DEPOSIT MOBILIZATION,

LOAN AND ADVANCES

AND PROFITABILITY OF NIC ASIA BANK LTD.

A Project work Report

Submitted By
Rekha Panta
TU Reg. No: 7-2-926-247-2020
Exam Roll No:709260047
Texas International College
Group: Finance

Submitted To
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSSINESS STUDIES (BBS)

Kathmandu, Nepal
June, 2025
 DECLARATION

I hereby declare that the project work entitled "DEPOSIT MOBILIZATION AND
PROFITABILITY OF NIC ASIA BANK LTD" Submitted to the Faculty of
Management, Tribhuvan University, Kathmandu is an original piece of work under
the supervisor, Dr. Samulson Neupane, faculty member, Texas International College,
and is submitted in partial fulfillment of the requirements for the degree of Bachelor
of Business Studies (BBS). This Project work report has not been submitted to any
other university or institution for the award of any degree or diploma.

……………..
Rekha Panta
Date: 6/9/2025

ii
 SUPERVISOR’S RECOMMENDATION

The Project Work Report entitled "DEPOSIT MOBILIZATION, LOAN AND

ADVANCES AND PROFITABILITY OF NIC ASIA BANK LTD" submitted by
Rekha Panta, Student of Texas International College, is prepared under my supervisor
as per the procedure and format requirements laid by the Faculty of Management,
Tribhuvan University, for the partial fulfillment of the requirements of Bachelor of
Business Studies (BBS). I, therefore, recommend the project report work for
evaluation.

Signature:
Dr. Samulson Neupane
Supervisor
Texas International College

iii
 ENDORSEMENT

We hereby endorse the project work report entitled “DEPOSIT MOBILIZATION,

LOAN AND ADVANCES AND PROFITABILITY OF NIC ASIA BANK LTD”
submitted by Rekha Panta of Texas International College, Mitrapark, Kathmandu, in
partial fulfillment of the requirement for the degree of the Bachelor of Business
Studies (BBS) for external evaluation.

…………………….. ………………………
Dr. Samulson Neupane Shyam Sundar Shrestha
Management Research Committee Campus Chief
Date: June, 2025 Date: June, 2025

iv
 ACKNOWLEDGEMENT

This report entitled "DEPOSIT MOBILIZATION AND PROFITABILITY OF NIC

ASIA BANK LTD" Has been prepared for the fulfillment of the required of Bachelor
Degree of Business studies (BBS) Programme the subject of Business Research
Methods. This report has been prepared under the Faculty of Management, Tribhuwan
University, is based on research models involving the use of quantitative and
qualitative model to analyze the report.

First of all, I regard it as my dispensation and providence to get an opportunity to

work under the admirable supervision Dr. Samulson Neupane, Chairman of Research
Committee Mr. Youbaraj Sapkota and Principal Mr. Shyam Sundar Shrestha who
helped me by providing their suggestions and ideas time to time during the
preparation of the project. I would also like to thank all my teachers, who helped me
in writing report and guided over time for the completion of my report.

Last but not the least, I would like express my greetings to my family and friends who
helped me a lot in finishing this report within the limited time. I am making this
project not only for the marks but to increase my knowledge.

With Sincere Thanks,

Rekha Panta
Texas International College

v
 TABLE OF CONTENT

Title Page ………………………………………………………………………………. i

Declaration ……………………………………………………………………………. ii
Supervisor's Recommendation ………………………………………………….. ….iii
Endorsement…………………………………………………………………………….iv
Acknowledgement …………………………………………………………………….. v
Table of Contents ………………………………………………………………………vi
List of Table …………………………………………………………………….…….. vii
Lists of Figures …………………………………………………………………........ viii
Abbreviations …………………………………………………………………..……... ix
CHAPTER I: INTRODUCTION
1.1 Background of Study …..……………………………………………….... 1
1.2 Profile of the organization ………………………………………………... 3
1.3 Statement of Problem………………………………………………………3
1.4 Objectives of Study…..………………………………………………….. . 4
1.5 Rationale………………………………………………………………… . 5
1.6 Review …………………………………………………………………... . 5
1.7 Methods ……………………………………………………………………9
1.8 Limitations ……………………………………………………………….. 14
CHAPTER II: RESULT AND ANALYSIS
2.1 Data Presentation ……………………………………………………. .. ....15
2.2 Analysis of Results …………………………………………………..... . ..28
2.3 Findings ……………………………………………………………….. . ..28
CHAPTER III: SUMMARY AND CONCLUSION
3.1 Summary ………………………………………………………………… .29
3.2 Conclusion …………………………………………………………….... ..30

BIBLOGRAPHY 31
APPENDIX 32

vi
 LIST OF TABLES

Table No. Title Page No.

1 Current Deposit 16

2 Fixed Deposit 17

3 Saving Deposit 18

4 Margin Deposit 19

5 Call and Other Deposit 20

6 Credit-Deposit Ratio 21

7 Return on Total Assets 23

8 Return on Equity 25

9 Net Profit Margin 26

10 Operating Profit 27

vii
 LIST OF FIGURES

Figure No. Title Page No.

1 Bar Graph of Current Deposit 16
2 Bar Graph of Fixed Deposit 17
3 Bar Graph of Saving Deposit 18
4 Trend Line of Margin Deposit 19
5 Bar Graph of Call and Other Deposit 20
6 Trend Line of CD Ratio 22
7 Trend Line of Return to Total Assets 24
8 Trend Line of Return on Equity 25
9 Trend Line of Net Profit Margin (NPM) 27

viii
 ABBREVIATIONS

& : And
ACM : Advance Credit Management
B.S. : Bikram Sambat
BBS : Bachelor of Business Studies
CRR : Cash Reserve Ratio
Etc. : Etcetera
i.e. : That is
No. : Number
Regd. : Registration
ROE : Return on Equity
Rs. : Rupees
SD : Standard deviation
T.U. : Tribhuvan University
Vs. : Versus

ix
 1

CHAPTER I
INTRODUCTION

1.1 Background of the Study

A commercial bank is a financial institution that provides services like loans, certificates of
deposits, saving bank accounts bank overdrafts, etc. to its customers. They also offer services
such as foreign exchange, investment advice, and wealth management. Commercials banks
are the main source which motivates people to save their earnings. Bank deals in accepting
the saving of people in the form of deposit collection and loan mobilization it in the
productive areas. Banks gives the loan to the people against real and financial assets. Banks
have played an importance role in the economic development of a country. In Nepalese
financial conditions, commercials banks play very importance role in mobilizing the
resources (Kassu & Menen, 2020).

