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Effect of interest rate on the performance of Nepalese commercial banks / Sushmita Amatya
Title : Effect of interest rate on the performance of Nepalese commercial banks Material Type: printed text Authors: Sushmita Amatya, Author Publication Date: 2016 Pagination: 65p. Size: GRP/Thesis Accompanying material: 4/B General note: Including bibilography Languages : English Descriptors: Bank and banking
Bank loans
Interest rateKeywords: 'interest rate deposit rate inflation rate return on assets return on equity' Class number: 332.820 Abstract: Banks specialize in assessing the credit worthiness of borrowers and providing an ongoing monitoring function to ensure borrowers meet their obligations. Business and other financial institutions are in the market to settle day-to-day transactions (Vohra and Sehgal 2012). By almost any measure, the commercial bank is the most important financial intermediary serving the public today. They offer more services than the majority of other financial Institutions, which include expanding the money supply by granting credits (loans) to borrowers. Interest rate directly affects the lending of the any financial institutions (Felicia, 2011). Lending behavior of the bank can be defined as the preferences and choices of bank while making loans and advances. Bank lending behavior is the selection of bank’s investment on loans and advances on the account of constraints given by regulators, opportunities or threats provided by macroeconomic, factors and the preferences of customers (Musleh, 2007).
Nepalese economy is under the crucial transformation through changes in bothintersectoral importance and linkages. The composition of GDP has changed with servicesector emerging as nearly the largest sector, trade-GDP ratio has increased, and foreignexchange regime has been liberalized. banking sector is facing with the danger of liquidity crisis, inflated interest rate, declining deposits and the problem of the liquidity started which has affected the inter banking interest rate (Shrestha, 2011). In spite of higher interest rate provided by commercial bank in the deposits, it still fails to attract the depositors. growing competition in the financial sector, recent increase in transaction of security and capital markets as well as the taxation laid on higher deposits in banks are, among others, the factors affecting bank's profitability. The impact of market interest rates on commercial bank revenues, costs, and profitability has increasingly concerned economists and policymakers as financial market conditions have become more volatile in recent years (Shahi, 2008).
This study has aimed to examine effect of interest rate on banking performance in Nepalese commercial banks. Specifically, it examines the effect on bank rate, deposit rate, loan rate, inflation rate and non performing loan to return on assets and return on equity of commercial banks of Nepal. This study has used secondary sources of data to analyze the impact of interest rate structure on bank performance. The secondary sources of data have been used to investigate the relationship of interest rate and banking performance. The secondary data for bank performance and interest rate have been taken from annual report of the commercial bank for the year2009/10 to 2013/14. Total of 21 sample banks have been taken with 105 observations from the five year period. This study has used descriptive statistics, and correlation analysis, stepwise regressions have been carried out to examine the secondary data.
This result has found that return on assets is positively related to loan rate, bank rate, capital adequacy, and non performing loan while negatively related to deposit rate and the inflation. ROE is positively related with loan rate, capital adequacy and the inflation rate. While negative relation is observed with bank rate, deposit rate and non performing loan.Beta coefficient is positive for loan rate with return on assets (ROA) which indicates that increase in loan rate increases the return on assets.The beta coefficient for capital adequacy is positive with ROA indicating banks with higher capital adequacy can increases its return on assets, but it is not significant at five percent level.
The results also revealed that beta coefficient for deposit rate is negative with return on assets and is significant at five percent. This indicates that increases in deposit rate leads to decrease in return on assets.Beta coefficient is negative for bank rate with return on assets indicating increased bank rate decreases the return on assets of the banks.Result also revealed that beta coefficient is negative for non performing loan with return on assets and is significant at one and five percent level. This result reveals that if bank became able to decreases its volume of nonperforming loan, can increase bank performance as measured by return on assets (ROA).
The study concludes that bank can increase its profitability if bank can manage its interest rates. If bankisable to increase loan rate, bank can improve bank performance in the coming year. This study also concludes that non performing loan is also positively related to interest rate or loan rate in the bank. Nonperforming loan is also positively related to interest rate, higher interest rates may reduce the tendency to repay the loan because of the higher cost of loan, banks can reduce the interest amount from the customer so that they would be willing to repay the loan in time. This study suggests that banks willing to increase bank performance should properly assess the cause of decrease in return on assets, and should have remedies as earlier as possible.Effect of interest rate on the performance of Nepalese commercial banks [printed text] / Sushmita Amatya, Author . - 2016 . - 65p. ; GRP/Thesis + 4/B.
