining.
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Kehinde D. (2013) argued that, financial resources are mobilized and channeled to
economic activities by financial institutions or financial intermediaries, especially
banks, who channel these resources from surplus economic units to deficit economic
units. Moreover, Gibson & Tsakalotos (2014) demonstrated that the banks could be a
catalyst of economic growth if it is developed and healthy. The benefits accruable 2
from a healthy and developed financial system relate to savings mobilization and
efficient financial intermediation roles. In addition to resource allocation good bank
performance rewards the shareholders with sufficient return for their investment.
When there is return there shall be an investment which, in turn, brings about
economic growth.

On the other hand, poor banking performance has a negative repercussion on the
economic growth and development (Shekhar, 2007). Poor performance can lead to
runs, failures and crises. Banking crisis could entail financial crisis which in turn
brings the economic meltdown as happened in USA in 2007 (Reddy, 2009). Thus, to
avoid the crisis due attention was given to banking performance. Sheku (2005) stated
profit is the ultimate goal of commercial banks. All the strategies designed and
activities performed thereof are meant to realize this grand objective. However, this
does not mean that commercial banks have no other goals. Commercial banks could
also have additional social and economic goals. However, the intention of this study is
related to the first objective, profitability. The performance of commercial banks can
be affected by internal and external factors. These factors can be classified into bank
specific (internal) and macroeconomic variables. This study focused on internal
factors that are not studied in most cases, like deposit mobilization, resource
allocation and the quality of loan (NPL). Performances of the bank depend on
deposits and resource allocation (Loan disbursement). Mobilization of deposits is one
of the important functions of banking business. It is an important source of working
fund for the bank (Rajeshwaries, 2014).

Deposit mobilization is an indispensable factor to increase the sources of the banks to

serve effectively. The Commercial Banks must tap deposits from urban and rural
areas. This helps the banks to provide large amount of funds to priority sectors for
development. On the other hand, the availability of loans is a factor that influences
bank profitability. Commercial banks borrow money for the purpose of lending at a
 xii

higher rate of interest. Bank grants various types of loans to the industrialists and
traders thus most of the bank’s income is generated from loan production. The margin
between the interest rate the bank pays the depositors and interest rate it charges for
loans represents the bank's profit. Therefore, the higher a bank’s loan-to-deposit ratio,
the more money it can earn in terms of lending revenue (Malede, 2014).

Though, deposit mobilization and resource allocations (loan disbursement) have a

great impact on banks performance, the quality of loan portfolio determines the
profitability of banks. The loan portfolio quality has a direct bearing on bank
profitability. The highest risk facing a bank is the losses derived from delinquent
loans (Kofi, 2013). It is the major concern of all commercial banks to keep the
amount of nonperforming loans to low level. Thus, low nonperforming loans to total
loans shows that the good health of the portfolio a bank.

Bank loans are one of the most important long-term financing sources in many
countries. In some developed countries like Japan, long term bank loans represent
more than its total long-term debt. The recent cross-country evidence shows that
banks in the emerging and developing countries’ economies are reluctant to extend
long-term credit to private businesses. Some factors influencing this reluctance are the
unstable local government economic policies, the idiosyncratic country legal risk and
the riskiness and opacity of business borrowers in these countries. Although there is a
broad body of literature that addresses these issues, it either focuses on the demand
side of debt (firms access to credit) or on the cross-country variation of bank lending
behavior. Little effort has been devoted in explaining the within country variation of
the supply side (banks) choices in their lending practices, especially in emerging
economies (Kinley, 2018).

The availability of external funding, especially access to long-term credit and costs of
credit, influences firms’ investments level in an economy and cash flow problems,
limited access to credit, and high costs of credit constrain firms’ ability to fund all
desired or required investment projects. Market imperfections as underdeveloped
financial and legal systems, improper macroeconomic environment constrain firms’
ability to fund investment projects (Hancock, 2009).
 xiii

Lending interest rate of commercial banks is influenced by a number of factors. The

classical theory argues that the rate of interest is determined by two forces. Firstly the
supplies of savings, derived mainly from households, and second the demand for
investable capital, coming mainly from the business sector. Moreover, the loanable
funds theory considers the rate of interest as the function of four variables: savings,
investment, the desire to hoard money and supply of money. Rational expectation
theory posits that the best estimation for future interest rates is the current spot rate
and that changes in interest rates are primarily due to unexpected information and or
changes in economic factors (Dickinson, 2010).

The development of any country largely depends upon the financial infrastructure of
that country. Therefore the primary goal of any nation including Nepal is rapid
economic development to promote the welfare of the people and nation as well. For
the development of banking system in Nepal, NRB refresh and change in financial
sector policies, regulations and institutional developments in 1980 A.D. Government
emphasized the role of the private sector for the investment in the financial sector.
These policies opened the doors for foreigners to enter into banking sector in Nepal
under joint venture [ CITATION Adh14 \l 1033 ].

Profile of Sample Banks

Everest Bank Limited (EBL)

Everest Bank Limited was established in 1992, as a joint venture with United Bank of
India and managed from very beginning till November 1996. Later on it handed over
the management to the Punjab National Bank Ltd, India that holds 20% equity on the
banks share capital. Altogether 62 branches, 5 extension counters, 24 revenue
collection counter and a representative office of Everest bank are in operation.
Authorized capital and paid-up capital of Everest Bank Limited are Rupees Nine
Billion Nine Hundred Twenty Million Only and Rupees Seven Billion Seven Hundred
Thirty Two Million Seven Hundred Twenty Three Thousand One Hundred And Forty
Seven Only respectively. Its book value is Rs.884.03. EPS is Rs.25.62.

NABIL Bank Limited (NABIL)

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Nabil Bank Limited was established in July 1984, as a nation’s first private sector
bank. Nabil was incorporated with the objective of extending international standard
modern banking services to various sectors of the society. There are 48 points of
representation. In addition to this, Nabil has presence through over 1300 Nabil Remit
agents throughout the nation. Authorized capital and paid-up capital of NABIL Bank
Limited are Rupees Eleven Billion Nine Hundred Twenty Million Only and Rupees
Eight Billion Forty One Million One hundred Fifty Nine Thousand and One Hundred
Onlyrespectively. Its market value is Rs.687. EPS is Rs.45.40

Nepal Bank Limited (NBL)

Nepal Bank Limited was established in November 15, 1937. This marked the
beginning of an era of formal banking in Nepal. Until then all monetary transactions
were carried out by private dealers and trading center. The Authorized capital and
paid-up capital of Nepal Bank Limited are Rupees Eleven Billion Four Hundred
Thirty One Million Two Hundred Sixty Thousand Only) and Rupees Eight Billion
Forty Two Million Six Hundred Sixty Two Thousand and Six Hundred Only)
respectively. Its market value is Rs.285. EPS is Rs.58.54. This marked the beginning
of an era of formal banking in Nepal. Until then all monetary transactions were
carried out by private dealers and trading center.

1.2 Problem Statement

Aydin, D. (2011) argued that, financial resources are mobilized and channeled to
economic activities by financial institutions or financial intermediaries, especially
banks, who channel these resources from surplus economic units to deficit economic
units. Banks, the world over, thrive on their ability to generate income through their
lending activities. The lending activity is made possible only if the banks can mobilize
enough funds from their customers. Since commercial banks depend on depositor’s
money as a source of funds.
Bouvatier (2010) bank use customer’s deposits mainly to give out loans to deficit
economic units or borrowers. The larger the amount of deposits a bank receives from
its customers, the better is its capacity to give out loans and the higher is the interest
income. In addition to resource allocation good bank performance rewards the
 xv

shareholders with sufficient return for their investment. When there is return there
shall be an investment which, in turn, brings about economic growth.
On the other hand, poor banking performance has a negative repercussion on the
economic growth and development. And, it can lead to runs, failures and crises
(Cihak, 2012). Thus, to avoid the crisis due attention should be given to banking
performance. Thus, financial performance analysis of commercial banks has been of
great interest to academic research since the Great Depression Intern the 1940’s. In
the last two decades studies have shown that commercial banks in Sub-Saharan Africa
(SSA) are more profitable than the rest of the world with an average Return on Assets
(ROA) of 2 percent.
Besides, the banking environment in Ethiopia has, for the past two decades,
undergone many regulatory 5 and financial reforms. These reforms have brought
about many structural changes in the banking sector of the country and have also
encouraged private banks to enter and expand their operations in the industry. During
those periods, Ethiopia has been showing an impressive performance in banking
service and the economic growth as a whole (Dasalegn. 2014). However, the
performance of commercial banks can be affected by various factors. Factors can be
classified into bank specific (internal) and macroeconomic (external) variables.
Among various factors, deposit mobilization and loan disbursement have an impact
on performance of commercial banks. Even though, the impact of deposit
mobilization and loan disbursement on bank performance is not widely studied some
of the relevant studies have examined the impact of deposit mobilization and loan
disbursement on banks’ performance around the world (Haron, 2017)
Basically, banks in Nepal have been facing the problems in credit and investment
sector and the present possibility for banks to diversify into wide range of services
and products provides good opportunity for banking entrepreneurs and managers. But
this diversification advantage is a once in a life time opportunity that should be
utilized with some caution and sound management as this involves a great deal of
risk. There is one saying that “the higher you go, the colder life becomes”. Banking
industry is high-risk business but it is not necessary to be high profit industry. It is
quite difficult to manage risk and return in banking industry. In Nepal, most of the
commercial banks are focusing on consumer loan, vehicle loan, real estate loan etc.
However, on the other part, growth of industrial loan has not been encouraging in
recent years. Lack of sound knowledge and various risks associated with loan leads to
 xvi

unsecured loan and investment that might bring banks towards liquidity and
bankruptcy. Due to transition phase, unstable government and deteriorating economic
scenario, Nepalese banks are reluctant to give loan to industrial and commercial
sectors so most of the banks are giving loan to profitable and unproductive sectors.
More flow of loan towards unproductive sectors has become serious concern for the
country. Lending policies are not systematic and no clear cut vision of policy is
available on lending aspect. In Nepal, it has been found that approval and lending
decisions are made in favor of those persons who have personal network. So a new
customer finds that loan providing process being very complicated and sometimes the
documents submitted the loan sanctioning being fraudulent and for formally purpose
only (John, 2010).

Pokharel (2015) concluded about the interest rate on both deposit and lending of all
sample banks are in decreasing trend, the saving deposit amount and saving interest
rate have negative relationship, fixed deposit amount and fixed interest rate shows
negative relationship. One of the variables that affect the demand of fund (lending
activity) is lending interest rate. The relationship between interest rate on deposit is
positive. The interest rate on lending and inflation rate has low degree of positive
correlation coefficient. This is one of the major issues for Nepalese banking
industry.The general objective of the study is to know the Lending Management of
Nepalese Commercial Banks with reference to EBL, NABIL and NBL and other
specific questions are as follows:

i. Is there any significant relationship between performing loan and non –

performing loan of selected sample banks?

ii. What is the position of the sample bank in term of non-performing loan ratio,
performing loan ratio, loan loss provision ratio, sector wise lending ratio and total
loan to total deposit ratio?

iii. What is the trend position of lending management adopted by the sample bank in
Nepal ?
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1.3 Objectives of the Study

The main objective of the study is to analyze the lending management adopted by the
sample bank. The specific objectives are as follows:

i) To examine the relationship between performing loan and non – performing

loan of selected sample banks.
ii) To examine the Co-efficient Correlation of the concerned bank in term of non-
performing loan ratio, performing loan ratio, loan loss provision ratio, sector
wise lending ratio and total loan to total deposit ratio.
iii) To examine the trend position of lending management adopted by the sample
bank in Nepal.

1.4 Rationale of the Study

There are only few researches conducted on the topic loan management of
commercial banks. Loan is a critical factor for the bank as it is a highest source of
income for bank and affects profit and performance. Banks get highest return in the
form of interest on loan. Growing competition and global financial crisis has had great
impact in banking business. The loan risk has risen substantially. This has increased
the importance of loan management and it is, therefore, a very current topic.
Especially, in the current economical situation, it is very important to have a clear and
effective loan management function that can help in maximizing profits during these
bad economical times. This study would be useful to all shareholders, investor and
bankers. Further, this study would help other free researcher for conducting further
research as it serves as a review of literature. Similarly finding of the study would be
beneficial to other who is interested in knowing about this particular bank. This help
to face challenges posed by other competitors and will help increase their reach by
attracting new customers.