The banking sector is an essential component of the financial systems and plays a critical role
in the economy by facilitating transactions, providing access to capital and promoting
economic growth and development. The increasing phenomenon of globalization has made
the concept of efficiency more importance both for the financial and non- financial
institutions and banks are the parts of them. Banks largely depends on competitive marketing
strategy that determines their success and growth. The modalities of the banking business
have changed a lot in the new millennium compared to the way they used to be in the years
by gone (Gyamfi, 2015).

A deposit refers to the act of placing money or fund into a bank account or other financial
institution. Deposits can be made in various forms, including cash, checks, electronic
transfers, and wire transfers. Deposits are the critical sources of funding for banks and other
financial institutions. When customers deposit funds, the bank can use that money to make
loans and investments, earnings interest and generating revenue. A deposit can be made by
individuals or entities such as co-orporations money at any time, transfer it to another
person's account, or use the money to purchased goods.

Commercial banks play a vital role in the economic development of a country by mobilizing
savings and channeling them into productive investments through loans and advances.
 2

Deposit mobilization is the primary source of funds for banks, and its effective utilization
directly influences the bank’s profitability and credit performance (Dongol, 2024). NIC ASIA
Bank, one of the leading commercial banks in Nepal, has significantly expanded its branch
network and digital services to attract deposits and extend credit facilities. The bank's ability
to efficiently manage deposits and loan portfolios is essential to achieving sustainable
profitability (Dhanuk, 2025). However, the banking sector in Nepal faces several challenges
such as interest rate volatility, credit risk, and rising non-performing assets, which can affect
the profitability of banks (Gnawali & Niroula, 2023). Understanding the interrelationship
between deposit mobilization, loan and advances, and profitability is therefore crucial for
evaluating the financial performance and strategic direction of NIC ASIA Bank (Mishra,
Kandel, & Aithal, 2021).

A bank's profitability is influenced by various factors, such as interest rates, economic

conditions, competition, and regulatory environment. Banks that are more efficient in
managing their expenses and generating revenue are typically more profitable. A company or
firms should earn profits to service and grow over a long period of time. Profits are essential
but it would be wrong to assume that every action initiating by management of the firms
should be aimed at maximizing profits, irrespective of social consequences.

Profitability is assessed relative to costs and expenses, and it is analyzed in comparison to

assets to see how effective a company is in deploying assets to generate sales and eventually
profits. The term return in the ROA ratio customarily refers to net profit or net income, the
amount of earnings from sales after all costs, expenses and taxes. The more assets a company
has amassed the more sales and potentially more profits the company may generate. As
economies of scale help lower costs and improve margins, return may grow at a faster rate
than assets, ultimately increasing return on assets.

Understanding the interrelationship between deposit mobilization, loan and advances, and
profitability is crucial for assessing the bank’s operational efficiency and sustainability.
Higher deposit levels enhance a bank’s ability to lend, while effective credit management
contributes to better income generation and profitability. This study aims to examine how
NIC Asia’s performance in mobilizing deposits and extending loans and advances impacts its
profitability, thereby offering insights into its financial health and strategic positioning within
the banking industry.
 3

1.2 Profile of the Organization

NIC ASIA BANK Ltd is a commercial bank based in Nepal, which was established on 21 st
July 1998 as Nepal Industrial and Commercial Bank Limited. The Bank was rechristened as
NIC ASIA BANK LTD. Bank after the merger of NIC Bank with Bank of Asia on 30 th June
2013. This was a historic merger in the annals of the Nepalese financial landscape as the first
of its kind merger between two successful commercial banks in the country. Today, NIC
ASIA BANK LTD. has established itself as one of the most successful commercial banks in
Nepal.

During the post-merger integration phase, NIC ASIA BANK LTD. managed the transition
very smoothly receiving accolades from the regulations as well as the stakeholders, paving
the way for other mergers and consolidation in the Nepalese financial sectors. After the
merger, NIC ASIA BANK LTD. was recognized as "Bank of the Year 2013-Nepal" by the
Banker, Financial Times, UK. This is the second time that the bank was recognized with this
prestigious award, the previous occasion being in 2007.

NIC ASIA BANK LTD. is now, one of the largest private-sector commercial banks in the
country in terms of capital base, balance-sheet size, number of branches, ATM networks, and
customer base. The Bank has 359 branches, 107 extension counters, 81 branchless banking,
and 473 ATMs, approximately 40 lakhs saving account and approximately 20 lakhs mobile
banking user across Nepal with a network covering all major financial centers of the country.
The Bank strongly believes in Meritocracy, Transparency, Professionalism, Team spirit, and
Services Excellence. These core values are internalized by all functions within the banks and
are reflected in all actions the Bank takes during its business.

1.3 Statement of Problem

In the context of a competitive and evolving banking industry in Nepal, effective deposit
mobilization and the efficient allocation of loans and advances are critical determinants of a
bank’s financial health and long-term sustainability. NIC ASIA Bank, one of the leading
commercial banks in the country, has experienced significant growth in both its deposit base
and credit portfolio. However, questions remain about how effectively these deposits are
being utilized through loans and advances, and how this, in turn, impacts the bank’s
profitability. Improper alignment between deposit mobilization and credit deployment can
 4

lead to liquidity issues, rising non-performing assets, and ultimately, reduced profitability.
Despite NIC ASIA's rapid branch expansion, adoption of digital banking, and growing
customer base, there is a need to critically assess whether these efforts are translating into
improved financial performance. Therefore, this study seeks to examine the relationship
among deposit mobilization, loan and advances, and profitability in the case of NIC ASIA
Bank, identifying whether current practices are efficient, balanced, and sustainable.

