Chapter-Five

A Study of liquidity analysis in Nabil Bank, Aug-2008

CHAPTER FIVE
5. SUMMERY, RECOMMENDATION

5.1 SUMMARY
Nepal is one of the least developed countries of the world. For most of the developing process, it is financially depending upon the foreign countries. It is economically too weak. Thus, the economic condition of the people is weak. In Nepal 90% of the people are depended upon agriculture sector which is unable to provide full employment to the people. HMG has to activate people in the nations development through overall industrialization of nation. For this purpose, Development of sound banking system is essential. In Nepalese banking sector, commercial banks including ventures bank are operating at present. In the absences of modern banking any country cannot develop the economic activity. Therefore, it is essential to find out whether or not the banks are serving an important contribution to develop sectors of economy. Liquidity is said to be general business of fund, which shows the bank ability to meet cash requirement. In this record, this study has been based upon the objective to evaluate the liquidity position of Nabil Bank Ltd. Conclusion: 5.1.a The saving deposit account is increasing trend. The highest ratio is 45% in fiscal year 2004/05 and the lowest ratio is 17% in fiscal year 2001/02. But the ratio is moving around moderately and considers as satisfactory. 5.1.b Fixed deposit in Nabil Bank is stabilized but in very low volume. The lowest ratio volume is 0.14 times and the highest ratio is 0.18 times. It is adversely fluctuated. But, now stabilized. But the ratio is not satisfactory due to so much little number of deposit. 5.1.c From the cash and bank balance to current deposit liability is slightly fluctuating. The ratio is moving around between 0.19 times and 0.39 times. Its not satisfactory, since the standard ratio for this ratio is 1:1 times. 5.1.d Cash and Bank Balance to total deposit ratio is fluctuating adversely. But the ratio is some how satisfactory even through the ratio is higher than the central banks prescription. The ration is moving around the 0.03 and 0.09 times. 5.1.e Cash and Bank balance to total deposit ration is slightly fluctuating in declining state. The ration is not satisfactory because of declining trend. But the percentage is higher than the requirement. However the ratio of the cash and bank balance to total deposits can be considered good. It is moving between 0.05 and 0.10 times. 5.1f The ratio of balance with the NRB to current and saving deposit has been maintained the same except in fiscal year 2005/06 the balance has been
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Chapter-Five

A Study of liquidity analysis in Nabil Bank, Aug-2008

increased by 0.03 times. The highest ratio is 0.11 times. In other year, the ratio is good because the ratio commensurate the standard prescribe by the NRB. 5.1.g The balance with the NRB to fixed deposit ratio is fluctuating. In fiscal year 2001/02, the bank has the balance with the NRB against fixed deposit liabilities in the ratio of 0.21-times. In fiscal year 2002/03, the bank has maintained the balance with the NRB against fixed deposit liabilities in the ratio of 0.40- times. In fiscal year 2003/04, the bank has had balance with NRB against fixed deposit liabilities in the ratio of 0.26times. In fiscal year 2004/05, the bank has maintained the balance with the NRB against fixed deposit liabilities in the ratio of 0.19-times. And in fiscal year 2005/06, the bank balance with the NRB in the ratio of 0.10times against the fixed deposit liabilities. 5.1.h The investment to deposit fluctuating adversely. Since the ratio is fluctuating the bank has unsatisfactory result. However the investments from source of deposit is higher, it will give a higher return with out risk only if the ratio is stabilized. 5.1.i The liquid asset to total deposit ratio is fluctuating slightly. However the ratio is higher and somehow may be considered satisfactory. The ratio is fluctuated from 0.34 times to 0.50 times. Therefore on the basis of the fluctuation, the ratio is not satisfactory. 5.1.j Liquid asset is increasing in slow trend. Mean of the liquid fund is Rs. 6026.698 Million. And standard deviation is Rs. 804.45 Million, and C.V. is 13.35%. But this calculation is not so useful. Because single mean, s.d, and c.v. fetch nothing for decision making except the standard volume during the period. 5.1.k Correlation between liquid fund and current deposit and saving deposit liability is positively correlated. The correlation coefficient is 0.80
5.2 Recommendation:

The overall result are satisfactory. But in some cases the Nabil Bank should take certain steps to improve the banks current financial condition. Therefore some recommendations are being put forward for its improvement along with its development of the country. 5.2.1 The proportion of the saving deposit account is high in total deposit liability. So, it is recommended that the bank should utilize the amount collected from the saving deposit account carefully. It should be invested in the higher yielding areas. 5.2.2 5.2.2 The proportion of the fixed deposits are decreasing over the year, the fixed deposits is the major financial source to the banks. With the higher amount form the fixed deposits, bank can earn a higher income spread investing in long term bound and higher yielding areas. Thus, it is recommended that the bank should take necessary steps and alternative to attract the fixed depositors. The bank should initialize various schemes to attract the fixed depositors.
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A Study of liquidity analysis in Nabil Bank, Aug-2008

5.2.3 The cash and bank balance in the Nabil is satisfactory. It is higher a bit though. Bank should analyze the opportunities for short term investments. 5.2.4 Balance with NRB to current plus saving deposit should be maintained at the straight of 0.04 times. 5.2.5 Investment to deposit ratio is fluctuating adversely. It may harm the operation of the bank. So the investment of the deposit source should be stabilized. 5.2.6 The bank is spreading its operation all over the nation so the bank should always be aware of liquidity need and keep in mind to maintain the optimum liquidity. Bank should not spend too much in the fixed assets because it yields only a nominal portion, almost no yield.

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