The study is very significant to shareholder of the sample banks, professionals,

students, teachers and general public, who want to know about the lending
management and who are planning to invest in the sample banks. The research finding
may also be valuable to the banks taken for study. This study helps to identify its
hidden strength and weakness of banks as well as regarding financial and lending
 xviii

condition of the banks. The finding may be useful for the banks to overcome its
weakness to alter and make new policies and strategies regarding lending
management. The study will be helpful to the borrowers who want to approach these
banks for loan. Further, the study will also be reference to the future researcher to do
research on lending management.

1.5 Limitations of the Study

The limitations of study are as follows:

i) This study is limited to the lending aspect mainly with the loan and advances
only.
ii) The secondary data are used to analyze for result interpretations, so the
accuracy of the finding depends on the reliability of available information.
iii) Only three commercial banks are taken for the study.
iv) The study analysis secondary data only for nine years period.
 xix

CHAPTER-II

LITERATURE REVIEW

This chapter covers both theoretical and empirical literature on determinants of

lending management of Nepalese commercial banks. It concludes with an overview of
the literature highlighting the research gap that the study seeks to fill.

2.1 Theoretical Review

A loan is a kind of advance made with or without security at agreed rate of interest. It
is the most profitable asset of the bank. So, bank management always tries to increase
loan portfolio in order to get more profit. The borrower initially receives an amount of
money from the lender, which he pays back, in regular installments, to the lender.
Borrower has to pay interest on the loan. So, loan is typically the major primary
source of income to banks. Though lending is the primary activity of the bank, they
are very cautious in granting the loans to their clients because their funds are collected
from the general public in the form of deposits that can be withdrawn at a short notice
at any time. For this, the provided loan and investment should be secured for easy
recovery not only backed by fixed collateral securities. This shows importance of
managing lending activities for success and profit. Lending activities are guided by
certain principals like principal of safety and security, principal of liquidity, principal
of risk diversification, principal of profitability and principal of purpose of loan.
Moreover, bank balance sheet position shows how effectively management has been
able to manage the granting of loans to borrowers. In order for the bank to secure the
risks with lending, research suggests that lending decisions are based on figures in the
balance sheet and income statements. Such reliance on accounting data requires (i) a
set of company documents compiled according to quality standards and (ii) that the
information available should allow an assessment of present and future financial
standing of the company (Udell, 2006).

Loan management is the process by which risk that is inherent in lending process are
managed and controlled. It is concerned with formulating and implementing lending
policies. Income and profit depends on lending and investment procedure. A sound
 xx

procedure provides high return and profit. So higher the loan, higher will be profit but
loan should be increased such that it is manageable. Moreover, lending and
investment are important not only for bank but also to the overall economic
development of the country. Loan management affects company’s profitability and
liquidity. The banks take care in analyzing creditworthiness of borrowing customer to
ensure that the interest and principal amount on loan are timely recovered without any
problem and liquidity. In short, loan mobilization and recovery are too important
aspect of loan management but it also includes all the activities related with loan such
as loan processing, marketing, monitoring concentrating risk, hedging risk, and credit
reporting. Sound loan policy can attract more customer and increase volume of
deposits, investment. Every bank has its own lending policies. Lending policies
provide guidelines for loan officers for granting loans (Lucy, 2012).

Diana states that banking institution in developing market states that loan policy
should incorporate several elements such as regulatory environment, the availability
of fund, the selection of risk, loan portfolio balances and term structure of liabilities.
Loan management is guided by loan policy adopted by bank and help to minimize risk
inherent in loan. A considered view is that banks’ lending policy could have crucial
influence on nonperforming loans (Liu, 2014). The purpose of loan management is to
manage the costs and risks associated with credit. Finding the optimal level of risk
and reward where the company’s profitability and earnings are highest is the main
goal of loan management. Loan management has gained more importance because
credit/loan risk increases rapidly in recent days as commercial banks are increasing
their loan and investment. In order to protect themselves from risks and maximize
returns, commercial banks develop different tools such as loan management policies
and procedures (e.g. loan appraisal policies), customer assessment systems,
monitoring systems, and so on. In short, before approving loans, commercial banks
assess potential risks in connection to clients (“screen” clients), and later on monitor
loans. The following statement sums up the importance of loan management.
“Optimizing cash flow and avoiding bad debts are two key objectives of any
successful business. Setting up a good credit control system is the starting point for
both. ”.Loan management’s main objective is to try and balance the risk and reward
relationship. Loan management can contribute to the financial performance of the
company. Loan officer has to assess the credit worthiness of the customer and it is
 xxi

based on financial information of the buyer like profitability, liquidity and financial
solvency. Loral Narayananan in her study “Effective Credit Management - 5 Keys to
Help Companies Survive in the Current Economy” states two important strategies for
bank to survive in market one is effective credit management for consistency in your
credit and collection processes. This consistency can be achieved through well
designed and actively implemented credit and collection policy. Even if you already
have a credit and collection policy, it's important to review it on a regular basis to
assess its effectiveness and to make sure you are following it. Second is with current
customers, don't assume they're okay now because they were okay last year. Review
the creditworthiness of all of your important customers. Companies that appeared
secure six months ago may now be on the verge of collapse. Set up regular reviews to
monitor each customer's creditworthiness to keep a step ahead of bad debt write-offs.
Loan management covers the various aspects like credit appraisal, NPA management,
recovery management and all the areas right from the beginning like inquiry till the
loan has been paid up (Adhikari, 2014).

2.1.1 Types of credit/loan

Thapa (2010) have mentioned in their book that credit is a kind of product which can
be developed on the basis of terms and conditions demanded by the credit agreement
between bank and the borrower. It can be classified as:

1. Funded loan

It refers to the loan which is disbursed in the form of cash or any other payment.
Whenever bank gives loan and cash goes out of the bank immediately, then it is called
as funded loan. Some of the examples of funded loans are overdraft, trust receipt loan,
importer/exporter loan, demand loan, home/hire purchase/auto loan etc.

2. Non funded loan

In non-funded loan bank do not have to pay cash but need to commit a conditional
payment. Some examples of non-funded loan are letter of credit, guarantee, and
acceptance.
 xxii

3. Working capital

The loan which is provided to finance company’s daily operations and repaid in fixed
installment is called working capital loan. They are not used to buy long-term assets.
Some examples of working capital loan are payroll, rent, debt payments etc.

4. Consumer or corporate loan

These loans are the loans which are granted for the consumption purpose and these
loans are based on security and future cash flow. Some examples are vehicle loan,
personal loan etc. However, corporate loans are the loans which are granted for big
business houses (Rawal, 2010).

2.1.3 The Loan Policy

The goal of every credit manager is to achieve the highest level of profitable loan,
over the shortest period of time, with the minimum bad debts. In this highly
competitive market for its market share it is not possible to lend loan only to solvent
customer. Trading with customers that have high credit risk, needs to be profitable.
For this bank should have sound policy. Loan policy is a standard and guidelines for
lending decisions and activities. Loan Policies are made by Board of Directors and
should communicate within the organization. So loan mobilization and recovery are
two important part of loan policy. A credit policy is the blueprint used by a loan
officer in making its decision to provide loan to the customers. In order to implement
credit policy to work it is essential that everybody is committed to it and everyone has
to know what they are doing, why they are doing it and what are the consequences if
it is not done. However loan policy should be flexible.

Lending policies are based on profit maximizing of institutions and economic

development of the country and it may differs from bank to bank. Some banks
approach credit very conservatively, lending only to financially strong, well-
established borrowers. Growth-oriented banks may approach lending more
aggressively, lending to borrowers who pose a higher repayment risk. It provides a
framework for achieving asset quality and earnings objectives; sets risk tolerance
 xxiii

levels, and guides the bank’s lending activities as per bank’s strategic direction. The
policy should provide a realistic description of where the bank wants to position itself.
Policies should be periodically reviewed and revised to response changes in the
bank’s strategic direction, risk tolerance level and market situation. NRB has sent
various directives, guidelines and a circular regarding credit and this is necessary so
as to use fund received as per direction set by policies .NRB time to time gives
directives and guidelines on credit for safe, sound andprofitable lending. So bank has
to set the direction of use of fund received from stakeholders, depositors and others.
The policies provide uniformity in lending activities (Das, 2002).

2.1.4 Loan process

The objective of loan management is to control loan approval process and achieve
loan quality. However, every loan approval process should introduce adequate
controls mechanism to achieve quality in credit at the time of origin. The process
should be in line with bank’s credit guidelines, its risk profile, and the capabilities of
its lenders. The loan approval decisions are made by credit committee of a bank.

Johnson (1985) pointed out that the activities in the process of commercial and
industrial (C&I) loans follow eight steps;

The first step is the application, which is conducted by a loan officer. Initially, the
loan officer obtains as much information as possible about the situation of the
borrower, for example, his or her previous credit history, current outstanding loans,
and current financial statement and income source.

The second step is the credit analysis conducted by the credit department. Loan
officer conduct a comparative and historic analysis of the company's financial data
and internal analyst prepares a recommendation report for the loan officer about
whether the loan should be granted or rejected.

In the third step, the loan officer obtains the credit analysis report and determines
whether the report accurately describes the borrowing capacity and characteristics of
the borrower.
 xxiv

The fourth step is the loan operation. Here, it is necessary to prepare primary notes,
agreements, collateral or non-collateral agreements.

In the fifth step, the loan officer obtains the borrowers’ signatures and receives
collateral; then the loan operation is closed and the loan proceeds.

The sixth step is the recording of the loan conducted by the loan operation and credit
department staff and check whether it is within the loan policy or not.

The seventh step is loan servicing and administration conducted by a loan operation
operator, a loan officer, a credit department staff member, and a financial analyst. The
loan operation staff person prepares the loan payment notice to notify the borrower
and is responsible for receiving periodic payments.

In the eighth step, the loan officer may receive periodic delinquency information and
need to follow up on this with borrowers. The loan officer also needs to adjust loan
terms and conditions as deemed necessary, and to take legal action if non-collectible
procedures and foreclosure on the loan are followed. When the entire lending process
has come to an end, the output comes with the profit earning status of the loan, which
is also used to measure lending performance. Sound lending decisions are based on
the 6C principles. These 6 Cs are character, capacity, capital, collateral, conditions
and control which are also important reference points for banks when making a credit
analysis to decide whether or not a borrower is worthy of a loan. In short while
approving loan bank follow following activities.

 Loan appraisal
 Loan approval,
 Documentation,
 Disbursement
 Loan monitoring
 Credit recovery

Loan officer should consider purpose of loan, source of repayment, length of

maturity, financial strength and character of borrower, adequacy of capital, quality of
financial statements and accounting procedures, ability to meet current obligations,
 xxv

quality of management, completeness of documentation, references and past credit

history, quality of collateral, if any, relationship with bank in lending process.

For instance, bank lending channel theory only looks at the effects of reserve
requirements while pro-concentration theory focuses on how bank capitalization
affects the bank’s lending behavior. Alternatively, Felicia (2011) argues that bank
lending reduces through monetary contraction as posited by the Keynesian theory.
This implies credit available from the banks is reduced. Further, within finance
literature, there exits several theories with regard to banks’ lending behavior. In this
study, the theories reviewed are summarized as follows:

Loan pricing theory

This asserts that banks cannot always set high interest rates. Therefore, in trying to
earn maximum interest income banks should consider the problems of adverse
selection and moral hazards since it is very difficult to forecast the borrower type at
the start of the banking relationship (Gambacorta, 2004) given the high credit market
information asymmetry. If banks set interest rates too high, they may induce adverse
selection problems because high risk borrowers are willing to accept these high rates.
Once these borrowers receive the loans, they may develop moral hazard behavior
since they are likely to take a highly risky projects or investments (Dimond, 1998). It
argued that at times it may be difficult to find interest rate set by bank which
commensurate with the risk of the borrowers. This theory suggests that loans
advanced to the public may or may not increase in the end.

Credit Market Theory

The neoclassical credit market model suggests that the terms of credits clear the
market. In this model, the interest rate is the only price mechanism that can clear the
credit market given that the loan collateral remains constant. With a growing demand
for credit and a given loan and advances supply by the banks, the interest rate can
only rise if the credit market is clear, and the reverse is true. The higher the default
risks of the borrower, the higher the interest premium (Dhungana, 2011) so as to
compensate against any possible losses. The increase in demand for credit brought
about by low interest rates eventually may lead to depreciation of currency. Central
bank therefore must adjust the interest rate to increase the cost of borrowing.
 xxvi

Commercial banks in their turn must increase their rates and therefore thus
contracting their lending activities in the long run. Although, central bank requires
banks to deposit a certain amount of money with them, increased cash requirement
ratio also acts as a mechanism of restricting credit available taking consideration of
macro-economic. According to Freixas(2008), this leaves commercial banks with
close to no alternative other than lowering lending volumes.