This study will help us to find the answer of the following questions:

1. Are deposit levels growing consistently?

2. What are the sources and structure of deposits (e.g., savings, current, fixed)?
3. What proportion of deposits is being converted into loans?
4. Is there a positive correlation between deposit growth and profitability?

In this context, the main purpose of the study is to analyze the deposit mobilization, loan and
advances and profitability of NIC ASIA BANK LTD in relation with CD Ratio, Deposit
Growth Rate, Return on Total Assets (ROA) and Return on Shareholders’ Equity (ROE).

1.4 Objectives

The major objective of this study is to determine the deposit mobilization and profitability on
the financial performance of NIC ASIA BANK LTD. This research work is to examine the
efficiency of NIC ASIA BANK LTD by making a study of deposits mobilization of sample
bank how it utilizes to fulfill the financial needs of the different sector of economy. The
specific subjective of the study are given as below:

 To assess the different types of deposits provided by the bank.

 To examine the relationship between total deposit mobilizations, loan & advances
 To analyze profitability position of the bank.

Mission:
The mission of this study is to analyze the effectiveness of NIC Asia Bank’s deposit
mobilization and loan and advance strategies, and to evaluate how these factors contribute to
the overall profitability of the bank. The study aims to provide insights that can support better
decision-making, strategic planning, and financial sustainability in the banking sector.
 5

1.5 Rationale

This study is focused on deposit and profitability of NIC ASIA BANK LTD. Deposit is one
of the basic sources of the bank to mobilize the fund, without deposit bank cannot operate its
activities. Therefore, bank has to focus on in collecting scared small deposit and transfer this
deposit into productive sector for the economic development of nation. Profitability is a
financial metric that companies use to determine how successful it is. Profitability is the
primary goal of all business ventures. Without profitability the business will not survive in
the long run. Profitability is measured with income and expenses.

The study deals with profitability in subject to total deposit, loan and advances, investment,
Net Profit, as an aid to economic development of the country by making research of deposit
mobilization of development bank and their utilization to fulfill the need of the different
sector of the economy. It is helpful to investor, customers and management team to know
how BFIs are utilizing deposit gather from general people and mobilizing into lending
activities either by loan or capital market in order to generate profit. The other significance of
this study is, to support further investigation on the area. Since, there are no sufficient studies
conducted on this area of deposit mobilization in Nepal, it will also help other researchers
through revealing issues for further research.

1.6 Review
The literature review section of the study covers the overview of Nepal banking system and
capital requirements, the theoretical and empirical studies review in the areas of deposit and
profitability of the sample bank. Moreover, it presents the variable summary and conceptual
framework as well as the conceptual review and previous research project.

1.6.1 Conceptual Review

The basic of financial planning analysis and decision making is the financial information
(statements). Financial statements are needed to predict, compare and evaluate firm's earning
ability. It is also requirement to aid in economic decision-making investment and financial
decision making. The financial information of an enterprise is contained in the financial
statements. The use of deposit and profitability analysis decision has been addressed by series
of authors.
 6

Financial Variables

The independent variables are deposits which include current deposit, saving deposit, call
deposit, fixed deposit, margin deposit and other deposit. Dependent variables are return on
assets, return on equity and net profit margin.

Dependent variables, which are affected by the change in independent variables, are known
as dependent variables. The dependent variables is the variable of primary interest to the
researchers. The researcher's goal is to explain or predict the variability in the dependent
variables. By the analysis of the dependent variables, researchers find the solution of the
problems.

Independent variable that influences the dependent variable in positive or negative way is non
independent variables. Such variable does not change due to change in other variables but it
leads to change in dependent variables. If independent variables are changed by one unit, then
dependent variables will be changed in some degree.

Deposit may define as the surplus by individual depositors of the bank that proportional to
the risk assumed over some future deposit period. A bank is an instruction where financial
services are broadly offered and wide ranges of financial are performed.

1.6.2 Review of Previous Work

This study is about the problems of developing a conclusive theory of loan and deposit
analysis and designing empirical tests those are powerful enough to provide a basis for
choosing among the various theories is still unresolved. The review of previous works on
loan and deposit analysis of the bank have produced mixed results are as presented.

Mishra, Kandel, and Aithal (2021) investigated the influence of various bank-specific factors
—such as loans, deposits, bank size, capital, and inflation—on the profitability of commercial
banks in Nepal. This mixed-method study utilized both secondary data from 2013 to 2019
(covering seven commercial banks) and primary data collected through surveys. The findings
showed that ROA and ROE were negatively correlated with loan ratios, deposit ratios, and
capital ratios, but positively correlated with bank size and inflation. On the other hand, Net
Interest Margin (NIM) was positively correlated with loan and deposit ratios and inflation,
but negatively associated with capital ratio. The study concluded that different profitability
 7

indicators react differently to internal banking structures and macroeconomic factors,

emphasizing the need for nuanced financial management strategies.

Shrestha and Aryal (2022) conducted a comparative study analyzing deposit mobilization,
loan and advances, and profitability between Nepal Bank Limited (NBL) and Sanima Bank
Limited (SBL). Using secondary data spanning from 2011 to 2020, they employed financial
ratio and trend analysis to explore how deposits and lending operations affect bank
performance. The study found that both Return on Assets (ROA) and Earnings Per Share
(EPS) significantly and positively influence profitability in both banks, indicating a strong
link between effective deposit mobilization and sound profitability. Moreover, the results
highlighted that robust deposit collection enables greater lending capability, which in turn
enhances profit generation. The researchers concluded that successful deposit mobilization
strategies are critical in strengthening bank lending practices and overall financial
performance

Shrestha and Aryal (2022) conducted a comparative study between Nepal Bank Ltd. and
Sanima Bank to understand how deposit mobilization, loans and advances, and profitability
are interconnected. The researchers analyzed secondary data from 2011 to 2020 using
financial ratio analysis and trend evaluations. Their objective was to assess the relationship
between deposit mobilization and overall bank profitability. The study found that profitability
indicators such as ROA and EPS have a substantial influence on bank performance. It
concluded that strong deposit mobilization efforts enhance the lending capacity of banks,
which in turn leads to better profitability. The findings highlighted the importance of efficient
deposit collection strategies for sustaining and improving financial performance.

