Title :	Impact of bank specific variables and macroeconomic variables on deposit and lending of Nepalese commercial banks
Material Type:	printed text
Authors:	Karun Bhandari, Author
Publication Date:	2016
Pagination:	82p.
Size:	GRP/Thesis
Accompanying material:	6/B
Languages :	English
Descriptors:	Macroeconomics
Class number:	332.632
Abstract:	Bank acts as an intermediary for transformation of fund from surplus unit to deficit unit in an effective and efficient manner. Banks collect deposits from general public providing certain rate of interest in order to provide loans to different needy persons or business houses at higher interest rate. In this way financial institutions makes profit and profit is essential for the survival of growth (Ojwiya, 2009). Lending of funds constitutes the largest single income-earning asset in the portfolio of most deposit money banks. Hence, banks deploy huge resources to estimate, monitor and manage the quality of their loan portfolio (Olokoyo, 2011). Deposits are the most secured and liquid financial assets available, which can accelerate bank lending to various sectors. In this nexus, it is important to state that deposit mobilization behavior in any economy is closely tied with the lending behaviors and as a consequence an analysis of the determinants of bank deposits is imperative (Deaton, 1991). Lending may be on short, medium or long-term basis which is one of the services that banks do render to their customers. In other words, banks grant loans and advances to individuals, business organizations as well as government in order to enable them embark on investment and development activities as a means of aiding their growth in particular or contributing toward the economic development of a country (Felicia, 2011). Deposit and lending activity plays a vital role for success of financial institution. There are different bank specific as well as macroeconomic factors influencing bank deposit and lending. Macroeconomic factors effecting bank lending and deposit are real interest rate, gross domestic product, exchange rate and inflation whereas bank specific factor such as net income, volume of deposit and lending, borrowing, investment and spread rate. All these variables have impact on bank deposit and lending activities of financial institutions (Kraft, 2000). Bernanke et al. (1991) showed a positive relationship between loan growth at individual banks and investment ratios. Cole et al. (2004) revealed that US commercial banks loan growth was more responsive to investment ratios during and after the recent financial crisis but not at other times. Pruteanu and Podpiera (2007) analyzed the impact of gross domestic product growth on growth rate of total loans in Cezch banks The results showed strong positive effect of GDP growth on the growth rate of loans.Bank investment have positive relation with bank lending (Mccarthyet al.2010). Kassri and Kassim (2009) found positive relationship between the level of Islamic bank deposit and interest rate. Bhimisetty and Samantaray (2013) revealed bank deposit have positive relationship with bank investments. Muhammad et al. (2011) found negative relationship for both inflation and base lending rate on bank deposits. Masson et al. (1998) revealed that GDP growth and changes in the terms of trade have positive relationship with the savings behavior in OECD countries. The study further indicates that interest rates had no significant effect on private or national saving. The study found that inflation rate has negative relationship with saving. The major purpose of this study is to analyze the impact of bank specific variables and macroeconomic variables on bank deposit and lending of Nepalese commercial banks. The specific objectives of this study are: a)to determine the impact of macroeconomic variables (GDP growth, inflation and per capita income) on deposit activity of commercial banks b) to analyze the impact of bank specific variables (net income, interest rate, borrowing, interest spread, investment) on lending of Nepalese commercial banks. c)to identify the impact of macroeconomic variables (GDP growth, inflation and per capita income) on deposit activity of commercial banks d) to evaluate the impact of bank specific variables (net income, interest rate, borrowing, interest spread, investment) on lending of Nepalese commercial banks. This study has employed descriptive research design and causal comparative research design to deal with issues associated with factors influencing bank deposit and lending of the commercial banks in the context of Nepal. The descriptive research design has been adopted for fact finding and search adequate information about impact of firm-specific and macroeconomic variables on deposit and lending of Nepalese commercial banks. The secondary data for the study are collected from various sources such as annual report of the sample banks, NRB data base, books and journals. The result shows that there is positive relationship of bank deposit with net income, investment, interest rate spread, inflation, GDP growth rate and per capita income. Likewise, the result shows that there is negative relationship of bank deposits with borrowing. The result also shows that there is positive relationship of bank loan and advances with net income, bank investment, GDP growth rate and per capita income whereas there is negative relationship of bank lending with inflation, bank borrowing and interest rate spread. The study reveals that net income, interest rate spread, bank investment and gross domestic product growth rate are among the significant variables that affect the deposit and lending in the context of Nepalese commercial banks.