Moral Hazard Theory

Moral hazard occurs when a contract is executed among two parties. The two types of
moral hazard are hidden information and hidden action. Hidden information occurs
when one contract party does not unveil the full range of his or her options and the
consequent risk factors. Hidden action occurs when one contract party chooses
options that are not in the interest of the counterparty and cannot be observed and
managed thus moral hazard may arise .In relation to credit markets and analyzing the
lender- borrower relationship in more detail, the financial institutions may not have
the capacity to ensure that the borrower invests the borrowed loan in productive
investments and as a result of this information asymmetry, the borrower may decide
to invest in risky projects leading to defaulting (Diamond, 2016).

2.2 Empirical Review

According to Aliyu (2010), are funds that customers place with a bank and that the
bank is obligated to repay on demand, after a specific period of time or after expiration
of some required notice period. Financial institutions such as commercial banks,
merchant banks, finance companies and discount houses are granted licenses by the
Central Bank of Nigeria to accept deposits from their customers. Deposit is the
primary funding source for most banks and, as a result, has significant effect on a
bank‟s liquidity. Thus, mobilization of deposits for a bank is as essential as oxygen for
human being.

Updhyaya (2011) found that the sound lending policies and optimum portfolio
management of financial institutions as well as an effective regulation and supervision
of financial institutions ensure the significant reduction of NPL and enhance bank
efficiency.
 xxvii

According to Bhetuwal, (2011) deposits play a pivotal role in bank funding, as a major
portion of a commercial bank’s assets is usually financed through customer deposits.
To enhance deposit mobilization from the public, banks have used various strategies
and most increasingly adopt a marketing approach for deposits mobilization, which
focuses on the identification of customer needs and offering of products.

The process of financial liberalization has intensified competition between financial

institutions, thus forcing commercial banks to compete for deposits in various forms.
According to Bologna (2011), deposits play a pivotal role in bank funding, as a major
portion of a commercial bank’s assets is usually financed through customer deposits.
To enhance deposit mobilization from the public, banks have used various strategies
and most increasingly adopt a marketing approach for deposits mobilization, which
focuses on the identification of customer needs and offering of products accordingly.

The term “deposit target” is used to denote the deposit mobilization strategy of banks
where bankers especially core marketers, new employees and marketing teams are
given certain period of time to mobilize deposits from anywhere and everywhere up to
a certain amount. In the banking institutions there are rewards and punishment for
meeting or not meeting the target. While the implementation of this policy differs
from bank to bank, this practice is common among the new generation banks. For
meeting the deposit target certain percentage of money are added to the banker‟s
income, it enhances his/her chances of good performance appraisal and subsequent
promotion and job security. For new employees it gives them quick confirmation of
appointment during the probationary period. However failure to meet the deposit
target is always unpleasant, resulting to no promotion, loss of job etc. In an economy
that is hard with high rate of unemployment and attractive salary and allowances for
bankers‟ combined with the drive for profit by bank owners both the bankers and their
owners often engage in business immorality, unethical banking practices and the like
to get deposits from the public (Keeton, 2012).

Borio (2012)argued, lending is one of the two principal functions of banks, not only
because of their social obligation to cater to the credit needs of different sections of the
community, but also because lending is the most profitable, for the interest rates
realized on loans have always been well above those realized on investments.
Adedoyin(2006) asserted that, most business organizations, especially in developing
 xxviii

countries are highly dependent on bank loans as a source of capital and the ability of
banks in giving loans depends much on their ability to attract deposits.

On the other hand, and as Vohra and Sehgal (2012) argued, lending is one of the two
principal functions of banks, not only because of their social obligation to cater to the
credit needs of different sections of the community, but also because lending is the
most profitable, for the interest rates realized on loans have always been well above
those realized on investments.

Haron and Azmi (2012) asserted that, most business organizations, especially in
developing countries are highly dependent on bank loans as a source of capital and the
ability of banks in giving loans depends much on their ability to attract deposits.

Dadzie, Winston and Afriyie (2013) provided empirical support of factors affecting
deposit to be the level of income, customer’s satisfaction, service quality and
demographic factors such as number of dependants and location. The deposit and
lending activities of banks determine to a large extent, the profitability of banks. This
is because banks generate their income from the interest differentials from what they
pay for deposit and what they charge for their loans and advances.

Budha (2013) revealed that banks play a role in Nepal's monetary transmission
mechanism. The empirical result showed that the bank lending decreases after a
monetary tightening. Capitalization was found to have no significant impact on the
bank lending. The bank loan supply was also found to be significantly affected by the
gross domestic product.

Kofi (2013) conducted a study to investigate lending behavior among the Ghanaian
banks. They used the Generalized Methods of Moments (GMM) as an estimation
technique. Their findings revealed that bank size and capital structure positively and
statistically significantly influenced banks’ lending behavior. Also they found out an
inverse relationship exhibited by exchange rate fluctuations. It was reported that a
significant and negative relationship was exhibited between exchange rate and total
loans advanced by commercial banks. Their findings concur to the study result of
affirms that small banks have comparative advantages in producing soft information
whereas large banks also have comparative advantages in lending based on hard
information. The study unveiled a positive significant effect of competition in the
 xxix

banking industry on bank lending behavior. In addition, Macroeconomic environment

within which a bank operates determines the lending decision of the bank. For
instance, during economic boom, businesses demand for loans to take advantage of
expansion and banks investment opportunities equally soar.

Malede (2014) explored determinants of commercial banks’ lending in the Ethiopian

banking industry using panel data from eight banks for the 2005 -2011 period. The
results of the study indicate a significant relationship between banks’ lending and
banks size, credit risk, gross domestic product and liquidity ratios. On contrary, the
study found out that deposit, investments, cash reserve ratios and interest rates had no
significant effect on Ethiopian banks’ lending activities.

Emphasized the implications of margin in funding an follow up and secondly, the

ways to use margin as a credit management tool for quality assets and found that using
margin as an effective credit management tool at all stages of advance would call for a
drastic change in risk perception and credit administration. To sum up, banks should
lay a conscious premium on margin by permitting healthier units a greater access to
banks funds. The present working capital gap approach based on estimated minimum
margin should be replaced by graduated scale of margin based on risk perception or
credit rating. The cost of servicing weal units, i.e., higher cost and lower return, should
be well appreciated and remedied by reducing exposure in them and increasing both
interest and margin stipulations for them. By extension, rehabilitation should be a
credit decision based strictly on clear commercial viability ensured through adequate
margin commitments. The leitmotif of the entire approach to lending should be the net
worth or margin to ensure asset quality and profitability. They also found the
relationship between deposits and national income will change and the proportion of
bank borrowings to total borrowings of the corporate sector would decline and
metropolitan deposits would grow faster than normal, while other deposits would
grow slower (Kofi, 2013).

In today‟s banking in Nigeria, financial intermediation is not really the target, but how
to amass deposits from the public. According to Lemo (2015), bank owners are more
interested in sourcing deposits by any means possible. Commenting on the strategy of
target deposits” he observed that banks often set impossible target for the staff in the
 xxx

marketing department, thus marketing becoming the most important function in the
banks.

Framed the objectives in the research paper that overall deposit mobilization
performances of all the scheduled commercial banks of India during the period 1985-
98 and concluded that the significant influence of GDP and Branch expansion on time
deposits during the period under consideration. The results also suit with the present
experiences of the commercial banks in India. A rise in GDP will no doubt have a
favorable effect on time deposits and hence on the profitability of the SCBs. But the
branch expansion during the period instead of having a favorable impact has an
unfavorable impact on the volume of time deposits. Unwise expansion of branch
simply with a view to spreading the banking facilities has an unfavorable impact and
hence on profitability of the SCBs of India. This is also supported by a very recent
statement made by the trade union of the United Bank of India (UBI). The Union in
their representation to the M.S.Burma Committee submitted that the UBI suffered a
loss due to unwise branch expansion especially in the rural areas. He also indicates
that a very cautious approach is to be taken before implementing any policy of branch
expansion by the SCBs (Koirala, 2017).

Lucy (2017) investigated the determinants of the bank credit by using time series data
from 1971 to 2010 in Pakistan. The empirical results indicated that the deposits have
significant impact on banks credit to the private sector in Pakistan, particularly in the
long run, whereas the inflation does not affect the private credit. In conclusion, the
determinants of bank lending behavior literature indicate that bank level (capital,
GDP) variables’ impact bank lending behavior in different ways in different countries.
In this context, bank lending behavior varies according to the dynamics and the
institutional background of the country.

The strategies must be employed for utilization of mobilized resources in a productive

manner. He suggested that within the broad framework of economic planning,
Government has introduced considerable relaxation in industrial and import-export
trade regulations and those concerning technology. Thus, external trade is becoming a
going ratio of GDP. As a result of the growth of the modern sector, the flows of goods
and services have become less seasonal an the distinction between what had
traditionally come to be known as the ‘busy’ and ‘slack’ seasons for the ebb and flow
 xxxi

of banking variables has got blurred. All of these changes have produced a situation
where the interaction between the real sector and the financial sector has become
quicker; this has created the necessity and scope for introducing flexibility in the
operations of monetary and credit policies ( Kinley, 2018).

The objectives that need for certain refinement in measuring profitability of PSBs so
that current profits are not earned at future cost. A need for risk factoring to profits
will exacted so as to reflect a correct and true position of profit and loss account. The
arguments would also point towards need for measuring risk so as to find ways to
hedge against the various types of asset liability risks and he also concluded that a
prudent method could be to perceive the risk, measure it and provide for it from out of
present profits to reflect a market position of all assets. Doing so, only for investments,
certain positive measures can be taken by the banks for their profit. The transparency
in the profitability of PSBs and in a bid to mark the balance sheet to market using a
balanced risk absorption strategy ( Kinley, 2018).

Fouopi (2018) carried out an investigation on bank capital and lending in the United
States of America. The question as to how the bank capital affects the lending
decisions of banks was the main concern of the study. The sample only included
commercial banks in the United States. The data were obtained from the Call Reports
database, maintained by the Federal Reserve Bank of Chicago. The regression analysis
was conducted only for the middle eighty percent of banks, by total assets. The result
of the study indicated a significant relationship between bank capital and lending in
the United States.

The global financial crisis has posed serious challenge for deposit mobilization by
banks, apart from the greater financial deepening which has created several alternative
investment outlets for investors. This development has serious consequences for banks
deposits and lending activities. As opined, due to reforms and developments in the
capital market, particularly the developments of non – banking financial companies,
there is much more awareness among the investors, and deposit mobilization has
become competitive and challenging for the banking industry (Meyer, 2018). The
regulatory environment is more stringent and must be observed but the economic
environment is perhaps the more challenging since it affords them the opportunity to
exercise their discretion at least relatively, in a manner that will impact positively on
 xxxii

their business in the long run. The economic environment is a systematic risk
component that affects every participant within the economy. The general
performance of the economy is reflected by the macroeconomic aggregates including
the gross domestic product (GDP) and inflation.

In line with lending view, many firms are dependent on bank loans to finance their
activities; this increase in loans will cause investment spending. An important result
of this implication is that monetary policy will have a greater effect on expenditure by
smaller firms, which are more dependent on bank loans compared to large firms,
which can easily access the credit markets. Small firms have fewer external funding
options and hence are more dependent on bank lending which face more severe
asymmetric information problems. The capacity of Ghanaian banks, especially
commercial banks, is to accept deposits from the general public for the purport of
lending and investment. This makes depositors the major stakeholders of the banking
system. While sundry deposits products by banks are assigned different names for
which they are designated to accommodate varying purposes, the deposit products of
commercial banks can be broadly categorized into demand deposits, savings deposits,
and term or fixed deposits. The banks provide various services to sectors of the
economy, e.g., liquidity services, information, maturity intermediation, transaction
cost, credit allocation, payment services, and money supply services, among others
(Elsevier, 2018).

Deposit mobilization is one of the crucial functions of a conventional financial

institutions or banks to satisfy one of the requirements of a "banking business", i.e.
sourcing of funds or borrowing money from customers. Continuous and adequate
deposit mobilization would ensure the bank shall be able to sustain its business of
lending and investing, thus incurring profit for future growth (Borio, 2019).