Gnawali and Niroula (2023) aimed to evaluate the effect of deposit mobilization on the
profitability of commercial banks in Nepal. Using a causal-comparative research design, the
study employed panel data from 2015 to 2023 and conducted regression analysis using SPSS.
The key variables included interest rate spread (IRS), interest on deposits (IOD), and
inflation, with ROA as the dependent variable. The results demonstrated that both IRS and
IOD had a positive and statistically significant impact on ROA, while inflation had a negative
effect on profitability. The researchers concluded that banks should focus on maintaining
favorable interest spreads and optimizing interest rates on deposits to enhance profitability.
 8

Shrestha (2024) conducted a bachelor-level research project on the profitability of NIC ASIA
Bank. The objective was to analyze the bank’s financial performance using secondary data
and key profitability ratios such as net interest margin, profit margin, ROA, ROE, and EPS.
Although the detailed findings were not publicly disclosed, the study identified consistent and
positive trends in profitability ratios over the study period. The researcher concluded that NIC
ASIA has maintained a strong and efficient financial profile, demonstrating robust
profitability through effective banking operations.

Dallakoti (2024) conducted a study on the relationship between deposit mobilization and
profitability in selected Nepalese commercial banks. Using multiple regression analysis on
secondary data, she examined variables like Cash Reserve Ratio, Credit-Deposit Ratio, and
Investment-to-Deposit Ratio in relation to ROA and ROE. The findings showed that most
variables had an insignificant impact, except for property and equipment-to-deposit ratio,
which negatively and significantly affected profitability. The study concluded that excessive
investment in fixed assets can reduce profitability and that banks must balance reserve and
asset utilization strategies.

Dongol (2024) examined the bank-specific determinants of deposit mobilization in Nepalese

commercial banks. Using a panel regression model with data from 20 commercial banks
covering fiscal years 2075 to 2079 B.S., the study investigated how factors such as paid-up
capital, number of branches, interest rates, non-performing loans (NPLs), liquidity, and
profitability influence deposit mobilization. The results showed that paid-up capital, branch
expansion, and higher saving interest rates positively impact deposit growth, while NPLs
have a negative effect. Interestingly, profitability, liquidity, and fixed-deposit interest rates
were found to be statistically insignificant. The conclusion recommended that banks aiming
to improve deposit mobilization should focus on increasing their capital base, expanding
branch networks, and offering competitive saving interest rates.

Dhanuk (2025) conducted a detailed study focused on the profitability of NIC ASIA Bank by
analyzing various financial ratios such as Return on Assets (ROA), Return on Equity (ROE),
profit margin, Earnings Per Share (EPS), and Price-to-Earnings (P/E) ratio. The objective of
the study was to evaluate the bank’s financial performance through secondary data analysis.
The findings revealed that NIC ASIA’s profitability is driven largely by operational
efficiency, effective cost management, and a growing base of non-interest income. The study
 9

emphasized that the bank’s strategic digital expansion and optimization of its branch network
have significantly contributed to its profit margins. However, challenges such as interest rate
fluctuations and credit risk remain pressing. The study concluded that NIC ASIA
demonstrates sustainable profitability, provided that external risks are effectively managed.

1.7 Research Methodology

This chapter discusses research methodology which the researcher used in the process of data
collection. It includes the research design, the target population, sampling method and sample
size, data collection procedures and data analysis method. Research methodology is a
systematically way of solving the research problem. It may be understood as science of
studying that how research is done scientifically as well as systematically.

1.7.1 Research Design

A research design is a plan of action adopted by researcher in carrying out the research. It is
the overall operational pattern of framework for the project that stipulates what information is
to be collected, form which sources and by what procedures. In other way, a research design
is the plan, structure and strategy of investigations conceived to obtain answer to research
question and to control variances. For this study, descriptive research design has been used.
This study adopts a descriptive and analytical research design. It primarily uses quantitative
methods to analyze the relationship between deposit mobilization, loans and advances, and
profitability of NIC ASIA Bank.

1.7.2 Data Collection Procedure

While preparing this report data are collected from secondary sources. Secondary data refers
to data that was collected by someone other than the users. It is originally collected from
different sources. So, in the course of preparing this report the necessary data and documents
are collected only from the secondary sources.

Secondary Data

Secondary data is defined as data collected earlier for a purpose other than the one currently
being pursued. Secondary sources refer to those for already gathered by others. They are
referred to as coming from secondary sources such includes:
 10

 Annual Reports
 Books
 Related articles & journals

1.7.3 Population and Sample

The population for this study includes all commercial banks operating in Nepal. However, for
the purpose of this research, NIC ASIA Bank has been selected as the sample institution
using a case study approach. The study focuses on the bank’s financial performance in terms
of deposit mobilization, loans and advances, and profitability. Secondary data from five fiscal
years, 2076/77 to 2080/81, have been used as the sample period for analysis. This focused
sampling allows for an in-depth examination of trends and relationships within a single,
leading commercial bank in Nepal. Though the sample is relatively small, efforts are made to
make the more accurate and precise.

1.7.4 Types and collection of data

Data have been obtained from secondary source. The use of same data by other parties would
now be termed as secondary data. This study has used secondary source of data collected
from NIC ASIA BANK LTD. All the collected data and information have been properly
arranged, synthesized, tabulated and calculated to arrive at the realistic analytical steps. In
this study, data are collected through published sources. They were collected from the
correspondent offices and their respective websites. The annual reports of NIC ASIA BANK
LTD were collected from its website and website of NRB, and other related documents were
collected from, unpublished master's thesis, books, research papers, Journal and articles from
Internet websites. Collected data were first presented in systematic manner in tabular forms
and then analyzed by applying different financial and statistical tools to achieve the research
objectives. Besides these, some Figure and Tables have been presented to analyze and
interpret the finding of the study.
 11

1.7.5 Tools Used

Data are collected for analysis and presentation of research or any conclusive result. Data
alone are not complete unless the data are related with activities to get some output/result.
The data can be analyzed by using financial and statistical tools. In order to get the concrete
results from this research, data are analyzed by using different types of tools. As per topic
requirement, emphasis is given on statistical tools rather than financial tools. So for the study
following two statistical tools are used.

