A Case Study

On
CREDIT RISKMANAGEMENT OF
SANIMA BANK LIMITED
A Project Work Report

Submitted By:
Chanarjit Sah
TU Regd. No.: 7-2-920-29-2016
4th Year Roll No.: 9200068
Group: Account
Danfe College
Putalisadak, Kathmandu

Submitted To:
Office of Controller of Examination
Faculty of Management
Tribhuvan University
In Partial Fulfillment of the Requirements for the Degree of
BACHELOR OF BUSINESS STUDIES (BBS)
Kathmandu, Nepal
January, 2021

i
 DECLARATION

I hereby declare that the project work entitled"CREDIT RISK MANAGEMENT OF

SANIMA BANK LIMITED " submitted to the Faculty of Management, Tribhuvan
University, Kathmandu is an original piece of work under the supervision ofMr. Ganesh
Khadka, faculty member,Danfe College Kathmandu,and is submitted in partial fulfillment
of the requirements for the degree of Bachelor of Business Studies (BBS).This project
work report has not been submitted to any other university or institution for the award of
any degree or diploma.

Signature:
Name of Student: Chanarjit Sah

ii
 SUPERVISOR’S RECOMMENDATION

The project work report entitled " CREDIT RISK MANAGEMENT OF SANIMA BANK
LIMITED"submitted by Chanarjit Sah of DanfeCollegeKathmandu, is prepared under my
supervision and guidance as per the procedure and format requirements laid by the Faculty
of Management, Tribhuvan University, as partial fulfillment of the requirements of the
degree of Bachelor of Business Studies (BBS). I, therefore, recommend the project work
report for evaluation.

Signature:
Name of Supervisor: Mr. Ganesh Khadka
Date:

iii
 ENDORSEMENT

We hereby endorse the project work report entitled " CREDIT RISK MANAGEMENT
OF SANIMA BANK LIMITED"submitted by Chanarjit Sah of Danfe College
Kathmandu, in partial fulfillment of the requirements for the degree of the Bachelor of
Business Studies (BBS) for external evaluation.

Signature: Signature:
Name of Chairman: Name of Principal: Mr.RidipKhanal
Chairman, Research Committee Campus Chief/Principal
Date: Date:

iv
 ACKNOWLEDGEMENTS

It is a great honor to thank the officials of Tribhuvan University for including the
Project work report in the syllabus of BBS fourth year. I think it is a most for the
practical development of the student.
I am extremely grateful to my respected supervisor Mr. Ganesh Khadka for his
precious guidelines, inspiration and suggestion thoroughly during the period of this
research.
I would like to thank all the teachers and library staff of Danfe College, who
provided the reference and reading materials during the period of research.
Similarly, I am indebted to all the staff personnel of Sanima Bank Limited. for
providing their valuable time and information which assisted a lot in preparing this
report.
Last but not the least, I would like to thank my family, friends and other persons
whoever have helped me in preparing this report directly or indirectly.

Thank You!

Chanarjit Sah
BBS 4th year

v
 TABLE OF CONTENTS

Page No.
Title Page………………………………………………………………………………………….i
Declaration ……………………………………………………………………………………...ii
Supervisor’s Recommendation ……………………………………………………………...iii
Endorsement ………………………………………………………………………………...… iv
Acknowledgements ………………………………………………………………………….…v
Table of Contents……………………………………………………………………….......…vi
List of Tables……………………………………………………………………………….…. vii
List of Figures………………………………………………………………………………...viii
CHAPTER I: INTRODUCTION
1.1 Background of the Study………………………………………...….…1

1.2 Profile of the Organization……………………........................….…3

1.3 Objectives of the Study…………………......………………….….... 4

1.4 Rationale of the Study……………………….………………………. 4

1.5 Statement of Problem………………………….……..………….5

1.6 Review of Literature……………………………..………..………...5

1.7Research Methodology…………….………………………..………. 10

1.8 Limitation of the Study………………………...………………..10

1.9Organization of Study…………………………….……………16

CHAPTER II: RESULTS AND ANALYSIS

2.1 Presentation of data in table and figure and their analysis.……...18
2.2 Major Findings………………………………………………… …...26
CHAPTER III: SUMMARY, CONCLUSIONS AND RECOMMENDATION
3.1 Summary…………………….........................................................…28
3.2 Conclusions……………………………………………………………...29
3.3 Recommendations………………………………………………...30
BIBLIOGRAPHY
APPENDIX
vi
 LIST OF TABLES

Titles Page No.

