| Title : | Impact of foreign bank penetration on Nepalese commercial banks | | Material Type: | printed text | | Authors: | Smita Shakya, Author | | Publication Date: | 2014 | | Pagination: | 91p. | | Size: | GRP/Thesis | | Accompanying material: | 2/B | | General note: | Including bibliography
| | Languages : | English | | Descriptors: | Banks
Banks and banking
Banks and banking-Foreign
Commercial banks
Nepal
| | Keywords: | 'foreign bank penetration banks banks and banking commercial banks nepal' | | Class number: | 346.730 | | Abstract: | Nepalese financial system has seen a tremendous growth in terms of number of institutions and in terms of products and services. Industry's growth coupled with the rapid development in information and communication technology not only increased the banking products to the consumers but also fostered the competition and increased the complexities, risks and challenges in the banking industry. There are limited numbersof foreign banks in Nepal and there is unclear view about whether entering of foreign banks, including joint venture, helps to improve overall performance of bankingsector as well as to spillover some benefit to domestic commercial banks in Nepal.The major objective of this study is to examine the impact of foreign bank penetrationon Nepalese commercial banks.
The review of literature has shown that the foreign banks penetration influenced interest rate spreads, operating expenses, profitability and risk of domestic bank.Besides examining effect of foreign presence, the literatureincluded two sets of variables to control for other determinants of domestic banks performance. While the first set consists of bank variables, the second set of variables includes general economic indicators.Based on the literature reviews, this study has proposed the conceptual framework identifyingforeign presence,bank variables and general economic indicatorsas the most important factors that determine the performance evaluation of commercial banks in the context of Nepal.
This study is based on primary as well as secondary data. For the purpose of study 14 commercial banks which are established before 2000/01are divided into three strata (government owned, joint venture and non-joint venture) is taken as sample.Required data of dependent variables (interest rate spread, accounting profitability, operating expenses and risk) and independent variables(entry number, foreign ownership, non-interest earning assets, equity levels, operating expenses, relative bank size, inflation, capital scarcity, reserve requirements, economic growth) are collected from various secondary sources for the period of 2001/02 to 2011/12.Primary survey questionnaire is conducted in order to assess the opinion impact of foreign bank presence on Nepalese commercial banks. Likewise, multiple regression analysis and correlation analysis are used to examine the relationship between bank performance variables and foreign presence variables, bank specific variables and general economic variables.
This study concludes that the impact of foreign bank penetration have strong impact on operating expenses and risk whereas foreign bank penetration have no impact on interest rate spread and profitability in context of Nepalese commercial banks. Foreign entry and foreign ownership have positive and significant impact on operating expenses of Nepalese commercial bank. Likewise, the penetration of foreign bank has positive and significant impact on risk.The result also shows that operating expenses, relative bank size are the most dominant variable that affects interest rate spread. Likewise non-interest earning assets and relative bank size are the most influencing factor of operating expenses. Similarly, GDP and equity level has strong impact on both accounting profitability and risk.
Based on the primary survey result, most of the employees believe that that the entry of foreign banks influence domestic banks to induce good banking practice whereas it also reduces credibility of local banks.Likewise, the primary survey results most employees agrees with the statement that foreign presence brings opportunity to domestic banks and suggests that central bank should allow foreign banks to conduct retail banking to bring competition to domestic banks. Similarly, the employees suggested that domestic banks should modernize their banking system to increase the efficiency of the banks.
The recommendation put forward by this study is that domestic banks are suggested to influence in corporate governance of the banking system and culture of effective product development and operation. Similarly commercial banks are suggested to be vigilant and quick on adapting to the advanced technologies in order to compete with foreign banks without lacking behind. The major limitation of this study lies in the fact that this study hasexcluded the time period, particularly from the beginning of liberalization of foreign ownership in mid-1980's, after the issuance of the new regulation due to lack of financial data the study has The study remains enough ground for future researcher in the same topic. The future studies can be carried out by selecting other financial institutions like development banks, public banks and finance companies to grab the wider view of impact of foreign bank penetration on Nepalese commercial banks.