1.7.5.1 Financial Tools

Financial tools are the most efficient techniques that can be used for deciphering both internal
and external financial strength and weakness of a firm. These financial tools are highly
helpful in evaluating the market and investing in a way to maximize the profit from the
investments made and to assess financial statements which contain information on past
performances and interpret it as a basis for forecasting future rates of return and for assessing
risk. Assessing the operational efficiency and managerial effectiveness and analyzing the
current position of the company.

Ratio analysis:

Ratio analysis is a quantitative method of gaining insight into a company's liquidity,

operational efficiency, and profitability by comparing information contained in its financial
statements. Ratio analysis is a cornerstone of fundamental analysis.

Ratio analysis can be used to establish a trend line for one company's results over a large
number of financial reporting periods. This can highlight company changes that would not be
evident if looking at a given ratio that represents just one point in time. Even though there are
many ratios of analysis and interpret and financial statement, those ratios that are related to
the investment operation of the bank are have been covered in this study, the following types
of ratios have been used in this study.

Total loan and advance to total deposit ratio

A loan and advance to deposit ratio is used to assess a bank's liquidity by comparing a bank's
total loans to its total deposits for the same period. In addition, the loan and advance to
 12

deposit ratio helps to show how well a bank is attracting and retaining customers. If a bank's
deposits are increasing, new money and new clients are being on-boarded. As a result, the
bank will likely have more money to lend, which should increase earnings. Although its
counterintuitive, loans are an asset for a bank since banks earn interest income from lending.
Loan and advanced consist of loans, advances, cash credit, overdrafts, and foreign bills
purchased and discounted.

Total Loans and Advances to Total Deposit Ratio = Loan and Advances
Total Deposit

Return on Total Deposit

Major financial source of a bank is deposit collection and deposit is mobilized for loan and
advances, Investment etc., to earn profit. The ratio shows the relation of net profit earned by
the bank with the total deposit accumulated. Higher ratio is the index of strong profitability
position. The ratio is computed by divining net profit after tax by total deposit.

Return on Total Deposit = Net Profit After Tax

Total Deposit

Return on Total Loan and Advance

Net Profit reveals the performance of bank. It shows efficiency of management. It shows the
capacity of management has been able to utilize deposits. Net profit increment plays vital role
of the bank. The ratio of Return to total loan and advances reveals profit in comparison to
total loan and advance disbursed. Net profit to loan and advances ratio measures the earning
capacity of commercial bank as its deposit mobilized on loan and advances higher the ratio
greater will be the return and vice-versa.

Return on Total Loan and Advance = Net Profit After Tax

Total Loan and Advances
 13

1.7.5.2 Statistical Tools

These different statistical tools can be used to find out the various statistical results. Few
relevant statistical tools are used in this study to analyze the mean, and correlation testing
their relationship.

Mean

The statistical mean (X) refers to the mean or average that is used to derive the central
tendency of observations in the sample. It is determined by adding all the data points in a
population and then dividing the total by the number of points. The resulting number is
known as the mean or the average. It represents the entire data which lies almost between the
two extremes. In this study it is used in data related to deposit of sample banks over five
years.

Mean is calculated by:

X = X 1 + X2 + X3 +…………+ X n

Or, n

X=nX

Where, X = Arithmetic mean return

x1, x2, x3 ………….. xn = Set of Observations

n = Total no. of observations

 X = Sum of given observation

Standard Deviation

In statistics, the standard (SD) deviation is a measure that is used to quantify the amount of
variation or dispersion of a set of data values. A low standard deviation indicates that the data
points tend to be close to the mean (also called the expected value) of the set, while a high
standard deviation indicates that the data points are spread out over a wider range of values.
 14

The standard deviation of the mean (SD) is the most commonly used measure of the spread of
values in a distribution. In simple term, high SD means very less similarity in the values and
low SD means high similarity among the values.

1.8 Limitations

This study is mainly focused on deposit and profitability analysis of the NIC ASIA BANK
LTD. The limitations of the study are as follows:

 The study is based on the secondary data only.

 This study is based on five years i.e. 2076/77 BS to 2080/81.
 Time and resources constraints may limit the area covered by the study.
 Due to limited time and resources, out of 20 commercial banks, only one of them
are included in this study.
 Constraints in applying advanced statistical tools due to limited expertise.
 Access to confidential or internal financial details was restricted, which may
have limited the depth of analysis.
 15

CHAPTER II
RESULTS AND ANALYSIS

2.1 Data Presentation

The data collected from the various sources are analyzed and findings its results. Data are
analyzed according to the research methodology as mentioned. In this chapter data has been
presented tabular form and bar diagram. To obtain best results, the data has been analyzed
according to the research methodology as mentioned earlier in previous chapter. Various
ratios have been calculated on the basis of the annual report of the organization.

2.1.1 Structure of Total Deposit in Different Fiscal Year

Deposit trend helps to analysis the bank's performance in term of deposit collection. Deposit
trend also helps to depict the efficiency of bank and customer faith towards the bank. NIC
ASIA Bank provides six types of deposit schemes to its account holders. They are:

 Current Deposit
 Saving Deposit
 Call Deposit
 Fixed Deposit
 Margin Deposit
 Other Deposit

NIC Asia Bank offers a diverse and competitive deposit structure designed to meet the
varying needs of its customers. The bank provides several types of deposit accounts,
including savings accounts, fixed deposits, recurring deposits, and foreign-currency
deposits. Its savings accounts, such as the “Sathi Bachat Khata” and “Super Chamatkarik
Bachat Khata,” offer attractive interest rates—up to 10% per annum for digital and interest-
sensitive customers.