Table 1 Credit and Advances to Fixed Deposit Ratio ...…………………………….……19

Table 2 Credit and Advances to Total Deposit Ratio………………………….…….…...20

Table 3 Credit and Advances to Total Assets Ratio ……………………………..….…...22

Table 4 Total Debt to Equity Ratio…………………………………………………….…..24

Table 5 Total Debt to Total Assets Ratio ……………………………………….…….……25

vii
 LIST OF FIGURES

Titles Page No.

Figure 1 Credit and Advances to Fixed Deposit Ratio.................................................20

Figure 2 Credit and Advances to Total Deposit Ratio……….…...……………………...21

Figure 3 Credit and Advances to Total Assets Ratio…………….…………….………...23

Figure 4Total Debt to Equity Ratio………………………………………….……...………24

Figure 5 Total Debt to Total Assets Ratio …………………………………………………26

viii
 CHAPTER-I
INTRODUCTION

1.1. Background of the Study

Capital formation is one of the important factors that leads to increase in the size of
national output, income and employment, solving the problem of inflation and balance of
payment and foreign debts. Capital formation indeed plays a deceive role in determining
the level and growth of national income and economic development.
A bank is a financial institution that accepts deposits from the public and creates a demand
deposit while simultaneously making loans.Lending activities can be directly performed
by the bank or indirectly through capital markets.
Due to the importance of banks in the financial stability and the economy of a country,
most jurisdictions exercise a high degree of regulation over banks. Most countries have
institutionalized a system known as fractional reserve banking, under which banks hold
liquid assets equal to only a portion of their current liabilities. In addition to other
regulations intended to ensure liquidity, banks are generally subject to minimum capital
requirements based on an international set of capital standards, the Basel Accords.

1.1.1 Background of Banking Industry in Nepal

Nepal Bank Ltd. (NBL) is the first modern bank of Nepal. It is taken as the milestone of
modern banking of the country. Nepal Bank marks the beginning of a new era in the
history of the modern banking in Nepal. This was established in 1937 A.D. Nepal Bank
has been inaugurated by King Tribhuvan Bir Bikram Shah Dev on 30th Kartik 1994 B.S.
NBL was established as a semi government bank with the authorized capital of Rs.10
million and the paid-up capital of Rs.892 thousand. Until mid-1940s, only metallic coins
were used as medium of exchange. So, the Nepal Government (His Majesty Government
at that time) felt the need of separate institution or body to issue national currencies and
promote financial organization in the country.

1
NBL remained the only financial institution of the country until the foundation of Nepal
Rastra Bank in 1956 A.D. Due to the absence of the central bank. NBL had to play the role
of central bank. Hence, the Nepal Rastra Bank Act 1955 was formulated, which was
approved by Nepal Government accordingly, the NRB was established in 1956 A.D. as the
central bank of Nepal. NRB makes various guidelines for the banking sector of the
country.
Today, the banking sector is more liberalized and modernized and systematically
managed. There is various type of bank working in modern banking system in Nepal. It
includes central, development, commercial, financial, co-operative and Micro Credit
(Grameen) banks. Technology is changing day by day and affecting the traditional method
of the service of bank.
Banking plays significant role in the economic development of a country. Bank is a
resource for the economic development which maintains the self-confidence of various
segments of society and extends credit to the people. So, commercial banks are those
financial institutions mainly dealing with activities of the trade, commerce, industry and
agriculture that seek regular financial and other helps from them for growing and
flourishing. The objective of commercial banks is to mobilize idle resources into the most
profitable sector after collecting them from scattered sources. Commercial banks
contribute significantly in the formation and mobilization of internal capital and
development effort.