Including bibilography
Languages : English
Descriptors: Bank and banking
Bank loans
Interest rateKeywords: 'interest rate deposit rate inflation rate return on assets return on equity' Class number: 332.820 Abstract: Banks specialize in assessing the credit worthiness of borrowers and providing an ongoing monitoring function to ensure borrowers meet their obligations. Business and other financial institutions are in the market to settle day-to-day transactions (Vohra and Sehgal 2012). By almost any measure, the commercial bank is the most important financial intermediary serving the public today. They offer more services than the majority of other financial Institutions, which include expanding the money supply by granting credits (loans) to borrowers. Interest rate directly affects the lending of the any financial institutions (Felicia, 2011). Lending behavior of the bank can be defined as the preferences and choices of bank while making loans and advances. Bank lending behavior is the selection of bank’s investment on loans and advances on the account of constraints given by regulators, opportunities or threats provided by macroeconomic, factors and the preferences of customers (Musleh, 2007).
Nepalese economy is under the crucial transformation through changes in bothintersectoral importance and linkages. The composition of GDP has changed with servicesector emerging as nearly the largest sector, trade-GDP ratio has increased, and foreignexchange regime has been liberalized. banking sector is facing with the danger of liquidity crisis, inflated interest rate, declining deposits and the problem of the liquidity started which has affected the inter banking interest rate (Shrestha, 2011). In spite of higher interest rate provided by commercial bank in the deposits, it still fails to attract the depositors. growing competition in the financial sector, recent increase in transaction of security and capital markets as well as the taxation laid on higher deposits in banks are, among others, the factors affecting bank's profitability. The impact of market interest rates on commercial bank revenues, costs, and profitability has increasingly concerned economists and policymakers as financial market conditions have become more volatile in recent years (Shahi, 2008).
This study has aimed to examine effect of interest rate on banking performance in Nepalese commercial banks. Specifically, it examines the effect on bank rate, deposit rate, loan rate, inflation rate and non performing loan to return on assets and return on equity of commercial banks of Nepal. This study has used secondary sources of data to analyze the impact of interest rate structure on bank performance. The secondary sources of data have been used to investigate the relationship of interest rate and banking performance. The secondary data for bank performance and interest rate have been taken from annual report of the commercial bank for the year2009/10 to 2013/14. Total of 21 sample banks have been taken with 105 observations from the five year period. This study has used descriptive statistics, and correlation analysis, stepwise regressions have been carried out to examine the secondary data.
This result has found that return on assets is positively related to loan rate, bank rate, capital adequacy, and non performing loan while negatively related to deposit rate and the inflation. ROE is positively related with loan rate, capital adequacy and the inflation rate. While negative relation is observed with bank rate, deposit rate and non performing loan.Beta coefficient is positive for loan rate with return on assets (ROA) which indicates that increase in loan rate increases the return on assets.The beta coefficient for capital adequacy is positive with ROA indicating banks with higher capital adequacy can increases its return on assets, but it is not significant at five percent level.
The results also revealed that beta coefficient for deposit rate is negative with return on assets and is significant at five percent. This indicates that increases in deposit rate leads to decrease in return on assets.Beta coefficient is negative for bank rate with return on assets indicating increased bank rate decreases the return on assets of the banks.Result also revealed that beta coefficient is negative for non performing loan with return on assets and is significant at one and five percent level. This result reveals that if bank became able to decreases its volume of nonperforming loan, can increase bank performance as measured by return on assets (ROA).
The study concludes that bank can increase its profitability if bank can manage its interest rates. If bankisable to increase loan rate, bank can improve bank performance in the coming year. This study also concludes that non performing loan is also positively related to interest rate or loan rate in the bank. Nonperforming loan is also positively related to interest rate, higher interest rates may reduce the tendency to repay the loan because of the higher cost of loan, banks can reduce the interest amount from the customer so that they would be willing to repay the loan in time. This study suggests that banks willing to increase bank performance should properly assess the cause of decrease in return on assets, and should have remedies as earlier as possible.Hold
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Barcode Call number Media type Location Section Status 166/D 332.820 AMA Books Uniglobe Library Social Sciences Available Market interest rate fluctuations and its impact on the profit ability of Nepalese commercial banks / Ashish N Adhikari
Title : Market interest rate fluctuations and its impact on the profit ability of Nepalese commercial banks Material Type: printed text Authors: Ashish N Adhikari, Author Publication Date: 2015 Pagination: 86p. Size: GRP/Thesis Accompanying material: 5/B General note: Including bibilography Languages : English Descriptors: Banks
Banks and banking
Interest rates
Money marketKeywords: 'interest rate deposit rate inflation rate return on assets return on equity' Class number: 332.809 Market interest rate fluctuations and its impact on the profit ability of Nepalese commercial banks [printed text] / Ashish N Adhikari, Author . - 2015 . - 86p. ; GRP/Thesis + 5/B.