Table 1
 16

Current Deposit of NIC ASIA BANK (In Millions)

Fiscal Year Current Deposit (CD) Change in CD in %

2076/77 12,070 35.66

2077/78 16,120 33.55

2078/79 15,777 -1.05

2079/80 16,358 3.68

2080/81 15,780 -3.54

(Source: Annual Report of NIC ASIA BANK LTD.)

In this above table 1, shows the deposit composition in different fiscal year from 2076/77 to
2080/81 BS. Current are taken into the consideration for five fiscal years. According to the
tables and provided financial data, the deposits are in fluctuation trend in five fiscal years.

Figure 1: Bar Graph of Current Deposit

Figure 1 shows the current deposit in different fiscal year from 2076/77 to 2080/81 BS.
According to the figure and provided financial data, Current Deposit is highest in fiscal year
2079/80 BS i.e. Rs. 16,358, whereas 2076/77 BS has lower Current deposit compared to
other fiscal years.
 17

Table 2
Fixed Deposit of NIC ASIA BANK ( In Millions)
Fiscal Year Fixed Deposit (FD) Change in FD in %

2076/77 72,877 10.45

2077/78 101,120 38.75

2078/79 100,058 -0.8

2079/80 104,789 4.47

2080/81 100,060 -4.51

(Source: Annual Report of NIC ASIA BANK LTD.)

Table 2 shows the Fixed deposit of NIC BANK LTD for last five fiscal year. FD is in
fluctuating trend. Fixed Deposit is highest in year 2079/80 BS i.e. Rs. 104,789.

Figure 2: Bar Graph of Fixed Deposit

Figure 2 represent the bar graph of fixed deposit of NIC ASIA BANK LTD from 2076/77 BS
to 2080/81 BS. Fiscal year 2076/77 BS has the lowest FD compared to other fiscal year i.e.
Rs. 72,877, whereas 2079/80 BS has highest FD funds.
 18

Table 3
Saving Deposit of NIC ASIA BANK (In Millions)
Fiscal Year Saving Deposit (SD) Change in SD in %

2076/77 70,689 12.94

2077/78 100,300 41.89

2078/79 98,275 -2.02

2079/80 103,041 4.84

2080/81 126,000 22.28

(Source: Annual Report of NIC ASIA BANK LTD.)

In this above table 3, shows the deposit composition in different fiscal year from 2076/77 to
2080/81 BS. Saving Deposit are taken into the consideration for five fiscal years. According
to the tables and provided financial data, the deposits are in fluctuation trend in five fiscal
years.

Figure 3: Bar Graph of Saving Deposit

Figure 3 shows the shows the deposit composition in different fiscal year from 2076/77 to
2080/81 BS. Saving Deposit are taken into the consideration for five fiscal years. According
 19

to the tables and provided financial data, the deposits are in fluctuation trend in five fiscal
years. Saving deposit is highest on year 2080/81 BS.

Table 4
Margin Deposit of NIC ASIA BANK (In Millions
Fiscal Year Margin Deposit (MD) Change in MD in %

2076/77 32,897 15.15

2077/78 50,820 54.48

2078/79 49,808 -1.99

2079/80 52,119 4.63

2080/81 65,000 24.71

(Source: Annual Report of NIC ASIA BANK LTD.)

In this above table 4, shows the deposit composition in different fiscal year from 2076/77 to
2080/81 BS. Margin Deposit are taken into the consideration for five fiscal years. According
to the tables and provided financial data, the deposits are in fluctuation trend in five fiscal
years.

Figure 4: Bar Graph of Margin Deposit

 20

Figure 4 shows the shows the deposit composition in different fiscal year from 2076/77 to
2080/81 BS. Margin Deposit are taken into the consideration for five fiscal years. According
to the tables and provided financial data, the deposits are in increasing trend in five fiscal
years, except 2078/79 BS. Margin deposit is highest on year 2080/81 BS.
Table 5
Call and Other Deposit of NIC ASIA BANK (In Million)
Fiscal Year Call Deposit and other deposit Change in CD in %

2076/77 22,110 52.52

2077/78 31,892 44.24

2078/79 31,059 -2.6

2079/80 38,003 22.35

2080/81 40,032 5.33

(Source: Annual Report of NIC ASIA BANK LTD.)

In this above table 5, shows the deposit composition in different fiscal year from 2076/77 to
2080/81 BS. Call and other Deposit are taken into the consideration for five fiscal years.
According to the tables and provided financial data, the deposits are in fluctuation trend in
five fiscal years. The change in call deposit is highest in 2076/77 with 52.52%, while 2078/79
BS faces decline in Call deposit.

Figure 5: Trend Line of Call and Other Deposit

 21

Figure 5 shows the deposit composition in different fiscal year from 2076/77 to 2080/81 BS.
Call and other Deposit are taken into the consideration for five fiscal years. According to the
tables and provided financial data, the deposits are in fluctuation trend in five fiscal years.
Call and other deposit is higher in fiscal year 2080/81 BS i.e. Rs. 40,032.

2.1.2 Credit-Deposit Ratio

The Credit-to-Deposit Ratio (CD Ratio) is a key financial metric used by banks to assess how
effectively they are utilizing their deposits to generate loans (credit). The CD ratio shows the
percentage of a bank’s total deposits that have been lent out as credit to borrowers.

CD Ratio= Loan and Advances

Total Deposit

Table 6
Credit-Deposit Ratio (In Millions)

Fiscal Year Loan and Total Deposit CD Ratio

Advances

2076/77 163,889 210,843 77.73

2077/78 252,963 300,252 84.25

2078/79 273,103 308,176 86.47

2079/80 315,617 316,545 99.69

2080/81 285,333 360,538 79.14

(Source: Annual Report of NIC ASIA BANK LTD.)