1.1.2 Concept of Commercial Bank

Commercial banks are those institutions, which deals in accepting deposit of individual
and giving loans. These banks provide working capital needs of trade, industry and even to
agricultural sector. Moreover, commercial banks also provide technical and administrative
assistance to industries, trade and business enterprises. Thus, as per today’s concept, the
commercial banks have become one of the bases for the measuring level of economic
development of nation. A commercial bank is a type of bank that provides services such as
accepting deposits, making business loans, and offering basic investment products that are
operated as a business for profit.
It can also refer to a bank, or a division of a large bank, which deals with corporations or
large/middle-sized business to differentiate it from a retail bank and an investment bank.
Commercial banks include private sector banks and public sector banks. Following are
commercial banks till date in Nepal:

S.N. Bank Name Headquarter

1 Kumari Bank Ltd Tangal, Kathmandu
2 Agriculture Development Bank Ltd Ramshahpath, Kathmandu
3 Nabil Bank Ltd Beena Marg, Kathmandu
4 Nepal Investment Bank Ltd Durbarmarg, Kathmandu
5 Standard Chartered Bank Nepal Ltd Nayabaneshwor, Kathmandu
6 Himalayan Bank Ltd Kamaladi, Kathmandu
7 Nepal SBI Bank Ltd Kesharmahal, Kathmandu
8 Nepal Bangaladesh Bank Ltd Kamaladi, Kathmandu
9 Everest Bank Ltd Lazimpat, Kathmandu
10 Nepal Bank Ltd Dharmapath, Kathmandu
11 Laxmi Bank Ltd Hattisar, Kathmandu
12 Citizens Bank International Ltd Narayanhitipath, Kathmandu
13 Prime Commercial Bank Ltd Kamalpokhari, Kathmandu
14 Sunrise Bank Ltd Gairidhara, Kathmandu
15 Century Commercial Bank Ltd Putalisadak, Kathmandu
16 Sanima Bank Ltd Nagpokhari, Kathmandu
17 Machhapuchhre Bank Ltd Lazimpat, Kathmandu
18 NIC Asia Bank Ltd Thapathali, Kathmandu
19 Global IME Bank Ltd Kamaladi, Kathmandu
20 NMB Bank Ltd Babarmahal, Kathmandu
21 Siddhartha Bank Ltd Hattisar, Kathmandu
22 Bank of Kathmandu Ltd Kamaladi, Kathmandu
23 Civil Bank Ltd Sundhara, Kathmandu
Nepal Credit and Commerce Bank
24 Bagbazar, Kathmandu
Ltd
25 Rastriya Banijya Bank Singhadurbarplaza,
 S.N. Bank Name Headquarter
Kathmandu
26 Prabhu Bank Ltd Babarmahal, Kathmandu
27 Mega Bank Nepal Ltd Kamaladi, Kathmandu

1.1.3 Concept of Credit Risk Management

Credit risk refers to the probability of loss due to a borrower’s failure to make payments
on any type of debt. Credit risk management is the practice of mitigating losses by
understanding the adequacy of a bank’s capital and loan loss reserves at any given time – a
process that has long been a challenge for financial institutions.
A credit risk is risk of default on a debt that may arise from a borrower failing to make
required payments. In the first resort, the risk is that of the lender and includes
lost principal and interest, disruption to cash flows, and increased collection costs. The
loss may be complete or partial. In an efficient market, higher levels of credit risk will be
associated with higher borrowing costs. Because of this, measures of borrowing costs such
as yield spreads can be used to infer credit risk levels based on assessments by market
participants.
To reduce the lender's credit risk, the lender may perform a credit check on the prospective
borrower, may require the borrower to take out appropriate insurance, such as mortgage
insurance, or seek security over some assets of the borrower or a guarantee from a third
party. The lender can also take-out insurance against the risk or on-sell the debt to another
company. In general, the higher the risk, the higher will be the interest rate that the debtor
will be asked to pay on the debt. Credit risk mainly arises when borrowers are unable or
unwilling to pay.

