| Title : | Credit growth and response to capital requirement: evidence from Nepalese commercial banks | | Material Type: | printed text | | Authors: | Ramesh Karki, Author | | Publication Date: | 2012 | | Pagination: | 133p. | | Size: | GRP/Thesis | | Accompanying material: | 1/B | | General note: | Includes bibliography | | Languages : | English | | Descriptors: | Credit
Credit control
Financial economics
Financial institutions
Monetary policy
| | Keywords: | 'credit growth financial economics commercial banks banks Nepal credit capital regulation' | | Class number: | 332.709 | | Abstract: | Bank is a financial institution, which deals on money. The basic commercial and industrial lending process remains the lifeblood of commercial banks and other banking institutions. Prudential regulation often imposes regulatory capital requirements in order to create the necessary cushion to protect banks against unexpected losses and ultimately failure. Minimum requirement of capital changes the behavior of banks to shrink their balance sheets and in effect, it creates a slowdown in the growth of economy. Nepal Rastra Bank (NRB) has developed and enforced Capital Adequacy Requirements based on the international practices with appropriate level of customization based on domestic state of market developments. NRB has already expressed its intention to adopt the Basel II framework albeit in a simplified form. All the Nepalese Commercial Banks has been adopting the Capital Adequacy Framework 2007 (Updated July 2008) by mid July 2008 (Fiscal Year 2065/066). This study is small attempt to assess and analyzed the impact of this framework on credit growth of banks.
The main issue of this study is to analyze the relationship and impact of capital standard on credit growth. The study basically deals and tries to establish link between bank capital standards and banks’ loan supply.
This study has employed descriptive, correlation and causal comparative research designs to deal with the fundamental issues associated with credit growth and response to capital requirements in the context of Nepalese commercial banks. Besides, an effort has also been made to describe credit growth, capital adequacy, and other key balance sheet indicators of 17 commercial banks consisting of 136 observations during fiscal year 2004/05 through 2011/12 by using descriptive statistics. This study is based on both primary and secondary sources of data. The secondary sources of data have been employed to understand the form of observed relation and to analyze predictive power of firm specific and macroeconomic variables in explaining credit growth and response to capital requirements. The primary sources of data have been used to assess the opinion of respondents with respect to minimum capital requirements and its impacts on banks portfolio basically credit in Nepal and to analyze their perceptions with respect to factors affecting credit growth and regulatory capital requirements.
Based on the findings this study concludes that the larger sized banks have lower deposit to total assets, lower credit/total assets, higher investment/total assets, lower investment in Government Security/total investment, lower credit/deposit and highest investment/deposit ratio. Similarly, banks having higher credit growth rate have higher deposit/total assets, higher credit/total assets, lower investment/total assets, lower investment in government securities/total investment higher credit/deposit and lower investment/deposit ratio. This study also concluded that higher capital adequacy ratio banks have high deposit/total assets, high credit/total assets, high investment/total assets, low investment in government securities/total investment, high credit/deposit and high investment/deposit ratio.
This study also concludes that the capital adequacy framework and capital adequacy ratio have significant relationship and higher CAR banks have the lower non-performing loans. The macroeconomic variable (GDP growth rate) has no any significant relation to determine the growth of credit in Nepal. However, if credit to total assets is increased the investment to total assets ratio also increased but the deposit to total assets, investment in government securities to total investment and credit to deposit ratios are decreased. The estimated and analyzed results show the implementation of capital adequacy framework seems to have much contribution to strengthen and increase the capital base in the context of Nepal. The study results support the minimum capital requirement norm significantly influences the credit growth. This implies that the credit growth is determined by capital regulation of countries.
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Credit growth and response to capital requirement: evidence from Nepalese commercial banks [printed text] / Ramesh Karki, Author . - 2012 . - 133p. ; GRP/Thesis + 1/B. Includes bibliography Languages : English | Descriptors: | Credit
Credit control
Financial economics
Financial institutions
Monetary policy
| | Keywords: | 'credit growth financial economics commercial banks banks Nepal credit capital regulation' | | Class number: | 332.709 | | Abstract: | Bank is a financial institution, which deals on money. The basic commercial and industrial lending process remains the lifeblood of commercial banks and other banking institutions. Prudential regulation often imposes regulatory capital requirements in order to create the necessary cushion to protect banks against unexpected losses and ultimately failure. Minimum requirement of capital changes the behavior of banks to shrink their balance sheets and in effect, it creates a slowdown in the growth of economy. Nepal Rastra Bank (NRB) has developed and enforced Capital Adequacy Requirements based on the international practices with appropriate level of customization based on domestic state of market developments. NRB has already expressed its intention to adopt the Basel II framework albeit in a simplified form. All the Nepalese Commercial Banks has been adopting the Capital Adequacy Framework 2007 (Updated July 2008) by mid July 2008 (Fiscal Year 2065/066). This study is small attempt to assess and analyzed the impact of this framework on credit growth of banks.
The main issue of this study is to analyze the relationship and impact of capital standard on credit growth. The study basically deals and tries to establish link between bank capital standards and banks’ loan supply.
This study has employed descriptive, correlation and causal comparative research designs to deal with the fundamental issues associated with credit growth and response to capital requirements in the context of Nepalese commercial banks. Besides, an effort has also been made to describe credit growth, capital adequacy, and other key balance sheet indicators of 17 commercial banks consisting of 136 observations during fiscal year 2004/05 through 2011/12 by using descriptive statistics. This study is based on both primary and secondary sources of data. The secondary sources of data have been employed to understand the form of observed relation and to analyze predictive power of firm specific and macroeconomic variables in explaining credit growth and response to capital requirements. The primary sources of data have been used to assess the opinion of respondents with respect to minimum capital requirements and its impacts on banks portfolio basically credit in Nepal and to analyze their perceptions with respect to factors affecting credit growth and regulatory capital requirements.
Based on the findings this study concludes that the larger sized banks have lower deposit to total assets, lower credit/total assets, higher investment/total assets, lower investment in Government Security/total investment, lower credit/deposit and highest investment/deposit ratio. Similarly, banks having higher credit growth rate have higher deposit/total assets, higher credit/total assets, lower investment/total assets, lower investment in government securities/total investment higher credit/deposit and lower investment/deposit ratio. This study also concluded that higher capital adequacy ratio banks have high deposit/total assets, high credit/total assets, high investment/total assets, low investment in government securities/total investment, high credit/deposit and high investment/deposit ratio.
This study also concludes that the capital adequacy framework and capital adequacy ratio have significant relationship and higher CAR banks have the lower non-performing loans. The macroeconomic variable (GDP growth rate) has no any significant relation to determine the growth of credit in Nepal. However, if credit to total assets is increased the investment to total assets ratio also increased but the deposit to total assets, investment in government securities to total investment and credit to deposit ratios are decreased. The estimated and analyzed results show the implementation of capital adequacy framework seems to have much contribution to strengthen and increase the capital base in the context of Nepal. The study results support the minimum capital requirement norm significantly influences the credit growth. This implies that the credit growth is determined by capital regulation of countries.
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