Including bibilography
Languages : English
Descriptors: Banks
Banks and banking
Interest rates
Money marketKeywords: 'interest rate deposit rate inflation rate return on assets return on equity' Class number: 332.809 Hold
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Barcode Call number Media type Location Section Status 74/D 332.809 ADH Thesis/Dissertation Uniglobe Library Social Sciences Available Factors influencing the interest setting behaviour of Nepalese commercial banks / Bikash Yadav
Title : Factors influencing the interest setting behaviour of Nepalese commercial banks Material Type: printed text Authors: Bikash Yadav, Author Publication Date: 2018 Pagination: 98p. Size: GRP/Thesis Accompanying material: 11/B Languages : English Descriptors: Bank and banking
Banks
InvestorsKeywords: 'interest rate deposit rate inflation rate return on assets return on equity' Class number: 332.6 Abstract: The interest setting behavior is treated as an important indicator of intermediation efficiency. Banks’ interest rate represents a vital component of profitability and typified a summary measure of bank net interest rate of return. Interest rates are of significant importance for efficient mobilization of resources for economic and productive activities. In the economy market, the interest setting behavior is significantly influenced by a number of factors which include macroeconomic environment, inflation and the policy interest rate (Treasury bill rate). Higher interest rate usually implies lower baking sector efficiency, marked by higher costs due to inefficient control of operating expenses, and have a negative impact of financial developments, resulting with lower investments and slower economic activity.
The major purpose of this study is to identify the firm-specific and macroeconomic factors influencing the interest setting behavior of Nepalese commercial banks. The study has the following specific objectives is to analyze the impact of assets growth ratio, efficiency ratio and capital adequacy ratio in determining the interest rate, to determine the impact of return on assets on interest setting behavior and to examine the relationship between macro-economic factors such as GDP growth and inflation on interest setting behavior.
This study is based on secondary data which were gathering for a sample of 18 commercial banks of Nepal within the time period from 2010 to 2016, leading to total of 126 observations. The secondary data have been obtained from Nepal Rastra Bank bulletin published by central bank of Nepal, annual audited financial statements and websites of respective commercial banks. The polled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is casual comparative types as it deals with relationship of bank specific factors like capital adequacy ratio, credit risk, management efficiency, liquidity position, return on assets and growth and macro-economic variables like GDP growth and inflation with dependent variable such as: I1 (interest on deposit) and I2 (interest on loan). The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The result shows thatcapital adequacy ratio has negative relation to I1 (interest on deposit) and I2 (interest on loan). The beta coefficient of credit risk is positive and highly significant. Efficiency ratio has negative relation with interest rate. The beta coefficient of liquidity ratio is negative for I1 (interest on deposit) and positive for I2 (interest on loan). Return on assets has positive relationship with interest on deposit. The beta coefficient of return on assets is large and highly significant. In the contrast return on assets has negative relationship with interest on loan. The beta coefficient of assets growth ratio is large and highly significant. GDP growth has negative and insignificant relation with interest on deposit whereas positive and significant relation with interest on loan. The beta coefficient of inflation is small and highly insignificant for interest on deposit and significant for interest on loan.
The major conclusion of this study is thatinterest rateof Nepalese commercial banks is affected by bank-specific factors and macroeconomic factors. Credit risk and return on assets is an internal factor which holds a definitely significant positive effect on interest on deposit where as capital adequacy ratio, efficiency ratio, liquidity ratio, assets growth ratio, GDP growth rate and inflation is an internal factor which holds significant negative effect on interest on deposit. Credit risk, liquidity ratio, GDP growth rate and inflation is an internal factor which holds a definitely significant positive effect on interest on loan where as capital adequacy ratio, efficiency ratio, return on assets and assets growth ratio is an internal factor which holds significant negative effect on interest on loan.
The study also concludes that there are behaviors towards the commercial banks in Nepal, which always expects to maintain a stable interest rate at a certain level in the long term. Thus, the high interest rate is not defined as the low level of efficiency of Nepalese commercial banks, but rather reflects the high asymmetric information and the high level of profitability of the bank.
Factors influencing the interest setting behaviour of Nepalese commercial banks [printed text] / Bikash Yadav, Author . - 2018 . - 98p. ; GRP/Thesis + 11/B.