1.2 Profile of Organization

Sanima, promoted by prominent and dynamic Non-Resident Nepalese (NRNs)
Businessmen, commenced its operation in 2004 as a National Level Development Bank.
Since February 2012, Sanima has been functioning as an "A" Class Commercial Bank
with its registered office at 'Alakpuri', Naxal, Kathmandu.
Sanima Bank is committed to provide one window financial solutions to the different
customer segments and to achieve healthy growth in profitability consistent with the
bank's risk appetite. The Bank has been dedicated to maintain the highest level of ethical
standards, professional integrity, corporate governance and regulatory compliance. As a
result, Sanima is perceived as a Strong and Reliable player in the banking industry.
Sanima has been committed to meet customer expectations in all areas of its business
through continuous improvement for overall benefit of the economy.
Sanima has 83 full-fledged branches and 15 extension counters within and outside
the Kathmandu Valley and has further plans to expand its reach in the various part of the
country.
Capital Structure 
Authorized Capital Rs.9,000,000,000
Issued Capital Rs.8,801,380,984
Paid-up Capital Rs.8,801,380,984
Retained Earnings Rs. 1,751,506,637
Reserve and Surplus Rs. 2,236,785,982

1.3 Objectives of Study

Each and every research study possess a certain objective. Research without any specific
objective will be worthless. The objectives summarize what is to be achieved by the study.
The objective includes answers to research questions or testing the research hypothesis.
The objective of credit analysis is to look at both the borrower and the lending facility
being proposed and to assign a risk rating. The risk rating is derived by estimating the
probability of default by the borrower at a given confidence level over the life of the
facility, and by estimating the amount of loss that the lender would suffer in the event of
default. This research study entitled "Analysis of Credit Risk Management of Sanima
Bank" highlights to attempt the following objectives:
▪ To determine the impact of credit risk and its effect on lending practices.
 ▪ To determine whether the bank loan disbursement and credit management effective
and efficient.
▪ To analyze how effectively is the credit policy of the chosen bank being followed.

1.4 Rational of Study

Lending is one of the main functions of Commercial bank where the whole banking
business is rested upon. Sanima Bank Ltd. plays significant role in lending procedures.
This study has proposed to measure the efficiency of bank in its lending procedures. This
study adds new idea and findings about the concerned bank. This study no doubt will have
importance to various groups but in particular is directed to a certain group of
people/organizations, which are:
▪ This study will provide information to those who are planning to invest in Sanima
Bank Ltd.
▪ Important to the management bodies of the bank for the evaluation of the
performance of bank.
▪ Important to the government bodies or the policy makers such as the central bank.
▪ The study will help general public to know about the overall financial position of
Sanima Bank Ltd.
So, this study helps to identify its hidden strength and weakness of bank as well as
regarding financial and credit condition of bank. Likely after the completion, this report
will be kept in the library, which will play the role of reference to the students making the
similar study in future.

1.5 Statement of Problem

Currently, there are 27 commercial banks (after merger of Global IME Bank Ltd and
Janata Bank Ltd) in Nepal. Due to large number of commercial banks and other financial
institutions, there is competition among the banks and financial institutions. All
commercial banks do not have satisfactory performance due to which they have gone
through merger. Thus, this study is mainly focused on following problems, especially
related to the credit risk management of Sanima Bank Ltd.
 ▪ What is the credit risksituation of Sanima Bank Ltd.?

▪ What is the trend of credit risk management of Sanima Bank Ltd.?

▪ What is the correlation between total loan and advances and credit risk of Sanima
Bank Ltd.?

▪ What is the effect of high credit risk of Sanima Bank Ltd.?

1.6 Review of Literature

Review of literature means reviewing research studies which include the current
knowledge including substantive findings, as well as theoretical and methodological
contributions to a particular topic. It is also the study of other relevant proposition in the
related area of the study so that all the past and previous studies, their conclusion and
perspective of deficiency may be known and further research can be conducted or done.
Literature reviews are secondary sources, and do not report new or original experimental
work. It is an integral mandatory process in research works. It is a crucial part of all
dissertations. In other words, it's just like fact finding based on sound theoretical
framework oriented towards discovery of relationship guided by experience, resonating
and empirical investigation. The primary purpose of literature review is to learn which
helps researcher to find out what research studies have been conducted in one's chosen
field of study, and what remains to be done. For review study, the researcher uses different
books and journals, reviews and abstract, indexes, reports and dissertation or research
studies published by various institutions, encyclopedia etc.
We study the review of literature dividing two headings:
i. Conceptual Review
ii. Empirical Review