According to Charles (2019), deposits play a pivotal role in bank funding, as a major
portion of a commercial bank’s assets is usually financed through customer deposits.
To enhance deposit mobilization from the public, banks have used various strategies
and most increasingly adopt a marketing approach for deposits mobilization. 12
Furthermore, mobilization of deposits is an important source of working fund for the
bank and it is an indispensable factor to increase the sources of the banks to serve
effectively. Mobilization of deposit plays an important role in providing satisfactory
 xxxiii

service to different sectors of the economy. The Commercial Banks must tap deposits
from urban and rural areas. This helps the banks to provide large amount of funds to
priority sectors for development. The success of the banking business greatly lies on
the extent of deposit mobilized. Performances of the bank depend on deposits, as the
deposits are normally considered as a cost effective source of working fund. On other
hand, if finance is not provided to any economic sector, it will suffer and that sector
will eventually fail. However, the ability to provide the relevant financing is
dependent on the ability of the banks to mobilize adequate amount of deposits in the
economy and other foreign sources of funding.

Dimond (2019) said that deposits provide most of the raw materials for bank loans
and thus represent the ultimate source of the bank’s profits and growth. Banks make
profit by using their deposits, therefore it is said that depositors can disciple banks.
For depository corporations mainly deposit money banks, their principal objectives is
undertaking financial intermediation to make profit and increase their shareholders
value. Studies around the world have shown that banks should fund more of their loan
books with customer deposit in order to stand more robustly against liquidity squeezes
and contribute to the stability of the banking system. So, deposits are the primary
source of funds for a bank, which facilitates the uses of funds (loans and investments).
The higher the deposits amount, the bigger the lending and investments portfolio can
be maintained by the banks to sustain its expansion and future growth. The banks
must have adequate deposits to meet the lending volume required by the public and at
the same time maintain extra cash for withdrawals by depositors.

2.3 Research Gap

The review of above relevant literatures has contributed to enhance the fundamental
understanding and knowledge, which is required to make the study meaningful and
purposeful. There are various research conducted on bank lending in different
countries such as Ethiopia, Malaysia, Pakistan, but, no single research has been
conducted on bank lending behavior in Nepal. Though, a number of studies in various
developing and developed countries have been conducted, findings of these studies
cannot be applied in Nepalese context. The study attempts to explore the various
factors affecting the lending behavior of the Nepalese commercial bank.
 xxxiv

During past few decades, many banks both in developed, emerging and developing
economies face difficult situation and problems in performance. Such bank failure and
financial distress have affected many banks and some of which have closed down by
the regulatory authorities. Banking problem results the output and employment loss in
an economy. This study estimates that the output loss due to banking crisis two digit
percentage of GDP. Many research studies found that most of the bank failure or crisis
has been caused by non performing assets(Richard, 2011).

Nepal is also facing banking crisis and some of the bank and financial institutions
have already failed last few years and are in the process of liquidation. This study
shows that the failure of banks in Nepal was also the result of the high non-performing
assets due to and the result of lending without differentiating markets, product and
borrowers credit worthiness and excessive loan exposure to real estate.(Sapkota,
2011).
 xxxv

CHAPTER-III

RESEARCH METHODOLOGY

Research methodology is a sequential procedure and collection of scientific method to

be adopted in a systematic study. This chapter deals about the research methodology
by which is the collected data are analyzed to gate result, in this regard, this chapter is
carried out to diagnose the lending management of Everest Bank, Nabil Bank and
Nepal Bank Limited.

3.1 Research Design

Collected data is organized, summarized and analyzed through descriptive statistics

by finding correlation and regression through the statistical software “Statistical
Package for Social Sciences” (SPSS). The collected data are interpreted using various
financial ratios of selected sample banks. Both primary and secondary data is used in
the analysis in this study. This study is carried out to get the empirical result of
lending management of Nepal bank, Nabil bank and Everest bank. All the data used in
this study are primary and secondary in nature.

3.2 Population and Sample

According to the annual report of NRB 2020, there are altogether 27 commercial
banks operating in Nepal. The concern of the study is on the lending management of
NBL, NABIL and EBL. So NBL, NABIL and EBL are taken as sample to achieve the
research objectives.

3.3 Nature and Sources of Data

To fulfill pre-determined objectives that are set up for the study, secondary sources
are included. The secondary data was obtained from the head office of NBL,Newroad;
EBL, Lazimpat and corporate office of Nabil bank,Kamaladi, Kathmandu. Annual
report and the data obtained from the account department and websites of NBL, NBIL
and EBL are considered the main source of secondary data. Besides these, various
bulleting available, websites, Journals are also taken into consideration.
 xxxvi

3.4 Methods of data Analysis

The main purpose of data analysis in this study is to explore the predictive power of
firm specific variables in explaining the determinant of bank lending behavior in
context of Nepalese commercial banks. Besides, the study also attempts to identify the
lending management behavior adopted by sample commercial banks and influence of
other factors on lending are total loan to total deposit ratio, sector wise lending ration,
non-performing loan to total loan ratio, performing loan to non-performing loan ratio
and loan loss provision to non-performing loan ratio.

3.5 Data Analysis Tools

To analyze the collected data many statistical and non- statistical tools can be
used. Among the different tools in the field of technical analysis, some of the
commonly used tools chart diagrams are used. Since all of these tools are not very
relevant to the Nepalese context due to lack of sophisticated computer software
packages and complexity of applications. So the study focused only simple type
tools moving average and bar diagrams are used for the presenting and analyzing
data.

Mean

The most popular and widely used measure of representing the entire data by one
value is called arithmetic mean. In this study, arithmetic mean is used as per the
necessity for analysis. In this research mean had been used to analyze average
lending ratio of 10 years’ time frame to compare with other sample bank.

Standard Deviation
The standard deviation is usually denoted the letter(σ). Karl Pearson suggested it as a
widely used measure of dispersion and defines as the given observation from their
arithmetic mean set of value. It is also known as root mean square deviation. Standard
deviation, in this study will be use to measure the degree of fluctuation of interest rate
and that of other variables as per the necessity of analysis.
 xxxvii

Ratio Analysis

Ratio analysis is the comparison of line items in the financial statements of a

business. Ratio analysis is used to evaluate a number of issues with an entity, such
as its liquidity, efficiency of operations, and profitability. For lending and deposit,
the study had used various ratios for analysis.

Correlation Co-efficient (r)

Correlation analysis is the statistical tool that can used to describe the degree to
which one variable is nearly related to other variables. It is calculated to measure
the degree of association between two variables. Two or more variables are said to
be correlated if change in the value of one variable appears to be related or linked
with the change in the other variables. Correlation coefficient describes not only
the magnitude of the correlation but also its direction. It always lies between +1
and -1. If r=+1, there is perfect positive correlation between two variables. If r=-1,
there is perfect negative correlation between the two variables. If r=0, the
variables are uncorrelated. When r lies between 0.7 to 0.999 (-0.7 to -0.999), there
is a high degree of positive (or negative) correlation. When r lies between 0.5 to
0.699, there is moderate degree of correlation.

Trend Analysis

Forecasting is an essential tool in any decision-making. Analysis is carried out to

determine rate in the past data. Trend analysis is adopted to ascertain future. The
trend analysis is taken as a tool to forecast the future position of commercial
banks. The equation used to obtain the trend values is Y=a+bx
 xxxviii

CHAPTER-IV

RESULT AND DISCUSSION

Results
Presentation and analysis of data is an important stage of the research study. The main
purpose of analyzing the data is to change it from the unprocessed from to an
understandable presentation. The analysis of data consists of organizing data by
tabulating and then placing the data in presentable from by using figures and table.
This is analytical chapter where those major financial items are analyzed and
evaluated which affect the loan management and fund mobilization of the Everest,
NBL and NABIL Banks in the comparison of each year.

4.1 .To examine the relationship between performing loan and non-performing
loan of selected sample banks.

A financial ratio is a relative magnitude of two selected numerical values taken from
an enterprise's financial statements. Often used in accounting, there are many standard
ratios used to try to evaluate the overall financial condition of a corporation or other
organization. Financial ratios may be used by managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Financial analysts
use financial ratios to compare the strengths and weaknesses in various companies. If
shares in a company are traded in a financial market, the market price of the shares is
used in certain financial ratios.

4.1.1 Loan and Advance to Total Deposit Ratio

This ratio helps to show the relationship loan and advances which are granted and the
total deposit collected by bank. This ratio measures the extent to which the banks are
successful to mobilize the total deposit on loan and advances for the purpose of
generating profit. A high ratio of loan and advances means better mobilization of
collected deposit and vice-versa. It is calculated as:

Loan and Advance to total deposit Ratio = Loan and advance / Total deposit
 xxxix

Table 4.1: Loan and Advance to Total deposit Ratio (%)

201 2012/ 2013/ 2014/ 2015/ 2016 2017/ 2018/ 201 S.D
Bank Mean
1/12 13 14 15 16 /17 18 19 9/20
EBL 68.1 71.8 75.2 76.6 65.6 72.5 73.6 74.2 73.1 72.30 3.46
NABIL 69.2 73 72.6 63.01 69.1 75.7 77.3 76.2 75.2 72.37 4.50
NBL 46.3 49.4 60.1 59.5 65.4 68.5 71.6 70.3 68.1 62.13 8.50

In the above table, all the banks have fluctuating trend regarding the ratios. EBL has
the highest ratios of 76.60% in the F/Y 2015 and the lowest ratio of 65.6% in the F/Y
2016. Accordingly, NABIL and NBL has highest ratios is 77.3% and 71.3% in the
F/Y 2018 each and the lowest ratio is 63.01% and 49.4% in the F/Y 2015 and 2013
respectively. In overall mean ratio of loan and advances to total deposit of NABIL is
higher than that of other banks and SD of NBL is greater than other banks.
In conclusion, EBL has strong position regarding the mobilization of total deposit on
loan and advance and acquiring higher profit in comparison to other. It states that
EBL is better in this regard.

Loan and Advance to total deposit Ratio(%)

4.1.2. Sector Wise Lending Ratio

1. Production Loan to Total Loan Ratio

Production loan is a debt instrument used by production units to finance the

production cost. The repayment is linked to cash flow, which occurs by selling of the
goods from the production unit. It is calculated as:

Production Loan to Total Loan Ratio = Production Loan / Total Loan

 xl

Table 4.2: Production Loan to Total Loan Ratio (%)

2011 2012/ 2013/ 2014/ 2015/ 2016/ 2017/ 2018 2019

Banks Mean S.D
/12 13 14 15 16 17 18 /19 /20
EBL 23.2 25.4 22 22.2 23.6 16.2 17.4 19.2 17.3 20.72 3.27
NABIL 28.3 30.5 31.5 37.5 34.3 36.7 40.5 42.3 41.3 35.88 5.04
NBL 29.3 31.2 32.3 38.1 35.2 37.1 40.6 41.1 42.2 36.12 4.37

The above table shows that all the banks have fluctuating trend regarding the ratios.
NBL has the highest ratio of 42.2% in the F/Y 2020 and the lowest ratio of 29.3% in
the F/Y 2012. On the basis of mean ratio, NBL has higher investment than other two
banks i.e. 36.12. And NABIL has highest S.D. than other banks. Lastly, we can say
that NBL fund mobilization in terms of production loan with respect to total loan fund
is more satisfactory than that of other banks.
2. Consumer Loan to Total Loan Ratio

A consumer loan is when a person borrows money from a lender, either unsecured or
secured. There are several types of consumer loans and some of the most popular ones
include mortgages, refinances, home equity lines of credit, credit cards, auto loans,
student loans, and personal loans. It is calculated as:

Consumer Loan to Total Loan Ratio = Consumer Loan / Total Loan

Table 4.3: Consumer Loan to Total Loan Ratio (%)

2011 2012/ 2013/ 2014/ 2015/ 2016/ 2017/ 2018/ 2019

Banks Mean S.D
/12 13 14 15 16 17 18 19 /20
EBL 0.86 0.88 0.98 1.01 1.21 0.01 0.1 0.12 0.11 0.587 0.48
NABIL 0.76 0.78 0.98 1.23 1.67 2.1 3.2 2.7 2.3 1.747 0.88
NBL 0.79 0.81 0.89 0.92 0.99 1.01 1.02 1.01 1.05 0.943 0.09

In the above table, all the banks have fluctuating trend regarding the ratios. NABIL
has the highest ratios of 3.2% in the F/Y 2018 and the lowest ratio of 0.76% in the
F/Y 2012. Accordingly, EBL and NBL has highest ratios is 1.21% and 1.02% in the
F/Y 2017 and 2018 respectively, and the lowest ratio is 0.01% and 0.81% in the F/Y
2017 and 2013 respectively. In overall mean ratio and SD ratio of consumer loan to
total loan ratio of NABIL is higher than that of other banks.
3. Agricultural Loan to Total Loan Ratio
 xli