Table 6, shows Credit-Deposit Ratio of the NIC BANK LTD. from the five fiscal year period
from 2076/77 BS to 2080/81 BS. The CD Ratio of the bank are 77.73%, 84.25%, 86.47%,
 22

99.69% and 79.14% over the five fiscal year period. The higher ratio of bank is 99.69%
which is in the fiscal year 2079/80 BS, showing almost full employment of the deposit and
lower ratio is 77.73% which is in the fiscal year 2076/77 BS. The ratio of the bank is in
increasing trend over the five fiscal year period except for fiscal year 2080/81 BS.

Figure 6: Trend Line of CD

Figure 6, shows the Trend Line of CD Ratio of the NIC ASIA BANK LTD. from the five
fiscal year period from 2076/77 BS to 2080/81 BS. The higher ratio of the bank is 99.96%,
which was in the fiscal year 2079/80 BS and lower ratio is 77.73% which was in the fiscal
year 2076/77 BS respectively. Higher the CD Ratio, Higher the full employment of deposit
and vice-versa.

Profitability Ratio
Profitability is the end results of a number of corporate policy and decision. It is differences
between revenue and expenses over a period of time. Profit is the ultimate output on the
company and it will have no future if it fails to make a sufficient profit. The profitability
ratios are calculated to measure the operating efficiency of the firms. It shows the pure
condition firm either the firm is in profit or loss.
 23

Profitability ratios are financial metrics used to evaluate a company's ability to generate
earnings relatives to its expenses and other costs. The ratios are importance tools for investors
and analysts to evaluate a company's profitability and financial health.

1. Return on Total Assets Ratio

Return on Assets explains the relationship between net income and total assets. It shows the
overall effectiveness of management in generating profits with the available assets. Higher
the firm's return on assets, the better is doing its operating and vice-versa. Return on total
assets the contribution of assets to generating net profit. Higher ratio indicates the higher
efficiency in utilization of total assets and vice-versa.

Table 7
Return on Total Assets Ratio (In Millions)

Fiscal Year Net Profit Total Assets ROA in %

2076/77 3099 250,590 1.25

2077/78 3259 346,148 1.02

2078/79 4215 358,570 1.20

2079/80 4650 379,269 1.22

2080/81 1380 380,140 0.36

(Source: Annual Report of NIC ASIA BANK LTD.)

Table 7, shows the Return on Total Assets of the NIC BANK LTD. from the five fiscal year
period from 2076/77 BS to 2080/81 BS. The return on total assets of the bank are 1.25%,
1.02%, 1.20%, 1.22% and 0.36% over the five fiscal year period. The higher ratio of bank is
 24

1.25% which is in the fiscal year 2076/77 BS and lower ratio is 0.36% which is in the fiscal
year 2080/81 BS. The ratio of the bank is in fluctuation trend over the five fiscal year period.

Figure 7: Trend line of Return on Total Assets

Figure 7 shows the Trend Line of Return on Total Assets of the NIC ASIA BANK LTD.
From the five fiscal year period from 2076/77 BS to 2080/81 BS. The higher ratio of bank is
1.25% which is in the fiscal year 2076/77 BS and lower ratio is 0.36% which is in the fiscal
year 2080/81. The ratio of the bank is in fluctuation trend over the five fiscal year period.

2. Return on Total Equity Ratio

The return on net ratio or return on equity ratio is measure to see the profitableness of the
owner's investment. The higher have used the resources of the shareholder equity and vice-
versa. So higher of return on shareholder equity is better for the owner of the firm as well as
the management.

Return on Equity (ROE) = Net Profit

 25

Shareholders' Equity

Table 8
Return on Equity (In Millions)
Fiscal Year Net Profit Change in Shareholder Change in Return on
Net Profit Equity Equity Equity(ROE)

2076/77 3099 2.41 17,250 15.49 17.97

2077/78 3259 5.16 19,000 10.14 17.15

2078/79 4215 29.33 26,114 37.44 16.14

2079/80 4650 10.32 29,526 13.06 15.74

2080/81 1380 -70.32 29,730 0.70 4.64

(Source: Annual Report of NIC ASIA BANK LTD.)

Table 8 shows the Return on Equity of the NIC ASIA BANK LTD. from the five fiscal year
period from 2076/77 BS to 2080/81 BS. The return on equity of the NIC ASIA BANK LTD
17.97%, 17.15%, 16.14%, 15.74% and 4.64%. The higher ratio of the bank is 17.97%, which
was in the fiscal year 2076/77 BS and lower ratio is 4.64% which was in the fiscal year
2080/81 BS respectively. The ratio of the bank is in declining trend over the five fiscal year
period.

Figure 8: Trend line of Return on Equity

 26

Figure 8, shows the Trend Line of Return on Equity of the NIC ASIA BANK LTD. from the
five fiscal year period from 2076/77 BS to 2080/81 BS. The higher ratio of the bank is
17.97%, which was in the fiscal year 2076/77 BS and lower ratio is 4.64% which was in the
fiscal year 2080/81 BS respectively. The ratio of the bank is in declining trend over the five
fiscal year period.

1.7.6 Net Profit Margin

Net profit margins shows the relationship between net incomes an operating income. It shows
proportion of net income with respect to its operating income. Higher the NPM indicates
better performance of the bank and vice-versa. The profit margin is calculated by dividing the
net profit by the total revenue and multiplying by 100.

Net Profit Margin (NPM) = Net Profit

Operating Income

Table 9
Net Profit Margin (In Millions)
Fiscal Year Net Profit Operating Profit NPM in %

2076/77 3099 4435 69.87

2077/78 3259 4798 67.92

 27

2078/79 4215 5965 70.66

2079/80 4650 6827 68.11

2080/81 1380 1638 84.24

(Note: Annual Report of NIC ASIA BANK LTD.)

Table 9 shows the Net Profit Margin of the NIC ASIA BANK LTD from the five fiscal year
period from 2076/77 BS to 2080/81 BS. The net profit margin of the bank are 69.87%,
67.92%, 70.66%, 68.11% and 84.24% respectively. The ratio of the bank is in fluctuation
trend over the five fiscal year period

Table 10
Operating Profit
Fiscal Year Operating Profit Change in Operating Profit

2076/77 4435 -1.75

2077/78 4798 8.18

2078/79 5965 24.32

2079/80 6827 14.45

2080/81 1658 -75.71

(Source: Annual Report of NIC ASIA BANK LTD.)