1.6.1 Conceptual Review

Simply, Bank is a financial institution that accepts deposits and invests the amount in the
lending activities and also provides commercial services. In ancient times, the word 'Bank'
was emerged from Latin word 'Bancus', French word 'Banque' and Italian word 'Banca',
which means a 'Bench' where sitting over there to invest, exchange and keep record of
money and cash. These all-functional activities are formed as current banking activities.
Different Authors and Economists have given some structural and functional definition on
Bank from different angles:
 "Bank is a financial intermediary institution which deals in loans and advances"…
Cairn Cross
 "Bank is an institution which collects idle money temporarily from the public and
lends to other people as per need"…R.P. Kent
 "Bank is such a financial institution which collects money in current savings or
fixed deposit account, collects cheques as deposits and pays money from the
depositors' account through cheques"…Sir John Pagette
The word 'Bank' refers as Central bank, Commercial bank, Development bank, Exchange
bank, Saving bank, Co-operative bank, Merchant bank, Housing bank, Equipment bank,
Infrastructure bank and Mutual fund etc. They provide financial as well as non-financial
services. It is the financial intermediary between depositors or lenders and withdrawal or
loaner. Bank plays a great role that helps investors to invest in different sectors by giving a
loan and providing other consultancy and agency services. Thus, the word 'Bank' itself
provides huge sense of banking activity.

1.6.2 Empirical Review

Credit risk is the major risk that banks are exposed to during the normal course of lending
and credit underwriting. Within Basel II, there are two approaches for credit risk
measurement: the standardized approach and the internal ratings based (IRB) approach.
Due to various inherent constraints of the Nepalese banking system, the standardized
approach in its simplified form, Simplified Standardized Approach has been prescribed in
the initial phase (SSA), NRB directives 2058/59.
Prudentially lenders face risk of default in every loan transaction. Credit risk is major
concern for lenders. Banks and financial intermediaries appoint Credit Risk Analyst, who
undertake risk assessment for various type of lending proposals, from sole proprietorship
to public limited company and for working capital to short term and long-term loan.
 
Credit Analysis consist of the following: 
1. Analysis of business and industry.
2. Financial Statement analysis.
3. Cash Flow analysis.
4. Collateral Analysis.
 
Credit Analysis is based on5 Cs, which are 
a. Capacity-It determine borrower's capacity to repay of loan.
b. Capital-What the owner are investing in particular business.
c. Collateral-Determine the security or guarantee offered against particular loan.
d. Condition-What terms and conditions offer to secure loan.
e. Character-It determine past history, loan repayment history etc.   