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Impact of foreign bank penetration on Nepalese commercial banks [printed text] / Smita Shakya, Author . - 2014 . - 91p. ; GRP/Thesis + 2/B. Including bibliography
Languages : English | Descriptors: | Banks
Banks and banking
Banks and banking-Foreign
Commercial banks
Nepal
| | Keywords: | 'foreign bank penetration banks banks and banking commercial banks nepal' | | Class number: | 346.730 | | Abstract: | Nepalese financial system has seen a tremendous growth in terms of number of institutions and in terms of products and services. Industry's growth coupled with the rapid development in information and communication technology not only increased the banking products to the consumers but also fostered the competition and increased the complexities, risks and challenges in the banking industry. There are limited numbersof foreign banks in Nepal and there is unclear view about whether entering of foreign banks, including joint venture, helps to improve overall performance of bankingsector as well as to spillover some benefit to domestic commercial banks in Nepal.The major objective of this study is to examine the impact of foreign bank penetrationon Nepalese commercial banks.
The review of literature has shown that the foreign banks penetration influenced interest rate spreads, operating expenses, profitability and risk of domestic bank.Besides examining effect of foreign presence, the literatureincluded two sets of variables to control for other determinants of domestic banks performance. While the first set consists of bank variables, the second set of variables includes general economic indicators.Based on the literature reviews, this study has proposed the conceptual framework identifyingforeign presence,bank variables and general economic indicatorsas the most important factors that determine the performance evaluation of commercial banks in the context of Nepal.
This study is based on primary as well as secondary data. For the purpose of study 14 commercial banks which are established before 2000/01are divided into three strata (government owned, joint venture and non-joint venture) is taken as sample.Required data of dependent variables (interest rate spread, accounting profitability, operating expenses and risk) and independent variables(entry number, foreign ownership, non-interest earning assets, equity levels, operating expenses, relative bank size, inflation, capital scarcity, reserve requirements, economic growth) are collected from various secondary sources for the period of 2001/02 to 2011/12.Primary survey questionnaire is conducted in order to assess the opinion impact of foreign bank presence on Nepalese commercial banks. Likewise, multiple regression analysis and correlation analysis are used to examine the relationship between bank performance variables and foreign presence variables, bank specific variables and general economic variables.
This study concludes that the impact of foreign bank penetration have strong impact on operating expenses and risk whereas foreign bank penetration have no impact on interest rate spread and profitability in context of Nepalese commercial banks. Foreign entry and foreign ownership have positive and significant impact on operating expenses of Nepalese commercial bank. Likewise, the penetration of foreign bank has positive and significant impact on risk.The result also shows that operating expenses, relative bank size are the most dominant variable that affects interest rate spread. Likewise non-interest earning assets and relative bank size are the most influencing factor of operating expenses. Similarly, GDP and equity level has strong impact on both accounting profitability and risk.
Based on the primary survey result, most of the employees believe that that the entry of foreign banks influence domestic banks to induce good banking practice whereas it also reduces credibility of local banks.Likewise, the primary survey results most employees agrees with the statement that foreign presence brings opportunity to domestic banks and suggests that central bank should allow foreign banks to conduct retail banking to bring competition to domestic banks. Similarly, the employees suggested that domestic banks should modernize their banking system to increase the efficiency of the banks.
The recommendation put forward by this study is that domestic banks are suggested to influence in corporate governance of the banking system and culture of effective product development and operation. Similarly commercial banks are suggested to be vigilant and quick on adapting to the advanced technologies in order to compete with foreign banks without lacking behind. The major limitation of this study lies in the fact that this study hasexcluded the time period, particularly from the beginning of liberalization of foreign ownership in mid-1980's, after the issuance of the new regulation due to lack of financial data the study has The study remains enough ground for future researcher in the same topic. The future studies can be carried out by selecting other financial institutions like development banks, public banks and finance companies to grab the wider view of impact of foreign bank penetration on Nepalese commercial banks.
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