Table 10 shows the change in Operating profit of NIC ASIA of last five fiscal years. The
operating profit declines by 75.51%, which is highest for last five years.

Figure 9: Trend Line of Net Profit Margin

 28

Figure 9 shows the Trend Line of Net Profit Margin of the NIC ASIA BANK LTD. from the
five fiscal year period from 2076/77 BS to 2080/81 BS. The higher ratio of the bank is
70.66% which is in the fiscal year 2078/79 BS and lower ratio is 67.92% which is in the
fiscal year 207/78 BS. The ratio of the bank is in fluctuation trend over the five fiscal year
period.

2.2 Analysis of Results

Financial analysis tools are the tools used in the process of evaluating businesses, projects,
budgets, and other finance-related transactions to determine their performance
and suitability. Typically, financial analysis is used to analyze whether an entity is stable,
solvent, liquid, or profitable enough to warrant a monetary investment. Financial analysis
tools are highly helpful in evaluating the market and investing in a way so as to maximize the
profit from the investments made. Financial analysis tool is used for assessing the intrinsic
strengths and weaknesses of a business organization and subjective as well as objective
measurement of special processes. Moreover, financial tools are also helpful in evaluation of
a company’s overall return, the operating income, and the capital financing processes. To
examine the financial performance of NIC ASIA Bank, different ratio has been computed,
tabulated, and analyzed.

2.3 Findings
 29

From the presentation and analysis of data made above, many results of findings of the bank
have found. Some of the major findings are presented as follows:

1. The total loan and advances to total deposit ratio of NIC ASIA Bank for the last five
fiscal years are in fluctuating trend.
2. The CD Ratio represent the higher full employment of deposit which is higher in
fiscal year 2079/80 BS.
3. The higher ratio in return on total assets of the bank is 1.25% which is in the fiscal
year 2076/77 BS and lower ratio is 0.25% which is in the fiscal year 2079/80 BS.
4. The return on equity of the NIC ASIA BANK LTD are 17.97%, 17.15%, 16.14%,
15.74% and 4.64% over the five fiscal year period.
5. The higher ratio in return on equity of the bank is 17.97%, which was in the fiscal
year 2076/77 BS and lower ratio is 4.64% which was in the fiscal year 2080/81 BS
respectively.
6. The higher net profit margin of the bank is 70.66% in the fiscal year 2078/79 BS and
lower ratio is 67.92% in the fiscal year 2077/78 BS.

CHAPTER III
SUMMARY AND CONCLUSION

3.1 Summary
Banks are the pillars of the financial system of a country. Specially, in developing country
Nepal, proper banking system is very important, because the capital market is in progress in
Nepal. Commercial bank has now emerged as renowned and reliable financial institutions.
The economic development of any nation depends on how well it has been able to mobilize
economic and financial resources. Bank has not just evolved as an institution where public
can deposit money or acquire loan. As deposits are the source of any commercial banks as
bank operates by collecting deposit from all over the country and mobilizing it into lending
activities either directly by loaning or indirectly through capital market. Their major target is
to gather deposit from all over the country by attracting customer with their new and
fascinated product however in status deposit mobilization is critical issue for banks.
 30

Cognizant of this, in depth analysis is done based on secondary data. The research is intended
to address challenges and prospects of deposit mobilization commercial bank in Nepal. It is
concluded that deposit mobilization is the key focus of many banks. However, finding
deposit is becoming a challenging role for the banks in Nepal compatible with the growing
need of loans. Owing to the growing need for finances from new and existing businesses of
the country coupled the banks own desire to make profits from those finances, deposit
mobilization is becoming the critical success factor for banks. The fast-increasing number of
branches, the service modernization activities and the growing competition among Banks all
justify this fact.

Commercial banks are successful somewhat in attracting the deposits from the public and
thereby it is successful in developing the habit of savings among people. In the context of
NIC ASIA Bank, it is able to collect the deposit in increasing trend. Like other commercial
banks. The loan and advances of the bank is in increasing trend. This shows that bank are
able to mobilize the deposit in the form of loan and advance. The deposits mobilized have a
direct effect on the financial performance of commercial banks in Nepal. Above all it has
observed that the commercial bank of Nepal are unable to meet the requirement of people for
loan and advance, due to lack of sufficient deposit collected causes by cut throat competition,
lack of policy to bring un source money in market. The findings also indicate that a positive
change in deposits interest rate affects the level of deposits received and later on the
profitability of the bank increase in deposits every year reflects the commercial bank of Nepal
in mobilization of funds for deployment. With its prudent management and good governance,
banks deposit mobilizations is comparatively good and in increment status. Bank is firmly
committed to consolidating and maintaining its identity as a leading, innovative commercial
bank, with a proactive approach to the changing needs of the society. This is because of
number of products and services made available to its valuable customers. Today, with its
efficient, value-added services, sustained growth, consistent profitability and development of
new technologies.

3.2 Conclusion

In conclusion, the loan and advance have positive and significant relationship with both net
profit and total deposit mobilization. Thus, they move in the same direction. An increment
over total loan and advance as well as net profit would lead to an increment over total deposit
 31

and vice-versa. The position of profitability in commercial banks is satisfactory and found to
be increasing per year. Similarly, the effect of both net profit and loan and advance over total
deposit mobilization is significant and positive. Therefore, an effective mobilization of total
deposit would increase the profitability of commercial banks. However, loan and advance
also have positive effect on deposit mobilization of commercial banks which indicates proper
maintenance of loan and advance out of total deposit mobilization would increase
profitability of banks.

In the present context of Nepal, Credit and liquidity risk, management efficiency, the
diversification of business, the market concentration and the economic growth have influence
on bank profitability. The likely reasons for the weak performance of banks in this fiscal year
is excessive interest expenses, low interest income and high loan losses.

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 32

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