| Title : | Impact of interest rate on profitability of Nepalese commercial banks | | Material Type: | printed text | | Authors: | Biraj Singh, Author | | Publication Date: | 2016 | | Pagination: | 101p. | | Size: | GRP/Thesis | | Accompanying material: | 6/B | | Languages : | English | | Descriptors: | Interest rate
| | Class number: | 332.820 | | Abstract: | Financial liberalization in many developing countries started in the 1980’s and it involved reduction and removal of in interest rate control. It also entailed new laws, institutional reforms and regulations that are governing the financial sector, as well as restructuring and privatization of banks (Chirwa and Mlachila, 2004). Efficient financial intermediation is important because it mobilizes resources required for growth and development. Ghasemi and Rostami (2015) concluded that the economic activities including productive and unproductive, value adding or non-value adding, socially useful or useless are needed to access the loan and credit from banks, to be successful.
The major purpose of this study is to identify the impact of interest rate on profitability of Nepalese commercial banks. The study has the following specific objectives is to analyze the structure and pattern of return on assets, return on equity, loan rate, deposit rate and bank rate, to evaluate the effect of Treasury bill rate and deposit rate for on profitability, to examine the impact of reverse repo rate and bank rate on profitability and to identify the structure and pattern of profitability and its determinants in Nepalese commercial banks.
This study based on the secondary of data which were gather for a sample of 22 commercial banks of Nepal within the time period from 2009/10 to 2013/14, leading to the total of 110 observations. The secondary data have been obtain from Nepal Rastra Bank bulletin published by central bank of Nepal, annual audited financial statements and websites of respective commercial banks. The research design adopted in this study is causal comparative types as it deals with relationship of bank specific factors like Treasury bill rate, bank rate, reverse repo rate, loan rate and deposit rate and control variables capital adequacy ratio and liquidity with dependent variable such as: return on assets and return on equity. The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The result shows that there is positive relationship of loan rate and reserve repo rate with return on assets which indicates higher the loan rate and reserve repo rate, higher would be the return on asset. Similarly, the study observed positive relationship of capital adequacy and liquidity with return on asset and return on equity which indicates that an increase in the capital adequacy and liquidity lead to an increase in the return on asset and return on equity. The result shows that deposit rate and Treasury bill rate are negatively correlated with return on assets and return on equity, which indicates that higher the deposit rate and Treasury bill rate, lower would be the return on asset and return on equity. Likewise, bank rate has negative relationship with return on asset and return on equity which indicates that an increase in the bank rate leads to a decrease in the return on assets and return on equity. The beta coefficient is positive for capital adequacy ratio, liquidity, loan rate and reverse repo rate with return on assets and return on equity whereas the beta coefficient is negative for bank rate, Treasury bill rate and deposit rate with return on assets and return on equity. The beta coefficient issignificant at 5 percent level of significance.
The major conclusion of the study is that higher the capital adequacy ratio, higher would be net return on assets and return on equity of banks. Similarly, higher the loan rate, higher would be return on assets and return on equity. Similarly, increase in liquidity of bank increases return on assets of banks. Likewise, it also shows that higher the deposit rate, lower would be return on assets and return on equity.
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Impact of interest rate on profitability of Nepalese commercial banks [printed text] / Biraj Singh, Author . - 2016 . - 101p. ; GRP/Thesis + 6/B. Languages : English | Descriptors: | Interest rate
| | Class number: | 332.820 | | Abstract: | Financial liberalization in many developing countries started in the 1980’s and it involved reduction and removal of in interest rate control. It also entailed new laws, institutional reforms and regulations that are governing the financial sector, as well as restructuring and privatization of banks (Chirwa and Mlachila, 2004). Efficient financial intermediation is important because it mobilizes resources required for growth and development. Ghasemi and Rostami (2015) concluded that the economic activities including productive and unproductive, value adding or non-value adding, socially useful or useless are needed to access the loan and credit from banks, to be successful.
The major purpose of this study is to identify the impact of interest rate on profitability of Nepalese commercial banks. The study has the following specific objectives is to analyze the structure and pattern of return on assets, return on equity, loan rate, deposit rate and bank rate, to evaluate the effect of Treasury bill rate and deposit rate for on profitability, to examine the impact of reverse repo rate and bank rate on profitability and to identify the structure and pattern of profitability and its determinants in Nepalese commercial banks.
This study based on the secondary of data which were gather for a sample of 22 commercial banks of Nepal within the time period from 2009/10 to 2013/14, leading to the total of 110 observations. The secondary data have been obtain from Nepal Rastra Bank bulletin published by central bank of Nepal, annual audited financial statements and websites of respective commercial banks. The research design adopted in this study is causal comparative types as it deals with relationship of bank specific factors like Treasury bill rate, bank rate, reverse repo rate, loan rate and deposit rate and control variables capital adequacy ratio and liquidity with dependent variable such as: return on assets and return on equity. The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The result shows that there is positive relationship of loan rate and reserve repo rate with return on assets which indicates higher the loan rate and reserve repo rate, higher would be the return on asset. Similarly, the study observed positive relationship of capital adequacy and liquidity with return on asset and return on equity which indicates that an increase in the capital adequacy and liquidity lead to an increase in the return on asset and return on equity. The result shows that deposit rate and Treasury bill rate are negatively correlated with return on assets and return on equity, which indicates that higher the deposit rate and Treasury bill rate, lower would be the return on asset and return on equity. Likewise, bank rate has negative relationship with return on asset and return on equity which indicates that an increase in the bank rate leads to a decrease in the return on assets and return on equity. The beta coefficient is positive for capital adequacy ratio, liquidity, loan rate and reverse repo rate with return on assets and return on equity whereas the beta coefficient is negative for bank rate, Treasury bill rate and deposit rate with return on assets and return on equity. The beta coefficient issignificant at 5 percent level of significance.
The major conclusion of the study is that higher the capital adequacy ratio, higher would be net return on assets and return on equity of banks. Similarly, higher the loan rate, higher would be return on assets and return on equity. Similarly, increase in liquidity of bank increases return on assets of banks. Likewise, it also shows that higher the deposit rate, lower would be return on assets and return on equity.
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