Languages : English
Descriptors: Bank and banking
Banks
InvestorsKeywords: 'interest rate deposit rate inflation rate return on assets return on equity' Class number: 332.6 Abstract: The interest setting behavior is treated as an important indicator of intermediation efficiency. Banks’ interest rate represents a vital component of profitability and typified a summary measure of bank net interest rate of return. Interest rates are of significant importance for efficient mobilization of resources for economic and productive activities. In the economy market, the interest setting behavior is significantly influenced by a number of factors which include macroeconomic environment, inflation and the policy interest rate (Treasury bill rate). Higher interest rate usually implies lower baking sector efficiency, marked by higher costs due to inefficient control of operating expenses, and have a negative impact of financial developments, resulting with lower investments and slower economic activity.
The major purpose of this study is to identify the firm-specific and macroeconomic factors influencing the interest setting behavior of Nepalese commercial banks. The study has the following specific objectives is to analyze the impact of assets growth ratio, efficiency ratio and capital adequacy ratio in determining the interest rate, to determine the impact of return on assets on interest setting behavior and to examine the relationship between macro-economic factors such as GDP growth and inflation on interest setting behavior.
This study is based on secondary data which were gathering for a sample of 18 commercial banks of Nepal within the time period from 2010 to 2016, leading to total of 126 observations. The secondary data have been obtained from Nepal Rastra Bank bulletin published by central bank of Nepal, annual audited financial statements and websites of respective commercial banks. The polled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is casual comparative types as it deals with relationship of bank specific factors like capital adequacy ratio, credit risk, management efficiency, liquidity position, return on assets and growth and macro-economic variables like GDP growth and inflation with dependent variable such as: I1 (interest on deposit) and I2 (interest on loan). The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The result shows thatcapital adequacy ratio has negative relation to I1 (interest on deposit) and I2 (interest on loan). The beta coefficient of credit risk is positive and highly significant. Efficiency ratio has negative relation with interest rate. The beta coefficient of liquidity ratio is negative for I1 (interest on deposit) and positive for I2 (interest on loan). Return on assets has positive relationship with interest on deposit. The beta coefficient of return on assets is large and highly significant. In the contrast return on assets has negative relationship with interest on loan. The beta coefficient of assets growth ratio is large and highly significant. GDP growth has negative and insignificant relation with interest on deposit whereas positive and significant relation with interest on loan. The beta coefficient of inflation is small and highly insignificant for interest on deposit and significant for interest on loan.
The major conclusion of this study is thatinterest rateof Nepalese commercial banks is affected by bank-specific factors and macroeconomic factors. Credit risk and return on assets is an internal factor which holds a definitely significant positive effect on interest on deposit where as capital adequacy ratio, efficiency ratio, liquidity ratio, assets growth ratio, GDP growth rate and inflation is an internal factor which holds significant negative effect on interest on deposit. Credit risk, liquidity ratio, GDP growth rate and inflation is an internal factor which holds a definitely significant positive effect on interest on loan where as capital adequacy ratio, efficiency ratio, return on assets and assets growth ratio is an internal factor which holds significant negative effect on interest on loan.
The study also concludes that there are behaviors towards the commercial banks in Nepal, which always expects to maintain a stable interest rate at a certain level in the long term. Thus, the high interest rate is not defined as the low level of efficiency of Nepalese commercial banks, but rather reflects the high asymmetric information and the high level of profitability of the bank.
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Barcode Call number Media type Location Section Status 411/D 332.6 YAD Books Uniglobe Library Social Sciences Available Impact of Interest rates on deposit and lending of Nepalese commercial banks / Grisha Yadav
Title : Impact of Interest rates on deposit and lending of Nepalese commercial banks Material Type: printed text Authors: Grisha Yadav, Author Publication Date: 2015 Pagination: 67p. Size: GRP/Thesis Accompanying material: 4/B General note: Including bibilography Languages : English Descriptors: Banks
Banks and banking
Commercial banks
Interest rateKeywords: 'bank rate deposit rate inflation rate return on assets return on equity' Class number: 332.820 Impact of Interest rates on deposit and lending of Nepalese commercial banks [printed text] / Grisha Yadav, Author . - 2015 . - 67p. ; GRP/Thesis + 4/B.
Including bibilography
Languages : English
Descriptors: Banks
Banks and banking
Commercial banks
Interest rateKeywords: 'bank rate deposit rate inflation rate return on assets return on equity' Class number: 332.820 Hold
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Barcode Call number Media type Location Section Status 80/D 332.820 YAD Thesis/Dissertation Uniglobe Library Social Sciences Available