| Title : | Determinants of bank liquidity in Nepalese commercial banks: A comparative study of public banks, joint venture banks and private banks | | Material Type: | printed text | | Authors: | Kiran Chaulagain, Author | | Publication Date: | 2018 | | Pagination: | 91p. | | Size: | GRP/Thesis | | Accompanying material: | 8/B | | Languages : | English | | Descriptors: | Bank liquidity
| | Class number: | 332.632 | | Abstract: | Banks are financial institutions that play intermediary role in the economy through channeling financial resources from surplus (depositors) economic units to deficit (borrowers) units. One of the main functions of commercial banks is the availing of funds (monetary) to its customers: for a bank to be in a position to do so, it must be in a healthy liquidity position.Liquidity is the availability of cash in the amount and at the time needed at a reasonable cost. Liquidity management is one of the major functions of banking institutions because, in its absence, banks may collapse. So, it is necessary to identify determinants of liquidity in Nepalese context. Numerous recent empirical studies aimed to test determinants of bank’s liquidity were studied by various researchers in different countries. All these previous studies showed that the bank’s liquidity is influenced by both bank specific and macroeconomic factors. Bank specific factors consist of bank size, capital adequacy, non-performing loan, deposit to asset ratio, profitability etc. while macroeconomic factors include GDP growth rate, treasury bill rate, inflation rate, financial crisis etc.However, those factors which have statistically significant impact on liquidity in one country may not be replicated in another country.
The major objective of this study is to identify the determinants that affect the liquidity of commercial banks of Nepal and comparative study of determinants of liquidity of Nepalese commercial banks i.e. public banks, joint venture banks and private banks.The study is based on secondary data of 23 commercial banks with 138 observations for the period of 2009/10 to 2014/15. The main source of data include various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of selected commercial banks. The pooled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is descriptive and causal comparative research design in order to analyze the determinants of liquidity in Nepalese commercial banks.
The result shows that NCC has highest liquid asset to total asset ratio (35.11times) and ADB has highest total loan to total deposit (105.45 percent) among the selected commercial banks throughout the study period. Similarly, the average capital adequacy ratio is highest for JBL (28.15 percent), average non-performing loan is highest for JBL (28.15 percent), average deposit to asset ratio is highest for NBL (91.55 percent), treasury bill rate is highest in year 2011 (8.35 percent), GDP growth rate is highest in year 2014 (5.40 percent), inflation rate is highest in year 2013 (9.9 percent) and average total asset is highest for NBL (105,571 million).
The descriptive statistics for the public banks reveals that the average total liquid asset to total asset is 3.07 times,average total loan to total deposit is 72.71 percent, average capital adequacy ratio is 2.57 percent, average non-performing loan ratio is 6.46 percent, average deposit to asset ratio is 82.53 percent, average size of public banks is 25.08 million. Similarly, the descriptive statistics for the joint venture banks reveals that the average total liquid asset to total asset is 10.58 times, average total loan to total deposit is 69.08 percent, average capital adequacy ratio is 11.84 percent, average non-performing loan ratio is 2.0 percent, average deposit to asset ratio is 86.93 percent, average size of joint venture banks is 24.62 million. Likewise, the descriptive statistics for the private banks reveals that that the average total liquid asset to total asset is 17.73 times, average total loan to total deposit is 81.75 percent, average capital adequacy ratio is 14.40 percent, average non-performing loan ratio is 1.64 percent, average deposit to asset ratio is 85.31 percent, average size of private banks is 23.09 million.The descriptive analysis shows that the average treasury bill rate, GDP growth rate and inflation rate are 3.90 percent, 4.32 percent and 8.95 percent respectively for the study period.