An agriculture loan is an overdraft facility which could be used to meet the cost of
farming, cultivation and working capital activities for agro-business and associated
activities. Agriculture loans are generally low interest loans that farmers can avail to
run their farming business more efficiently. Agricultural loans are provided to finance
the planning and harvesting of crops. The loan is repaid when crops are harvested and
sold. Long term financing extended for purchase of livestock, tractor, machines,
equipment and this loan helps to recognize the significance of agriculture to the
livelihood of Dominicans and its potential to contribute to national development. It is
calculated as:

Agricultural Loan to Total loan Ratio = Agricultural Loan / Total Loan

Table 4.4: Agricultural Loan to Total loan Ratio (%)

2011 2012/ 2013/ 2014 2015/ 2016 2017/ 2018 2019/

Banks Mean S.D
/12 13 14 /15 16 /17 18 /19 20
EBL 0.89 0.91 0.96 1.12 1.15 1.54 1.49 1.48 1.46 1.22 0.27
NABIL 0.76 0.77 0.82 0.92 0.45 0.88 0.87 0.86 0.85 0.80 0.14
NBL 0.97 0.98 1.02 1.06 1.12 1.05 1.05 1.06 1.05 1.04 0.05

The above table exhibits that the ratio of EBL has maintained increasing trend up to
2017. NABIL has increasing trend up to fiscal year 2015 then decreasing trend.
Similarly, NBL has increasing trend up to fiscal year 2016 then decreases.
The mean ratio and SD ratio of the EBL is higher i.e. 1.19 and 0.27respectively than
other banks. The comparison of mean ratio reveals that EBL has higher ratio than
other banks. This shows that EBL has been more successful in maintaining its higher
return on agriculture loan. It proves that EBL has more consistency and uniformity
than other two samples banks

4.1.3 Non Performing Loan to Total Loan Ratio

Non-performing loan is a loan on which the borrower is not making interest payments
or repaying any principal. At what point the loan is classified as non-performing by
the bank, and when it becomes bad debt, depends on local regulations. Banks
normally set aside money to cover potential losses on loans (loan loss provisions) and
write off bad debt in their profit and loss account. In some countries, banks that have
accumulated too many NPLs are able to sell them on - at a discount - to specially
 xlii

established asset management companies (AMCs), which attempt to recover at least

some of the money owed. It is calculated as:

Non-Performing to Total Loan Ratio = Non-Performing Loan / Total Loan

Table 4.5: Non- Performing to Total Loan Ratio (%)

Banks 2011 2012/ 2013/ 2014/ 2015/ 2016/ 2017 2018/ 2019/ Mean S.D
/12 13 14 15 16 17 /18 19 20
EBL 2.2 2.21 1.97 2.01 2.12 1.97 1.94 1.93 1.9 2.03 0.12
NABIL 2.2 2.1 1.21 0.97 0.99 0.67 0.68 0.69 0.68 1.13 0.61
NBL 1.94 1.97 1.67 0.98 1.5 0.98 0.99 0.97 0.95 1.33 0.44

The above table shows that all the banks have fluctuating trend regarding the ratios.
EBL has the highest ratio of 2.21% in the F/Y 2013 and the lowest ratio of 1.9% in
the F/Y 2020. On the basis of mean ratio EBL has higher investment than that of other
two banks i.e. 1.13. NABIL is more consistent and homogenous than other banks on
the basis of S.D. EBL has maintained the higher ratio than other banks.

4.1.4 Performing Loan to Non-Performing Loan Ratio

According to the International Monetary Fund, a performing loan is any loan in
which: interest and principal payments are less than 90 days overdue; less than 90
days' worth of interest has been refinanced, capitalized, or delayed by agreement; and
continued payment is anticipated. All conditions must be present for a loan to be
performing. However, the specific definition is dependent upon the loan's particular
terms. This ratio measures the bank's good loan to the bad loan. Higher the ratio
means bank's loans efficiency of the management in providing the loans and
recovering the non- performing loans. It is calculated as:

Performing Assets to Non-Performing Assets Ratio = Performing Loan/ Non-

Performing Loan

Table 4.6: Performing Loan to Non-Performing Loan Ratio (%)

 xliii

2011 2012/ 2013/ 2014/ 2015/ 2016/ 2017/ 2018/ 2019/

Banks Mean S.D
/12 13 14 15 16 17 18 19 20
EBL 42.1 44.2 49.8 48.75 46.16 49.75 37.94 39.21 38.2 44.01 4.88

NABIL 44.3 46.6 81.7 102.1 100 148.3 152.2 157.3 159.2 109.6 45.7

NBL 47.1 49.8 58.9 101 65.67 101.5 101.9 103.2 102.1 81.25 25.1

In the above table, all the banks have fluctuating trend regarding the ratios. NABIL
has the highest ratios of 159.2% in the F/Y 2020 and the lowest ratio of 43.3% in the
F/Y 2012. Accordingly, EBL and NBL has highest ratios is 49.75% and 101.58% in
the F/Y 2017 and 2018 respectively and the lowest ratio is 37.94% and 47.1% in the
F/Y 2018 and 2012 each. In overall mean ratio and SD ratio of performing loan to
non-performing loan ratio of NABIL is higher than that of other banks.

The mean ratio and SD ratio of the NABIL is higher i.e. 109.6% and 45.7%
respectively than other banks. The comparison of mean ratio reveals that NABIL has
higher ratio than other banks. This shows that NABIL has been more successful in
maintaining its higher return on performing loan. It proves that NABIL has more
consistency and uniformity than other two samples banks..

4.2. To examine the Co-efficient of correlation of the concerned bank in term of

non-performing loan ratio, performing loan ratio, loan loss provision, sector wise
lending ratio and total loan to total deposit ratio .

4.2.1 Analysis of Co-efficient of correlation between Total Deposit and Loan and
Advance of Everest Bank Limited

The co-efficient of correlation between deposits and loan and advances measures the
degree of relationship between them. In our study, we have taken deposit as an
independent variable denoted by (x) and loan and advances as dependent variable(y).
The main objectives of calculating ‘r’ between these two variables are to justify
whether deposits are significantly used as loan and advances or not. The following
table shows the value of r, r2, P.E. and 6P.E between total deposits and loan and
advances of Everest Bank Limited during the study period.

Table 4.7: Co-efficient of Correlation between Total Deposit and Loan

 xliv

T- Test P-
2
Coefficient of Correlation (r) r P.E. 6PE Value
-0.24 0.0576 0.26 1.56 4.221 0.001

The result shows that the coefficient of correlation between deposit to loan and
advances in case of Everest Bank Limited are -0.24. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0576. This means 5.7% of variation of the
dependent variable (loan and advances) has been explained by the independent
variable (deposit). When the value of ‘r ’i.e., -0.24 is compared with six times the
probably error or 6P.E. i.e., 1.56, we can say that there is no significant relationship
between deposits and loan and advances because ‘r’ is less than six times P.E. i.e. -
0.27<1.56.

4.2.2 Analysis of Co-efficient of correlation between Total Deposit and Loan and
Advance of Nabil Bank Limited

The co-efficient of correlation between deposits and loan and advances measures the
degree of relationship between them. In our study, we have taken deposit as an
independent variable denoted by (x) and loan and advances as dependent variable (y).
The main objectives of calculating ‘r’ between these two variables are to justify
whether deposits are significantly used as loan and advances or not.

The following table shows the value of r, r2, P.E. and 6P.E between total deposits and
loan and advances of Nabil Bank Limited during the study period.

Table 4.8: Co-efficient of Correlation between Total Deposit and Loan

T- Test P-
Coefficient of Correlation (r) r2 P.E. 6PE Value
-0.21 0.0441 0.41 2.46 -3.11 0.042

The result shows that the coefficient of correlation between deposit to loan and
advances in case of Nabil Bank Limited are -0.21. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0441. This means 4.4% of variation of the
dependent variable (loan and advances) has been relationship between deposits and
loan and advances because ‘r’ is less than six times P.E. i.e.-0.21<2.46.explained by
 xlv

the independent variable (deposit). When the value of ‘r ’i.e., -0.21 is compared with
six times the probably error or 6P.E. i.e., 2.46, we can say that there is no significant
relationship between deposits and loan and advances because ‘r’ is less than six times
P.E. i.e.-0.21<2.46.
4.2.3 Analysis of Co-efficient of correlation between Total Deposit and Loan and
Advance of Nepal Bank Limited

The co-efficient of correlation between deposits and loan and advances measures the
degree of relationship between them. In our study, we have taken deposit as an
independent variable denoted by (x) and loan and advances as dependent variable (y).
The main objectives of calculating ‘r’ between these two variables are to justify
whether deposits are significantly used as loan and advances or not.

The following table shows the value of r, r2, P.E. and 6P.E between total deposits and
loan and advances of Nepal Bank Limited during the study period.

Table 4.9: Co-efficient of Correlation between Total Deposit and Loan

T- Test P-
Coefficient of Correlation (r) r2 P.E. 6PE Value
-0.24 0.0576 0.13 0.78 6.408 0.001

The result shows that the coefficient of correlation between deposit to loan and
advances in case of Nepal Bank Limited are -0.24. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0576. This means 5.76% of variation of the
dependent variable (loan and advances) has been explained by the independent
variable (deposit). When the value of ‘r ’i.e., -0.24 is compared with six times the
probably error or 6P.E. i.e., 0.78, we can say that there is no significant relationship
between deposits and loan and advances because ‘r’ is less than six times P.E.
 xlvi

4.3 Analysis on trend position of lending management adopted by the

sample bank in Nepal.

To find out the future scenario of lending and deposit for sample banks, trend analysis
has been done. This statistical test describes the trend of any variables with passage of
time. Most popular method for trend analysis is least square method.

4.3.1 Trend Analysis of Loan and Advance to Total deposit Ratio Everest, NBL
and Nabil
In this section, an attempt is made to analyze the trend of Loan and Advance to Total
deposit Ratio for EBL, Nabil and NBL and to forecast the home loan for coming two
years on the basis of present trend.

EBL NABIL NBL

Yc =
Yc = trend trend Yc = trend
  LA/TD Values LA/TD Values LA/TD Values
2011/12 68.1 70.98 69.2 68.68 46.3 49.88
2012/13 71.8 71.31 73 69.61 49.4 52.91
2013/14 75.2 71.64 72.6 70.54 60.1 55.94
2014/15 76.6 71.97 63.01 71.47 59.5 58.97
2015/16 65.6 72.3 69.1 72.4 65.4 62
2016/17 72.5 72.63 75.7 73.33 68.5 65.03
2017/18 73.6 72.96 77.3 74.26 71.6 68.06
2018/19 74.2 73.29 76.2 75.19 70.3 71.09
2019/20 73.1 73.62 75.2 76.12 68.1 74.12
2020/21 73.95 77.05 77.15
2021/22 74.28 77.98 80.18
2022/23 74.61 78.91 83.21
A 72.3 72.36 62.13
B 0.12 0.93 3.03
Trend Eqn 72.3+0.12x 72.36+0.93x 62.13+3.03x

Table 4.4.1 depicts that the trend of Loan and Advance to Total deposit Ratio of
sample banks. If the other things remain the same, the projected amount of Loan and
Advance to Total deposit Ratio of EBL, Nabil and NBL for the fiscal year 2020/21
will be 73.95, 77.05 and 77.15 respectively. Similarly, the amount of Loan and
Advance to Total deposit Ratio of same banks for the fiscal year 2021/22 will be
74.28, 77.98 and 80.18 respectively.
 xlvii

4.3.2 Trend Analysis of Production Loan to Total Loan Ratio Everest, NBL and
Nabil
EBL NABIL NBL
Yc =
Yc = trend trend Yc = trend
  PL/TL Values PL/TL Values PL/TL Values
2011/12 23.2 22.08 28.3 33.4 29.3 34.06
2012/13 25.4 21.74 30.5 34.02 31.2 34.63
2013/14 22 21.4 31.5 34.64 32.3 35.2
2014/15 22.2 21.06 37.5 35.26 38.1 35.77
2015/16 23.6 20.72 34.3 35.88 35.2 36.34
2016/17 16.2 20.38 36.7 36.5 37.1 36.91
2017/18 17.4 20.04 40.5 37.12 40.6 37.48
2018/19 19.2 19.7 42.3 37.74 41.1 38.05
2019/20 17.3 19.36 41.3 38.36 42.2 38.62
2020/21 19.02 38.98 39.19
2021/22 18.68 39.6 39.76
2022/23 18.34 40.22 40.33
A 20.72 35.88 36.34
B -0.34 0.62 0.57
Trend Eqn 20.72-0.34x 35,88+0.62x 36.34+0.57x