1.6.2.1Review of Journal, Reports, Books and Articles

Duchassi, Shawk and Seagle (2006) in their article "A Knowledge-Engineered System for
Commercial Loan Decisions" have showed Commercial Loan Analysis Support System
(CLASS) in their article. This article describes an expert system, commercial loan analysis
support system (CLASS) is an expert system designed to evaluate a company's financial
posture, recommend commercial loan decision apertinent component, and document loan
analysis. Like a loan officer, CLASS constituently synthetics a large number of detailed
facts into a loan recommendation. CLASS has been designed to seek out any potential
weakness in the prospective borrower and conduct an extensive detailed analysis of each
weakness. Weakness may be over analyzed but none will be overlooked. This approach is
consistent with the general notion in commercial lending that one is primarily concerned
with weaknesses instead of strong points which are taken for granted. In addition to the
limited validation conducted by the expert a more comprehensive validation can be
implemented in two ways. First, the system can be empirically tested with a large sample
of historical loan decisions. Second, filed test can be conducted in which loan officer use
CLASS while making actual loan decisions. Their judgments can be compared to those of
CLASS at each step in the analysis. By building CLASS, it was demonstrated that
financial knowledge can be represented and applied to a complex financial problem. It is
hoped that the approach described will pave the way for building expert systems that
address other important financial problems.
Singh and Singh (2009) have mentioned in the book entitled "Financial Analysis for Credit
Management in Banks" that the investment (credit) policies of bank are conditioned to
great extent by the national policy framework, every banker has to apply his own
judgment for arriving at a credit decision, keeping his bank's credit policy also in mind.
Gitman and Joehk (2008) in the book entitled "Fundamentals of Investing" compare the
bank investment with a vehicle. He says that it is a vehicle into which funds can be placed
with the expectation that will preserve of inverse in a value and generates positive results.
A banker seeks optimum combination of earning, liquidity and safety while formulating
policy.
Bhandari (2006) has mentioned in the book entitled "Banking Management" that in
banking sector or transaction an unavailability of loan management and its methodology is
regarded very important. Under this management man is regarded very important. Under
this management many subject matters are considered and thought for example there are
subject matters like policy of loan, the condition of loan flow, the provision of security, the
documents of loan flow, loan administration, audit of loan, renewal of loan, the provision
of the payment of capital and its interest and other such procedures. This management
plays a vital role in healthy competitive activities. (Bhandari, 2006) yet another dubbed as:
loan and advances dominate the asset side of the Balance sheet at any bank. Similarly,
earnings from such loan and advance occupy a major space in income statement of the
bank. Lending can be said to be the vision of the bank. However, it is very important to be
denuded that most of the bank failures in the world are due to shrinkage in the value of
loans and advances. Hence risk of non-payment of loan is known as credit risk or default
risk.
As inference from all these above stated authors it can be said that loan management refers
to systematic identification of needy one or required party (loan taker), verifying their
documents, pre- and post-disbursement inspection cum sound recovery of granted loan as
far as practicable.
1.6.3 Research Gap
A literature gap, or research gap, is an unexplored topic revealed during a literature search
that has scope for research or further exploration. The review of above literature has
contributed to the fundamental understanding and knowledge, which is required to make
this study meaningful and purposeful. The past researcher in measuring credit
management of bank have focused on the limit ratio which are incapable of solving the
problems. Actually, credit management is determined by various factors. In this research
various ratios are systematically analyzed and generalized. Past researcher has not
properly analyzed about lending and its impact on the profitability. In this research all
ratios are categorized according to their area and nature.
In this study of analysis of credit risk management of Sanima bank Ltd., ratio analysis,
trend analysis and various statistical tools as well as financial tools are used for analyzing
data. This study tries to define credit management by applying and analyzing various
financial tools like liquidity ratio, leverage ratio, profitability ratio and lending efficiency
ratio as well as different statistical tools like coefficient of variations, correlation and trend
analysis. Updating the five fiscal year data with new 2016/17 annual report and data
should be appropriate research in the area of credit management of bank and financial
institutions.

1.7 Research Methodology

A research methodology or involves specific techniques that are adopted in research
process to collect, assemble and evaluate data. It defines those tools that are used to gather
relevant information in a specific research study. Surveys, questionnaires and interviews
are the common tools of research.
The methods section describes actions to be taken to investigate a research problem and
the rationale for the application of specific procedures or techniques used to identify,
select, process and analyze information applied to understanding the problem, thereby,
allowing the reader to critically evaluate a study's overall validity and reliability. The
methodology section of a research answers two main questions: How was the data
collected or generated? And, how was it analyzed? This research methodology has
primary sought the evaluation of the credit management and practices of Sanima Bank
Ltd. Research methodology refer to a various sequential step. It describes research design,
source of data and analysis of data.

1.7.1 Research Design

A research design is an overall framework or plan for the collection and analysis of data.
The research design serves as framework for the study, guiding the collection and analysis
of the data. Design sets up the framework for adequate tests of the reactions among
variables. It tells us about, what observations to make, how to make them and how to
analyze the quantitative representation of the observation. Specifically, research deign
describes the general plan for collecting, analyzing and evaluating data after identifying.
The present study follows the descriptive as well as analytical design to meet the stated
objective of the study. The importance of the research is to analyze Sanima Bank Ltd. In
relation to credit disbursement and recovery as well as overall management. This research
followed descriptive research design.