The correlation matrix of public bank shows that capital adequacy ratio, deposit to asset ratio, GDP growth rate and bank size are positively related to total liquid asset to total asset ratio (L1) whereas, non-performing loan, treasury bill rate and inflation rate are negatively relatedto total liquid asset to total asset ratio. The result also revealed that non-performing loan and treasury bill rate are negatively related with total loan to total deposit ratio (L2). However, capital adequacy ratio, deposit to asset ratio, GDP growth rate, inflation rate and bank size are positively related to total loan to total deposit ratio.The correlation matrix of joint venture bank reveals that capital adequacy ratio,non-performing loan, deposit to asset ratio, inflation rate and bank size have negative relationship with total liquid asset to total asset and treasury bill rate, GDP growth rate have a positive relation with total liquid asset to total asset. The result also reveals that capital adequacy ratio, non-performing loan, deposit asset ratio, GDP rate and bank size are negatively related to loans to deposit ratio. However, treasury bill rate and inflation rate are positively related to loans to deposit ratio.The correlation matrix of private banks shows the positive relation of capital adequacy ratio and GDP growth rate with total liquid asset to total asset ratio whereas non-performing loan, treasury bill rate, inflation rate and bank size reveals the negative relation with total liquid asset to total asset. The result also shows that capital adequacy ratio, treasury bill rate, and inflation rate are positively related to loans to deposit ratio. However, the non-performing loan, deposit to assets ratio, GDP rate and bank size are negatively related to loans to deposit ratio.
The regression result shows that the beta coefficients for capital adequacy ratio are positive and significant with liquidity (L1) for public and private banks.It indicates that capital adequacy ratio has positive impact on liquidity ratio.Likewise, beta coefficients for deposit asset ratio and GDP growth rate are positive and significant with liquidity (L1) for public, private and joint venture banks. It means deposit asset ratio and GDP growth rate are positive and significant with liquidity (L1). However, the beta coefficients for non-performing loans, treasury bill rate and inflation rate are negative and significant with liquidity for private, public and joint venture banks. It indicates that nonperforming loans, treasury bill rate and inflation rate have negative impact on liquidity. The result also shows that the beta coefficients for bank size are negative with liquidity ratio for joint venture and private banks. It indicates that bank size has negative impact on liquidity ratio. The regression resultalso shows that the beta coefficients for capital adequacy ratio are positive and significant with liquidity (L2) for public and private banks. It means that capital adequacy ratio has positive impact on liquidity. Likewise, beta coefficients for deposit asset ratio and inflation rate are positive and significant with liquidity (L2) for public, private and joint venture banks. It means deposit asset ratio and inflation rate are positive and significant with liquidity (L2). However, the beta coefficients for non-performing loans, treasury bill rate, GDP growth rate and bank size are negative and significant with liquidity for private, public and joint venture banks. It indicates that nonperforming loans, treasury bill rate, GDP growth rate and bank size have negative impact on liquidity.
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Determinants of bank liquidity in Nepalese commercial banks: A comparative study of public banks, joint venture banks and private banks [printed text] / Kiran Chaulagain, Author . - 2018 . - 91p. ; GRP/Thesis + 8/B. Languages : English | Descriptors: | Bank liquidity
| | Class number: | 332.632 | | Abstract: | Banks are financial institutions that play intermediary role in the economy through channeling financial resources from surplus (depositors) economic units to deficit (borrowers) units. One of the main functions of commercial banks is the availing of funds (monetary) to its customers: for a bank to be in a position to do so, it must be in a healthy liquidity position.Liquidity is the availability of cash in the amount and at the time needed at a reasonable cost. Liquidity management is one of the major functions of banking institutions because, in its absence, banks may collapse. So, it is necessary to identify determinants of liquidity in Nepalese context. Numerous recent empirical studies aimed to test determinants of bank’s liquidity were studied by various researchers in different countries. All these previous studies showed that the bank’s liquidity is influenced by both bank specific and macroeconomic factors. Bank specific factors consist of bank size, capital adequacy, non-performing loan, deposit to asset ratio, profitability etc. while macroeconomic factors include GDP growth rate, treasury bill rate, inflation rate, financial crisis etc.However, those factors which have statistically significant impact on liquidity in one country may not be replicated in another country.
The major objective of this study is to identify the determinants that affect the liquidity of commercial banks of Nepal and comparative study of determinants of liquidity of Nepalese commercial banks i.e. public banks, joint venture banks and private banks.The study is based on secondary data of 23 commercial banks with 138 observations for the period of 2009/10 to 2014/15. The main source of data include various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of selected commercial banks. The pooled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is descriptive and causal comparative research design in order to analyze the determinants of liquidity in Nepalese commercial banks.
The result shows that NCC has highest liquid asset to total asset ratio (35.11times) and ADB has highest total loan to total deposit (105.45 percent) among the selected commercial banks throughout the study period. Similarly, the average capital adequacy ratio is highest for JBL (28.15 percent), average non-performing loan is highest for JBL (28.15 percent), average deposit to asset ratio is highest for NBL (91.55 percent), treasury bill rate is highest in year 2011 (8.35 percent), GDP growth rate is highest in year 2014 (5.40 percent), inflation rate is highest in year 2013 (9.9 percent) and average total asset is highest for NBL (105,571 million).