Table 4.3.2 depicts that the trend of Production Loan and Total loan Ratio of sample
banks. If the other things remain the same, the projected amount of Production Loan
and Total loan Ratio of EBL, Nabil and NBL for the fiscal year 2020/21 will be
19.02, 38.98and 39.19 respectively. Similarly, the amount of Production Loan and
Total loan Ratio of same banks for the fiscal year 2021/22 will be 18.68, 39.6 and
39.76respectively.
 xlviii

4.3.3 Trend Analysis of Consumer Loan to Total Loan Ratio Everest, NBL and
Nabil
EBL NABIL NBL
Yc =
Yc = trend trend Yc = trend
  CL/TL Values CL/TL Values CL/TL Values
2011/12 0.86 0.79 0.76 1.35 0.79 0.9
2012/13 0.88 0.74 0.78 1.45 0.81 0.91
2013/14 0.98 0.69 0.98 1.55 0.89 0.92
2014/15 1.01 0.64 1.23 1.65 0.92 0.93
2015/16 1.21 0.59 1.67 1.75 0.99 0.94
2016/17 0.01 0.54 2.1 1.85 1.01 0.95
2017/18 0.1 0.49 3.2 1.95 1.02 0.96
2018/19 0.12 0.44 2.7 2.05 1.01 0.97
2019/20 0.11 0.39 2.3 2.15 1.05 0.98
2020/21 0.34 2.25 0.99
2021/22 0.29 2.35 1
2022/23 0.24 2.45 1.01
a 0.59 1.75 0.94
b -0.05 0.101 0.011
Trend Eqn 0.59-0.05x 1.75+0.101x 0.94+0.011x

Table 4.3.3 depicts that the trend of Consumer Loan and Total loan Ratio of sample
banks. If the other things remain the same, the projected amount of Consumer Loan
and Total loan Ratio of EBL, Nabil and NBL for the fiscal year 2020/21 will be 0.34,
2.25 and 0.99 respectively. Similarly, the amount of Consumer Loan and Total loan
Ratio of same banks for the fiscal year 2021/22 will be 0.29, 2.35and 1 respectively.
 xlix

4.3.4 Trend Analysis of Agricultural Loan to Total loan Ratio Everest, NBL and
Nabil
EBL NABIL NBL
Yc =
Yc = trend trend Yc = trend
  CL/TL Values CL/TL Values CL/TL Values
2011/12 0.89 1.1 0.76 0.784 0.97 1.028
2012/13 0.91 1.13 0.77 0.788 0.98 1.031
2013/14 0.96 1.16 0.82 0.792 1.02 1.034
2014/15 1.12 1.19 0.92 0.796 1.06 1.037
2015/16 1.15 1.22 0.45 0.8 1.12 1.04
2016/17 1.54 1.25 0.88 0.804 1.05 1.043
2017/18 1.49 1.28 0.87 0.808 1.05 1.046
2018/19 1.48 1.31 0.86 0.812 1.06 1.049
2019/20 1.46 1.34 0.85 0.816 1.05 1.052
2020/21 1.37 0.82 1.055
2021/22 1.4 0.824 1.058
2022/23 1.43 0.828 1.061
a 1.22 0.80 1.04
b 0.03 0.004 0.004
Trend Eqn 1.22+0.03x 0.80+0.004x 1.04+3.004x

Table 4.3.4 depicts that the trend of Agricultural Loan and Total loan Ratio of sample
banks. If the other things remain the same, the projected amount of Agricultural Loan
and Total loan Ratio of EBL, Nabil and NBL for the fiscal year 2020/21 will be 1.37,
0.82 and 1.055 respectively. Similarly, the amount of Agricultural Loan and Total
loan Ratio of same banks for the fiscal year 2021/22 will be 1.4, 0.824 and 1.058
respectively.
 l

4.3.5 Trend Analysis of Non Performing Loan to Total Loan Ratio Everest, NBL
and Nabil
EBL NABIL NBL
Yc =
Yc = trend trend Yc = trend
  CL/TL Values CL/TL Values CL/TL Values
2011/12 2.2 1.99 2.2 1.41 1.94 1.53
2012/13 2.21 2 2.1 1.34 1.97 1.48
2013/14 1.97 2.01 1.21 1.27 1.67 1.43
2014/15 2.01 2.02 0.97 1.2 0.98 1.38
2015/16 2.12 2.03 0.99 1.13 1.5 1.33
2016/17 1.97 2.04 0.67 1.06 0.98 1.28
2017/18 1.94 2.05 0.68 0.99 0.99 1.23
2018/19 1.93 2.06 0.69 0.92 0.97 1.18
2019/20 1.9 2.07 0.68 0.85 0.95 1.13
2020/21 2.08 0.78 1.08
2021/22 2.09 0.71 1.03
2022/23 2.1 0.64 0.98
A 2.03 1.13 1.33
B -0.01 -0.07 -0.05
Trend Eqn 2.03-0.01x 1.13-0.07x 1.33-0.05x

Table 4.3.5 depicts that the trend of Non Performing Loan to Total Loan Ratio of
sample banks. If the other things remain the same, the projected amount of Non
Performing Loan to Total Loan Ratio of EBL, Nabil and NBL for the fiscal year
2020/21 will be 2.08, 0.78 and 1.08 respectively. Similarly, the amount of Non
Performing Loan to Total Loan Ratio of same banks for the fiscal year 2021/22 will
be 2.09, 0.71 and 1.03 respectively.
 li

4.3.6 Trend Analysis of Performing Loan to Non-Performing Loan Ratio

Everest, NBL and Nabil
EBL NABIL NBL
Yc =
Yc = trend trend Yc = trend
  PL/NPL Values CL/TL Values CL/TL Values
2011/12 42.1 45.29 44.3 87.15 47.1 70.24
2012/13 44.2 44.97 46.6 92.91 49.8 72.99
2013/14 49.8 44.65 81.7 98.67 58.9 75.74
2014/15 48.75 44.33 102.1 104.43 101 78.49
2015/16 46.16 44.01 100 110.19 65.67 81.24
2016/17 49.75 43.69 148.3 115.95 101.5 83.99
2017/18 37.94 43.37 152.2 121.71 101.9 86.74
2018/19 39.21 43.05 157.3 127.47 103.2 89.49
2019/20 38.2 42.73 159.2 133.23 102.1 92.24
2020/21 42.41 138.99 94.99
2021/22 42.09 144.75 97.74
2022/23 41.77 150.51 100.49
A 44.01 110.18 81.24
B -0.31 5.76 2.75
Trend Eqn 44.01-0.31x 110.18+5.76x 81.24+2.75x

Table 4.3.6 depicts that the trend of Performing Loan to Non Performing Loan Ratio
of sample banks. If the other things remain the same, the projected amount of Non
Performing Loan to Non Performing Loan Ratio of EBL, Nabil and NBL for the fiscal
year 2020/21 will be 42.41, 138.99and 94.99respectively. Similarly, the amount of
Performing Loan to Non Performing Loan Ratio of same banks for the fiscal year
2021/22 will be 42.09, 144.75and 97.74respectively.

4.4 Discussion

Findings from Coefficient of Correlation Analysis

The result shows that the coefficient of correlation between deposit to loan and
advances in case of Everest Bank Limited are -0.24. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0576. This means 5.7% of variation of the
dependent variable (loan and advances) has been explained by the independent
variable (deposit). When the value of ‘r ’i.e., -0.24 is compared with six times the
probably error or 6P.E. i.e., 1.56, we can say that there is no significant relationship
 lii

between deposits and loan and advances because ‘r’ is less than six times P.E. i.e. -
0.27<1.56.

The result shows that the coefficient of correlation between deposit to loan and
advances in case of Nabil Bank Limited are -0.21. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0441. This means 4.4% of variation of the
dependent variable (loan and advances) has been relationship between deposits and
loan and advances because ‘r’ is less than six times P.E. i.e.-0.21<2.46.explained by
the independent variable (deposit). When the value of ‘r ’i.e., -0.21 is compared with
six times the probably error or 6P.E. i.e., 2.46, we can say that there is no significant
relationship between deposits and loan and advances because ‘r’ is less than six times
P.E. i.e.-0.21<2.46.
The result shows that the coefficient of correlation between deposit to loan and
advances in case of Nepal Bank Limited are -0.24. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0576. This means 5.76% of variation of the
dependent variable (loan and advances) has been explained by the independent
variable (deposit). When the value of ‘r ’i.e., -0.24 is compared with six times the
probably error or 6P.E. i.e., 0.78, we can say that there is no significant relationship
between deposits and loan and advances because ‘r’ is less than six times P.E.
 liii

CHAPTER V

SUMMARY AND CONCLUSION

5.1 Summary

The term “deposit target” is used to denote the deposit mobilization strategy of banks
where bankers especially core marketers, new employees and marketing teams are
given certain period of time to mobilize deposits from anywhere and everywhere up to
a certain amount. In the banking institutions there are rewards and punishment for
meeting or not meeting the target. While the implementation of this policy differs
from bank to bank, this practice is common among the new generation banks. For
meeting the deposit target certain percentage of money are added to the banker‟s
income, it enhances his/her chances of good performance appraisal and subsequent
promotion and job security. For new employees it gives them quick confirmation of
appointment during the probationary period.

Borio (2012)argued, lending is one of the two principal functions of banks, not only
because of their social obligation to cater to the credit needs of different sections of the
community, but also because lending is the most profitable, for the interest rates
realized on loans have always been well above those realized on investments.

The main objectives of the study are to analyze the lending management adopted by
the sample bank with view to provide workable suggestion. Therefore, the main
objective of the study is to find out the lending management position of the sample
banks, to analyze the Performing loan and Non-Performing loan of the selected
sample banks, to evaluate the significant relationship between commercial banks’
lending and bank's-specific factors and To analyze the position of the concerned bank
in term of non-performing loan ratio, C/D ratio, loan loss provision ratio and non-
performing to performing ratio.

The result shows that the coefficient of correlation between deposit to loan and
advances in case of Nepal Bank Limited are -0.24. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0576. This means 5.76% of variation of the
 liv

dependent variable (loan and advances) has been explained by the independent
variable (deposit). When the value of ‘r ’i.e., -0.24 is compared with six times the
probably error or 6P.E. i.e., 0.78, we can say that there is no significant relationship
between deposits and loan and advances because ‘r’ is less than six times P.E.

5.2 Conclusion
The result shows that the coefficient of correlation between deposit to loan and
advances in case of Nabil Bank Limited are -0.21. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0441. This means 4.4% of variation of the
dependent variable (loan and advances) has been relationship between deposits and
loan and advances because ‘r’ is less than six times P.E. i.e.-0.21<2.46.explained by
the independent variable (deposit). When the value of ‘r ’i.e., -0.21 is compared with
six times the probably error or 6P.E. i.e., 2.46, we can say that there is no significant
relationship between deposits and loan and advances because ‘r’ is less than six times
P.E. i.e.-0.21<2.46.
The result shows that the coefficient of correlation between deposit to loan and
advances in case of Everest Bank Limited are -0.24. This indicates that there is a
negative relationship between deposit and loan advances. The calculated value of (r2)
or coefficient of determination is 0.0576. This means 5.7% of variation of the
dependent variable (loan and advances) has been explained by the independent
variable (deposit). When the value of ‘r ’i.e., -0.24 is compared with six times the
probably error or 6P.E. i.e., 1.56, we can say that there is no significant relationship
between deposits and loan and advances because ‘r’ is less than six times P.E. i.e. -
0.27<1.56.