1.7.2 Nature and Sources of Data

The source of data collection is basically secondary and the research is based on secondary
sources of data.

1.7.2.1 Secondary Source

This refers to data that are already used and gathered by others. Secondary data are mostly
used for this research purpose. So, the major sources of secondary data are as follows:
 Annual Reports of Sanima Bank
 Internet and Websites
 NRB Directives
 Newspaper, Journals, Articles and various Magazines

1.7.3 Population and Sample

In Nepal, there are 27 Commercial Banks till 4th January 2020. (www.nrb.gov.np) which
are considered as population of this study. Out of them, Sanima Bank Limited. is taken as
sample for project work by following convenience sampling method.
 1.7.4 Data Collection Procedure
There are two sources of the data collection, primary sources and secondary sources. This
study was conducted on the basis of secondary data relating to deposit policy e.g., deposit,
loan and advances and profit/loss that have been collected from profit and loss account,
balance sheet of related banks and annual report of auditors. The annual reports of the
concerned banks were the major sources of data for the study. Besides the annual reports
of the banks, the following sources of data have been used.
 Notices published in newspapers, articles.
 NRB published books, reports and bulletin
 Annual reports and statement of Sanima Bank Limited
 Banks bulletin
 Webpage of Sanima Bank Limited
 Information given by bank staffs.

This is mainly a descriptive and analytical research in which a 5-year (FY 2014/15- FY
2018/19) time horizon is taken to assess the data.

1.7.5 Data Analysis Tools

For the purpose of the study, all data collected are arranged, tabulated under various
heads and then after statistical analysis have been carried out to enlighten the study.
Mainly financial methods are applied for the purpose of the study. Appropriate statistical
tools are used. To make the study more specific and reliable, two types of tools are used
for analysis:
A. Financial Tools
B. Statistical Tools

A. Financial tools:
Financial tools are those, which are used for the analysis and interpretation of financial
data. These tools can be used to get the precise knowledge of a business, which in turn,
are fruitful in exploring the strengths and weaknesses of the financial policies and
strategies. For the sake of analysis following various financial tools have been used in
order to meet the purpose of the study. Here, Credit Deposit (CD) ratio has been used in
this study.
Mathematically,
CD Ratio = (Total Loan/ Total Deposit) *100%

B. Statistical tools:

Being the quantitative research, the collected data are analyzed with MS Excel. Almost
all the collected data of this research have been analyzed descriptively with frequency
and percentage and chi-square test for testing hypothesis. The information collected
through websites are transferred into quantitative data sheet and then the necessary
tabulation is done using Microsoft excel. Statistical tools provided in Microsoft excel to
make bar chart. In this way various statistical tools have been used for statistical analysis
in this project.
For supporting the study, statistical tools such as Mean, Standard Deviation, Coefficient
of Variation, Correlation and diagrammatic cum pictorial tools have been used.

Tabulation Method: 
Generally, the tables are classified in two ways.
According to purpose:
a)  Reference table: It is big and has large data and general in nature.
b)  Summary table: It contains data, which may be useful for the study of particular
problem and specific in nature.
According to character:
a)  Simple table: It provides information about only one characteristic of the particular
data.
b)  Complex table: The data are classified with respect to two or more inter-related
characteristics.
Pie chart and trend line
Charts:
The chart is used to show the range of variation in the values.
Pie-chart: It divides the data into several parts into which it is broken up form of circle
and the divided sectors that each represent a proportion of the whole. It is called pie-chart
because it looks like slices of a pie.
Percentage and Average
A percentage is a number or ratio expressed as a fraction of 100. It is often denoted using
the percent sign, "%". A percentage is a dimensionless number (pure number).
Arithmetic Mean
The arithmetic mean (or mean or average) is the most commonly used and readily
understood measure of central tendency. The arithmetic mean is defined as being equal to
the sum of the numerical values of each and every observation divided by the total
number of observations. Arithmetic mean represents the entire data by a single value. It
provides the gist and gives the birds' eye view of the huge mass of a widely numerical
data. It is calculated as:
n
1
X= ∑X
n i=1 i
Where:
X = mean volume or arithmetic mean
n

∑ X i = sum of the observation

i=1

n = number of observations

 An average is the sum of a list of numbers divided by the number of numbers in the list.
Most of the time, this is used in finding a number. In mathematics and statistics, this
would be called the arithmetic mean. In statistics, mean, median, and mode are all known
as measures of central tendency.