Impact of bank specific variables and macroeconomic variables on deposit and lending of Nepalese commercial banks [printed text] / Karun Bhandari, Author . - 2016 . - 82p. ; GRP/Thesis + 6/B.
Languages : English

Descriptors:	Macroeconomics
Class number:	332.632
Abstract:	Bank acts as an intermediary for transformation of fund from surplus unit to deficit unit in an effective and efficient manner. Banks collect deposits from general public providing certain rate of interest in order to provide loans to different needy persons or business houses at higher interest rate. In this way financial institutions makes profit and profit is essential for the survival of growth (Ojwiya, 2009). Lending of funds constitutes the largest single income-earning asset in the portfolio of most deposit money banks. Hence, banks deploy huge resources to estimate, monitor and manage the quality of their loan portfolio (Olokoyo, 2011). Deposits are the most secured and liquid financial assets available, which can accelerate bank lending to various sectors. In this nexus, it is important to state that deposit mobilization behavior in any economy is closely tied with the lending behaviors and as a consequence an analysis of the determinants of bank deposits is imperative (Deaton, 1991). Lending may be on short, medium or long-term basis which is one of the services that banks do render to their customers. In other words, banks grant loans and advances to individuals, business organizations as well as government in order to enable them embark on investment and development activities as a means of aiding their growth in particular or contributing toward the economic development of a country (Felicia, 2011). Deposit and lending activity plays a vital role for success of financial institution. There are different bank specific as well as macroeconomic factors influencing bank deposit and lending. Macroeconomic factors effecting bank lending and deposit are real interest rate, gross domestic product, exchange rate and inflation whereas bank specific factor such as net income, volume of deposit and lending, borrowing, investment and spread rate. All these variables have impact on bank deposit and lending activities of financial institutions (Kraft, 2000). Bernanke et al. (1991) showed a positive relationship between loan growth at individual banks and investment ratios. Cole et al. (2004) revealed that US commercial banks loan growth was more responsive to investment ratios during and after the recent financial crisis but not at other times. Pruteanu and Podpiera (2007) analyzed the impact of gross domestic product growth on growth rate of total loans in Cezch banks The results showed strong positive effect of GDP growth on the growth rate of loans.Bank investment have positive relation with bank lending (Mccarthyet al.2010). Kassri and Kassim (2009) found positive relationship between the level of Islamic bank deposit and interest rate. Bhimisetty and Samantaray (2013) revealed bank deposit have positive relationship with bank investments. Muhammad et al. (2011) found negative relationship for both inflation and base lending rate on bank deposits. Masson et al. (1998) revealed that GDP growth and changes in the terms of trade have positive relationship with the savings behavior in OECD countries. The study further indicates that interest rates had no significant effect on private or national saving. The study found that inflation rate has negative relationship with saving. The major purpose of this study is to analyze the impact of bank specific variables and macroeconomic variables on bank deposit and lending of Nepalese commercial banks. The specific objectives of this study are: a)to determine the impact of macroeconomic variables (GDP growth, inflation and per capita income) on deposit activity of commercial banks b) to analyze the impact of bank specific variables (net income, interest rate, borrowing, interest spread, investment) on lending of Nepalese commercial banks. c)to identify the impact of macroeconomic variables (GDP growth, inflation and per capita income) on deposit activity of commercial banks d) to evaluate the impact of bank specific variables (net income, interest rate, borrowing, interest spread, investment) on lending of Nepalese commercial banks. This study has employed descriptive research design and causal comparative research design to deal with issues associated with factors influencing bank deposit and lending of the commercial banks in the context of Nepal. The descriptive research design has been adopted for fact finding and search adequate information about impact of firm-specific and macroeconomic variables on deposit and lending of Nepalese commercial banks. The secondary data for the study are collected from various sources such as annual report of the sample banks, NRB data base, books and journals. The result shows that there is positive relationship of bank deposit with net income, investment, interest rate spread, inflation, GDP growth rate and per capita income. Likewise, the result shows that there is negative relationship of bank deposits with borrowing. The result also shows that there is positive relationship of bank loan and advances with net income, bank investment, GDP growth rate and per capita income whereas there is negative relationship of bank lending with inflation, bank borrowing and interest rate spread. The study reveals that net income, interest rate spread, bank investment and gross domestic product growth rate are among the significant variables that affect the deposit and lending in the context of Nepalese commercial banks.