5.3 Implications

From the above analytical and interpretational point of view following

recommendation can be achieved:-

 The coefficient of determination of total deposit to total loan is 6.67% for

Everest Bank Limited. This means that dependent variable (Lending behavior)
is affected by independent variable (total deposit to total loan) by 6.67%.
Therefore to improve lending behavior Everest bank should focus on deposit
to be collected and loan should be flowed.
 lv

 The coefficient of determination of total deposit to total loan is 9.61% for

Nabil Bank Limited. This means that dependent variable (Lending behavior) is
affected by independent variable (total deposit to total loan) by 9.61%
Therefore to improve lending behavior Nabil bank should focus on deposit to
be collected and loan should be flowed.
 The coefficient of determination of total deposit to total loan is 10.24% for
Nepal Bank Limited. This means that dependent variable (Lending behavior)
is affected by independent variable (total deposit to total loan) by 10.24%
Therefore to improve lending behavior Nepal bank should focus on deposit to
be collected and loan should be flowed.
 The production loan for Everest bank limited is lower than Nabil bank limited
and Nepal bank limited, this shows that Everest bank Limited had got poor
lending behavior in production loan therefore to improve lending behavior on
production loan Everest bank should focus loan to manufacturing sector.
 The consumer loan for Everest bank limited is lower than Nabil bank limited
and Nepal bank limited, this shows that Everest bank Limited had got poor
lending behavior in consumer loan therefore to improve lending behavior on
consumer loan Everest bank should focus loan to consumer on the basis of
credit rating of consumer.
 The consumer loan for Nabil bank limited is lower than Everest bank limited
and Nepal bank limited, this shows that Nabil bank Limited had got poor
lending behavior in consumer loan therefore to improve lending behavior on
consumer loan Nabil bank should focus on agriculture sector.
 lvi

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 lxi

ANNEX1
Loan and Advance to Total Deposit Ratio

Everest
Fiscal Loan and Total Ratio
Year Advance deposit (%)
2011/12 30673 45041 68.1
2012/13 35,911 50006 71.81
2013/14 43,393 57720 75.18
2014/15 47,572 62108 76.6
2015/16 54,482 83094 65.57
2016/17 67,955 93735 72.5
2017/18 71,844 97654 73.57
2018/19 74965 101031 74.2
2019/20 83956 114851 73.1
Nabil
F.Y. Loan and Total Ratio
Advance deposit (%)
2011/12 41287 59663 69.2
2012/13 46,370 63506 73.02
2013/14 54,684 75361 72.56
2014/15 65,502 103957 63.01
2015/16 76,106 110211 69.05
2016/17 89,877 118684 75.73
2017/18 93,241 120684 77.26
2018/19 94843 124466 76.2
2019/20 99684 132559 75.2
Nepal
F.Y. Loan and Total deposit Ratio
Advance (%)
2011/12 23421 50585 46.3
2012/13 27,671 56052 49.37
2013/14 37,855 62989 60.1
2014/15 41,218 69338 59.45
2015/16 50,971 77999 65.35
2016/17 61,250 89410 68.5
2017/18 66,759 93251 71.59
2018/19 69473 98824 70.3
2019/20 75943 111517 68.1
 lxii

Production Loan to Total Loan Ratio (%)

Everest
F.Y. Production Total Loan Ratio
Loan (%)
2011/12 8956 38603 23.2
2012/13 9,121 35,911 25.4
2013/14 9,523 43,393 21.95
2014/15 10,543 47,572 22.16
2015/16 12,876 54,482 23.63
2016/17 10,987 67,955 16.17
2017/18 12,143 69,764 17.4
2018/19 14354 74760 19.2
2019/20 18763 108457 17.3
Nabil
F.Y. Production Total Loan Ratio
Loan (%)
2011/12 13254.21 46835 28.3
2012/13 14,142.85 46,370 30.5
2013/14 17,225.46 54,684 31.5
2014/15 24,563.25 65,502 37.5
2015/16 26,066.31 76,106 34.25
2016/17 32,984.86 89,877 36.7
2017/18 37,624.36 92,824 40.53
2018/19 43765.65 103465 42.3
2019/20 53874.65 130447 41.3
Nepal
F.Y. Production Total Loan Ratio
Loan (%)
2011/12 15487.4 52858 29.3
2012/13 17,488.22 56,052 31.2
2013/14 20,345.45 62,989 32.3
2014/15 26,417.78 69,338 38.1
2015/16 27,455.65 77,999 35.2
2016/17 33,171.11 89,410 37.1
2017/18 37,653.11 92,765 40.58
2018/19 41874.87 101885 41.1
2019/20 49958.65 124275 40.2
 lxiii

Consumer Loan to Total Loan Ratio (%)

Everest

F.Y. Consumer Total loan Ratio

Loan (%)
2011/12 34763.54 40423 0.86
2012/13 31,601.68 35,911 0.88
2013/14 42,525.14 43,393 0.98
2014/15 48,047.72 47,572 1.01
2015/16 65,923.22 54,482 1.21
2016/17 6,795.50 67,955 0.01
2017/18 7,634.50 72,325 0.1
2018/19 8674.95 72291 0.12
2019/20 6731.98 61200 0.11
Nabil
F.Y. Consumer Total loan Ratio
Loan (%)
2011/12 29654.8 39019 0.76
2012/13 36,168.60 46370 0.78
2013/14 535,90.32 54684 0.98
2014/15 805,67.46 65502 1.23
2015/16 127,097 76106 1.67
2016/17 188,741.70 89877 2.1
2017/18 19,274.70 91877 3.2
2018/19 23854.6 8835 2.7
2019/20 45873.43 19945 2.3

Nepal
F.Y. Consumer Total loan Ratio
Loan (%)
2011/12 44863.8 56790 0.79
2012/13 45,402.12 56052 0.81
2013/14 56,060.21 62989 0.89
2014/15 63,790.96 69338 0.92
2015/16 77,219.01 77999 0.99
2016/17 90,304.10 89410 1.01
2017/18 94,984.10 92345 1.02
2018/19 97321.8 96358 1.01
2019/20 104842.7 99850 1.05
 lxiv

Agricultural Loan to Total loan Ratio (%)

Everest
F.Y. Agriculture Total Loan Ratio
Loan (%)
2011/12 27694.9 31118 0.89
2012/13 32,679.01 35911 0.91
2013/14 41,657.28 43393 0.96
2014/15 53,280.64 47572 1.12
2015/16 62,654.30 54482 1.15
2016/17 104,650.70 67955 1.54
2017/18 107,652.70 71952 1.49
2018/19 109527.87 74005 1.48
2019/20 114964.7 78743 1.46
Nabil
F.Y. Agriculture Total Loan Ratio
Loan (%)
2011/12 33621.76 44239 0.76
2012/13 35,704.90 46370 0.77
2013/14 44,840.88 54684 0.82
2014/15 59,606.82 65502 0.91
2015/16 34,247.70 76106 0.45
2016/17 79,091.76 89877 0.88
2017/18 82,091.43 93845 0.87
2018/19 89365.87 103914 0.86
2019/20 97492.65 114697 0.85
Nepal
F.Y. Agriculture Total Loan Ratio
Loan (%)
2011/12 51846.76 53450 0.97
2012/13 54,930.96 56052 0.98
2013/14 64,248.78 62989 1.02
2014/15 73,498.28 69338 1.06
2015/16 87,358.88 77999 1.12
2016/17 93,880.50 89410 1.05
2017/18 97,120.50 92150 1.05
2018/19 101738.87 95980 1.06
2019/20 117453.2 111860 1.05
 lxv

Non- Performing to Total Loan Ratio (%)

Everest

F.Y. Non- Total Loan Ratio

Performing (%)
Loan
2011/12 76375.9 34716 2.2
2012/13 79,363.31 35911 2.21
2013/14 85,484.21 43393 1.97
2014/15 95,619.72 47572 2.01
2015/16 115,501.80 54482 2.12
2016/17 133,871.40 67955 1.97
2017/18 137,821.10 70952 1.94
2018/19 139121.5 72084 1.93
2019/20 145321.87 76485 1.9
Nabil
F.Y. Non- Total Loan Ratio
Performing (%)
Loan
2011/12 93764.76 42620 2.2
2012/13 97,377 46370 2.1
2013/14 66,167.64 54684 1.21
2014/15 63,536.94 65502 0.97
2015/16 75,344.94 76106 0.99
2016/17 60,217.59 89877 0.67
2017/18 63,217.32 92873 0.68
2018/19 67984.43 98528 0.69
2019/20 75385.76 110861 0.68
Nepal
F.Y. Non- Total Loan Ratio
Performing (%)
Loan
2011/12 96452.4 49718 1.94
2012/13 110,422.40 56052 1.97
2013/14 105,191.60 62989 1.67
2014/15 67,951.24 69338 0.98
2015/16 116,998.50 77999 1.5
2016/17 87,621.80 89410 0.98
2017/18 90,631.20 91421 0.99
2018/19 94873.98 97808 0.97
2019/20 99453.98 104688 0.95
 lxvi

Performing Loan to Non-Performing Assets Ratio (%)

Everest
F.Y. Performing Non- Ratio
Loan Performing (%)
Loan
2011/12 33854.4 804 42.1
2012/13 35,117 794 44.24
2013/14 42,538 855 49.76
2014/15 46,616 956 48.75
2015/16 53,327 1155 46.16
2016/17 66,616 1339 49.76
2017/18 67,653 1783 37.94
2018/19 71657.76 1828 39.21
2019/20 83674.87 2190 38.2
Nabil
F.Y. Performing Non- Ratio
Loan Performing (%)
Loan
2011/12 41834.87 944 44.3
2012/13 45,396.23 974 46.62
2013/14 54,022.33 662 81.65
2014/15 64,866.64 635 102.09
2015/16 75,352.56 753 100.01
2016/17 89,274.83 602 148.26
2017/18 92,874.80 610 152.22
2018/19 93065.31 592 157.3
2019/20 99560.54 646 154.2
Nepal
F.Y. Performing Non- Ratio
Loan Performing (%)
Loan
2011/12 43856.65 931 47.1
2012/13 54,948 1104 49.76
2013/14 61,937 1052 58.88
2014/15 68,658 680 101.04
2015/16 76,829 1170 65.67
2016/17 88,534 876 101.04
2017/18 89,524 881 101.58
2018/19 92734.6 899 103.2
2019/20 97564.7 956 102.1
 lxvii

ANNEX II

Calculation of R2of Everest Bank

Deposit (X) Loan (Y) x - mean of x y-mean of y d*e Predicted SST SSR
26963699 1,795,833,42 194647142. 9047142.5
50,006 35,911 -19,327 -13,952
3 1 6 6
3,922,430,55 41855724.1 9095724.1
57,720 43,393 -11,613 -6,470 75128877
5 6 6
8076848.3
62,108 47,572 -7,225 -2,291 16548669 67,955 5246848.36
6
21338856.3 4198856.3
83,094 54,482 13,761 -104,345 -1.44E+09 67,955
6 6
44149798 327334937. 4174937.7
93,735 67,955 24,402 18,092 67,955
2 8 6
590423509. 34593509.
69,333 49,863
2 2

R2 = SSR/SST = 0.058
Calculation of R2 of Nabil Bank
Deposit x - mean of y-mean of
(X) Loan (Y) x y d*e Predicted SST SSR
62100544 405530988. 50047142.5
63506 46370 -30,838 -20,138 9 2,280,631,921 8 6
22444883 139802246. 30095724.1
75361 54684 -18,983 -11,824 1 5,121,224,710 4 6
10076848.3
103957 65502 9,613 -1,006 -9668957 67,955 1011633.64 6
92125443.2 10198856.3
110211 76106 15,867 -142,614 -2.26E+09 67,955 4 6
56881100 546119508.
118684 89877 24,340 23,369 2 67,955 6 8174937.76
108593509.
94,344 66,508         1184589821 2

R2 = SSR/SST = 0.0918
Calculation of R2 of Nepal Bank
Deposit x - mean of y-mean of
(X) Loan (Y) x y d*e Predicted SST SSR
24353248 25991888 155047142.
56,052 27,671 -15,106 -16,122 3 2,012,951,327 4 6
130095724.
62,989 37,855 -8,169 -5,938 48505147 4,280,485,450 35259844 2
100076848.
69,338 41,218 -1,820 -2,575 4685470 67,955 6630625 4
100198856.
77,999 50,971 6,841 -94,764 -6.48E+08 67,955 51523684 4
31863214 30474684 108174937.
89,410 61,250 18,252 17,457 7 67,955 9 8
71,158 43,793         65807988 593593509.
 lxviii

6 2

R2 = SSR/SST = 0.0901

ANNEX III
Loan and advance to total deposit

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 68.1 -4 16 -272.4 70.98
2012/13
(2) 2 71.8 -3 9 -215.4 71.31
2013/14
(3) 3 75.2 -2 4 -150.4 71.64
2014/15
(4) 4 76.6 -1 1 -76.6 71.97
2015/16
(5) 5 65.6 0 0 0 72.3
2016/17
(6) 6 72.5 1 1 72.5 72.63
2017/18
(7) 7 73.6 2 4 147.2 72.96
2018/19
(8) 8 74.2 3 9 222.6 73.29
2019/20
(9) 9 73.1 4 16 292.4 73.62
2020/21 10 5 25 73.95
2021/22 11 6 36 74.28
2022/23 12 7 49 74.61
650.7 18 170 19.9