The descriptive statistics for the public banks reveals that the average total liquid asset to total asset is 3.07 times,average total loan to total deposit is 72.71 percent, average capital adequacy ratio is 2.57 percent, average non-performing loan ratio is 6.46 percent, average deposit to asset ratio is 82.53 percent, average size of public banks is 25.08 million. Similarly, the descriptive statistics for the joint venture banks reveals that the average total liquid asset to total asset is 10.58 times, average total loan to total deposit is 69.08 percent, average capital adequacy ratio is 11.84 percent, average non-performing loan ratio is 2.0 percent, average deposit to asset ratio is 86.93 percent, average size of joint venture banks is 24.62 million. Likewise, the descriptive statistics for the private banks reveals that that the average total liquid asset to total asset is 17.73 times, average total loan to total deposit is 81.75 percent, average capital adequacy ratio is 14.40 percent, average non-performing loan ratio is 1.64 percent, average deposit to asset ratio is 85.31 percent, average size of private banks is 23.09 million.The descriptive analysis shows that the average treasury bill rate, GDP growth rate and inflation rate are 3.90 percent, 4.32 percent and 8.95 percent respectively for the study period.
The correlation matrix of public bank shows that capital adequacy ratio, deposit to asset ratio, GDP growth rate and bank size are positively related to total liquid asset to total asset ratio (L1) whereas, non-performing loan, treasury bill rate and inflation rate are negatively relatedto total liquid asset to total asset ratio. The result also revealed that non-performing loan and treasury bill rate are negatively related with total loan to total deposit ratio (L2). However, capital adequacy ratio, deposit to asset ratio, GDP growth rate, inflation rate and bank size are positively related to total loan to total deposit ratio.The correlation matrix of joint venture bank reveals that capital adequacy ratio,non-performing loan, deposit to asset ratio, inflation rate and bank size have negative relationship with total liquid asset to total asset and treasury bill rate, GDP growth rate have a positive relation with total liquid asset to total asset. The result also reveals that capital adequacy ratio, non-performing loan, deposit asset ratio, GDP rate and bank size are negatively related to loans to deposit ratio. However, treasury bill rate and inflation rate are positively related to loans to deposit ratio.The correlation matrix of private banks shows the positive relation of capital adequacy ratio and GDP growth rate with total liquid asset to total asset ratio whereas non-performing loan, treasury bill rate, inflation rate and bank size reveals the negative relation with total liquid asset to total asset. The result also shows that capital adequacy ratio, treasury bill rate, and inflation rate are positively related to loans to deposit ratio. However, the non-performing loan, deposit to assets ratio, GDP rate and bank size are negatively related to loans to deposit ratio.
The regression result shows that the beta coefficients for capital adequacy ratio are positive and significant with liquidity (L1) for public and private banks.It indicates that capital adequacy ratio has positive impact on liquidity ratio.Likewise, beta coefficients for deposit asset ratio and GDP growth rate are positive and significant with liquidity (L1) for public, private and joint venture banks. It means deposit asset ratio and GDP growth rate are positive and significant with liquidity (L1). However, the beta coefficients for non-performing loans, treasury bill rate and inflation rate are negative and significant with liquidity for private, public and joint venture banks. It indicates that nonperforming loans, treasury bill rate and inflation rate have negative impact on liquidity. The result also shows that the beta coefficients for bank size are negative with liquidity ratio for joint venture and private banks. It indicates that bank size has negative impact on liquidity ratio. The regression resultalso shows that the beta coefficients for capital adequacy ratio are positive and significant with liquidity (L2) for public and private banks. It means that capital adequacy ratio has positive impact on liquidity. Likewise, beta coefficients for deposit asset ratio and inflation rate are positive and significant with liquidity (L2) for public, private and joint venture banks. It means deposit asset ratio and inflation rate are positive and significant with liquidity (L2). However, the beta coefficients for non-performing loans, treasury bill rate, GDP growth rate and bank size are negative and significant with liquidity for private, public and joint venture banks. It indicates that nonperforming loans, treasury bill rate, GDP growth rate and bank size have negative impact on liquidity.
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