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 69.2 -4 16 -276.8 68.68
2012/13
(2) 2 73 -3 9 -219 69.61
2013/14
(3) 3 72.6 -2 4 -145.2 70.54
2014/15
(4) 4 63.01 -1 1 -63.01 71.47
2015/16
(5) 5 69.1 0 0 0 72.4
2016/17
(6) 6 75.7 1 1 75.7 73.33
2017/18 7 77.3 2 4 154.6 74.26
 lxix

(7)
2018/19
(8) 8 76.2 3 9 228.6 75.19
2019/20
(9) 9 75.2 4 16 300.8 76.12
2020/21 10 5 25 77.05
2021/22 11 6 36 77.98
2022/23 12 7 49 78.91
651.31 0 60 55.69

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 46.3 -4 16 -185.2 49.88
2012/13
(2) 2 49.4 -3 9 -148.2 52.91
2013/14
(3) 3 60.1 -2 4 -120.2 55.94
2014/15
(4) 4 59.5 -1 1 -59.5 58.97
2015/16
(5) 5 65.4 0 0 0 62
2016/17
(6) 6 68.5 1 1 68.5 65.03
2017/18
(7) 7 71.6 2 4 143.2 68.06
2018/19
(8) 8 70.3 3 9 210.9 71.09
2019/20
(9) 9 68.1 4 16 272.4 74.12
2020/21 10 5 25 0 77.15
2021/22 11 6 36 0 80.18
2022/23 12 7 49 0 83.21
559.2 0 60 181.9 62

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 23.2 -4 16 -92.8 22.08
2012/13
(2) 2 25.4 -3 9 -76.2 21.74
2013/14
(3) 3 22 -2 4 -44 21.4
2014/15
(4) 4 22.2 -1 1 -22.2 21.06
2015/16
(5) 5 23.6 0 0 0 20.72
2016/17
(6) 6 16.2 1 1 16.2 20.38
2017/18
(7) 7 17.4 2 4 34.8 20.04
2018/19
(8) 8 19.2 3 9 57.6 19.7
 lxx

2019/20
(9) 9 17.3 4 16 69.2 19.36
2020/21 10 5 25 19.02
2021/22 11 6 36 18.68
2022/23 12 7 49 18.34
186.5 18 170 -57.4

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 28.3 -4 16 -113.2 33.4
2012/13
(2) 2 30.5 -3 9 -91.5 34.02
2013/14
(3) 3 31.5 -2 4 -63 34.64
2014/15
(4) 4 37.5 -1 1 -37.5 35.26
2015/16
(5) 5 34.3 0 0 0 35.88
2016/17
(6) 6 36.7 1 1 36.7 36.5
2017/18
(7) 7 40.5 2 4 81 37.12
2018/19
(8) 8 42.3 3 9 126.9 37.74
2019/20
(9) 9 41.3 4 16 165.2 38.36
2020/21 10 5 25 38.98
2021/22 11 6 36 39.6
2022/23 12 7 49 40.22
322.9 18 170 104.6

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 29.3 -4 16 -117.2 34.06
2012/13
(2) 2 31.2 -3 9 -93.6 34.63
2013/14
(3) 3 32.3 -2 4 -64.6 35.2
2014/15
(4) 4 38.1 -1 1 -38.1 35.77
2015/16
(5) 5 35.2 0 0 0 36.34
2016/17
(6) 6 37.1 1 1 37.1 36.91
2017/18
(7) 7 40.6 2 4 81.2 37.48
2018/19 8 41.1 3 9 123.3 38.05
 lxxi

(8)
2019/20
(9) 9 42.2 4 16 168.8 38.62
2020/21 10 5 25 39.19
2021/22 11 6 36 39.76
2022/23 12 7 49 40.33
327.1 18 170 96.9

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 0.86 -4 16 -3.44 0.79
2012/13
(2) 2 0.88 -3 9 -2.64 0.74
2013/14
(3) 3 0.98 -2 4 -1.96 0.69
2014/15
(4) 4 1.01 -1 1 -1.01 0.64
2015/16
(5) 5 1.21 0 0 0 0.59
2016/17
(6) 6 0.01 1 1 0.01 0.54
2017/18
(7) 7 0.1 2 4 0.2 0.49
2018/19
(8) 8 0.12 3 9 0.36 0.44
2019/20
(9) 9 0.11 4 16 0.44 0.39
2020/21 10 5 25 0.34
2021/22 11 6 36 0.29
2022/23 12 7 49 0.24
5.28 18 170 -8.04

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 0.76 -4 16 -3.04 1.35
2012/13
(2) 2 0.78 -3 9 -2.34 1.45
2013/14
(3) 3 0.98 -2 4 -1.96 1.55
2014/15
(4) 4 1.23 -1 1 -1.23 1.65
2015/16
(5) 5 1.67 0 0 0 1.75
2016/17
(6) 6 2.1 1 1 2.1 1.85
2017/18
(7) 7 3.2 2 4 6.4 1.95
2018/19
(8) 8 2.7 3 9 8.1 2.05
 lxxii

2019/20
(9) 9 2.3 4 16 9.2 2.15
2020/21 10 5 25 2.25
2021/22 11 6 36 2.35
2022/23 12 7 49 2.45
15.72 18 170 17.23

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 0.79 -4 16 -3.16 0.9
2012/13
(2) 2 0.81 -3 9 -2.43 0.91
2013/14
(3) 3 0.89 -2 4 -1.78 0.92
2014/15
(4) 4 0.92 -1 1 -0.92 0.93
2015/16
(5) 5 0.99 0 0 0 0.94
2016/17
(6) 6 1.01 1 1 1.01 0.95
2017/18
(7) 7 1.02 2 4 2.04 0.96
2018/19
(8) 8 1.01 3 9 3.03 0.97
2019/20
(9) 9 1.05 4 16 4.2 0.98
2020/21 10 5 25 0.99
2021/22 11 6 36 1
2022/23 12 7 49 1.01
8.49 18 170 1.99

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 0.89 -4 16 -3.56 1.1
2012/13
(2) 2 0.91 -3 9 -2.73 1.13
2013/14
(3) 3 0.96 -2 4 -1.92 1.16
2014/15
(4) 4 1.12 -1 1 -1.12 1.19
2015/16
(5) 5 1.15 0 0 0 1.22
2016/17
(6) 6 1.54 1 1 1.54 1.25
2017/18
(7) 7 1.49 2 4 2.98 1.28
2018/19
(8) 8 1.48 3 9 4.44 1.31
 lxxiii

2019/20
(9) 9 1.46 4 16 5.84 1.34
2020/21 10 5 25 1.37
2021/22 11 6 36 1.4
2022/23 12 7 49 1.43
11 18 170 5.47

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 0.76 -4 16 -3.04 0.784
2012/13
(2) 2 0.77 -3 9 -2.31 0.788
2013/14
(3) 3 0.82 -2 4 -1.64 0.792
2014/15
(4) 4 0.92 -1 1 -0.92 0.796
2015/16
(5) 5 0.45 0 0 0 0.8
2016/17
(6) 6 0.88 1 1 0.88 0.804
2017/18
(7) 7 0.87 2 4 1.74 0.808
2018/19
(8) 8 0.86 3 9 2.58 0.812
2019/20
(9) 9 0.85 4 16 3.4 0.816
2020/21 10 5 25 0.82
2021/22 11 6 36 0.824
2022/23 12 7 49 0.828
7.18 18 170 0.69

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 0.97 -4 16 -3.88 1.028
2012/13
(2) 2 0.98 -3 9 -2.94 1.031
2013/14
(3) 3 1.02 -2 4 -2.04 1.034
2014/15
(4) 4 1.06 -1 1 -1.06 1.037
2015/16
(5) 5 1.12 0 0 0 1.04
2016/17
(6) 6 1.05 1 1 1.05 1.043
2017/18
(7) 7 1.05 2 4 2.1 1.046
2018/19
(8) 8 1.06 3 9 3.18 1.049
2019/20 9 1.05 4 16 4.2 1.052
 lxxiv

(9)
2020/21 10 5 25 1.055
2021/22 11 6 36 1.058
2022/23 12 7 49 1.061
9.36 18 170 0.61

X Y X=x-5 x2 xy Yc = trend Values

2011/12 2.2
(1) 1 -4 16 -8.8 1.99
2012/13 2.21
(2) 2 -3 9 -6.63 2
2013/14 1.97
(3) 3 -2 4 -3.94 2.01
2014/15 2.01
(4) 4 -1 1 -2.01 2.02
2015/16 2.12
(5) 5 0 0 0 2.03
2016/17 1.97
(6) 6 1 1 1.97 2.04
2017/18 1.94
(7) 7 2 4 3.88 2.05
2018/19 1.93
(8) 8 3 9 5.79 2.06
2019/20 1.9
(9) 9 4 16 7.6 2.07
2020/21 10 5 25 2.08
2021/22 11 6 36 2.09
2022/23 12 7 49 2.1
18.25 18 170 -2.14

Yc =
trend
X Y X=x-5 x2 xy Values
2011/12 2.2
(1) 1 -4 16 -8.8 1.41
2012/13 2.1
(2) 2 -3 9 -6.3 1.34
2013/14 1.21
(3) 3 -2 4 -2.42 1.27
2014/15 0.97
(4) 4 -1 1 -0.97 1.2
2015/16 0.99
(5) 5 0 0 0 1.13
2016/17 0.67
(6) 6 1 1 0.67 1.06
2017/18 0.68
(7) 7 2 4 1.36 0.99
 lxxv

2018/19 0.69
(8) 8 3 9 2.07 0.92
2019/20 0.68
(9) 9 4 16 2.72 0.85
2020/21 10 5 25 0.78
2021/22 11 6 36 0.71
2022/23 12 7 49 0.64
10.19 18 170 -11.67

Yc =
trend
X Y X=x-5 x2 xy Values
2011/12 1.94
(1) 1 -4 16 -7.76 1.53
2012/13 1.97
(2) 2 -3 9 -5.91 1.48
2013/14 1.67
(3) 3 -2 4 -3.34 1.43
2014/15 0.98
(4) 4 -1 1 -0.98 1.38
2015/16 1.5
(5) 5 0 0 0 1.33
2016/17 0.98
(6) 6 1 1 0.98 1.28
2017/18 0.99
(7) 7 2 4 1.98 1.23
2018/19 0.97
(8) 8 3 9 2.91 1.18
2019/20 0.95
(9) 9 4 16 3.8 1.13
2020/21 10 5 25 1.08
2021/22 11 6 36 1.03
2022/23 12 7 49 0.98
11.95 18 170 -8.32

X Y X=x-5 x2 xy Yc = trend Values

1 42.1 -4 16 -168.4 45.29
2 44.2 -3 9 -132.6 44.97
3 49.8 -2 4 -99.6 44.65
4 48.75 -1 1 -48.75 44.33
5 46.16 0 0 0 44.01
6 49.75 1 1 49.75 43.69
7 37.94 2 4 75.88 43.37
8 39.21 3 9 117.63 43.05
9 38.2 4 16 152.8 42.73
10 5 25 42.41
11 6 36 42.09
12 7 49 41.77
 lxxvi

396.11 18 170 -53.29

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 44.3 -4 16 -177.2 87.15
2012/13
(2) 2 46.6 -3 9 -139.8 92.91
2013/14
(3) 3 81.7 -2 4 -163.4 98.67
2014/15
(4) 4 102.1 -1 1 -102.1 104.43
2015/16
(5) 5 100 0 0 0 110.19
2016/17
(6) 6 148.3 1 1 148.3 115.95
2017/18
(7) 7 152.2 2 4 304.4 121.71
2018/19
(8) 8 157.3 3 9 471.9 127.47
2019/20
(9) 9 159.2 4 16 636.8 133.23
2020/21 10 5 25 138.99
2021/22 11 6 36 144.75
2022/23 12 7 49 150.51
991.7 18 170 978.9

X Y X=x-5 x2 xy Yc = trend Values

2011/12
(1) 1 47.1 -4 16 -188.4 70.24
2012/13
(2) 2 49.8 -3 9 -149.4 72.99
2013/14
(3) 3 58.9 -2 4 -117.8 75.74
2014/15
(4) 4 101 -1 1 -101 78.49
2015/16
(5) 5 65.67 0 0 0 81.24
2016/17
(6) 6 101.5 1 1 101.5 83.99
2017/18
(7) 7 101.9 2 4 203.8 86.74
2018/19
(8) 8 103.2 3 9 309.6 89.49
2019/20
(9) 9 102.1 4 16 408.4 92.24
 lxxvii

2020/21 10 5 25 94.99
2021/22 11 6 36 97.74
2022/23 12 7 49 100.49
731.17 18 170 466.7