Correlation coefficient
 It is a statistical tool for measuring the intensity or the magnitude of the linear
relationship between two series. Karl Pearson's measure known as Pearson's correlation
coefficient between two variable and series X and Y is usually denoted by 'r' and can be
obtained.
The Karl Pearson Coefficient of correlation always falls between -1 and 1. The value of
correlation in minus signifies the negative correlation and in plus signifies the positive
correlation. As the value of correlation reaches to zero, it is said there is no significant
relationship between the variables.
The coefficient of variation measures the relative measure of dispersion, hence capable to
compare two variables independently in terms of variability.
σ
C.V. = × 100
x
σ = Standard Deviation
x = sum of the observation

1.8 Limitation of the Study

The analysis performed and conclusion drawn regarding the credit risk management of
SanimaBank Ltd., there is considerable place for arguing about its accuracy and reliability.
The limitations of this study are as follows:
▪ Out of Primary data and Secondary data, only secondary data will be used for the
study.
▪ The time frame preferred for different analysis may vary from subject to subject of
credit risk management. However, sampling of data will be done from Fiscal Year
2071/72(2014/15) to 2075/76(2018/19)
▪ As a matter of fact, credit risk management function is not an independent and
exclusive variable and is related with many other macroeconomic factors. This
study doesn’t consider all the other related forces that influence the credit risk
management efforts of commercial banks and is focused only on the risk
management aspect of the loan.
▪ There are different Financial Institutions in credit risk management such as
development banks, finance companies, and micro-finance financial institutions.
▪ Out of 27 Commercial bank, only Sanima Bank Ltd has been studied.

▪ The study has been felt to be inadequate to some extent due to non-availability of
sufficient literature journals.
▪ The accuracy of the finding depends on the reliability of available information.

▪ The qualitative factors such as growth, expansion, policies, quality of services,

effectiveness of management etc. have been ignored. The non-availability of
various resources also acts as constraints.
▪ This study is simply conducted for the partial fulfillment of requirement for the

degree of the bachelor in business studies (BBS).

1.9 Organization of the Study

The study has been organized mainly into three chapters;

Chapter I: Introduction: includes brief description about the bank and, statement of
problem, objectives of the study, rationale of the study, Literature review, the research
gap, methodology and limitation of the Study.

Chapter II: Presentation and analysis: research design or approach (quantitative or

qualitative); population and/or sample; collection and tabulation of data; and data analysis
procedures; financial analysis; and major findings. Further, it also includes the ways of
presentation of those relevant data and analyzes them in terms of ratio so as to ease the
task of evaluation. Finally, it consists of major findings or the result.

Chapter III: Summary and Conclusion: Presentation of results and findings of project
work. Discussion and Conclusion: Evaluating and interpreting the implications results
obtained.
 CHAPTER II
RESULTS AND ANALYSIS

This chapter is focused with the analysis, presentation, interpretation and major findings of
relevant data of Sanima Bank Ltd. in order to fulfill the objectives of research study.
To obtain better result, the data's have been analyzed according to the research
methodology as mentioned in first chapter. The main purpose of this chapter is to
introduce the mechanics of data analysis and interpretation. With the help of this analysis,
efforts have been made to highlight credit management of Sanima Bank as well as other
cases or problems also. For analysis, different types of analytical methods and tools such
as financial ratio analysis as well as statistical analysis are used. This chapter deals with
the various aspects of credit management such as financial ratios, impact of deposit in
liquidity, priority sector lending, lending efficiency, correlation and trend analysis.

2.1 Presentation of data in table and figure and their analysis

Data presentation and analysis forms an important part of all academic studies,
commercial, industrial and marketing activities as well as professional practices. It is
necessary to make use of collected data which is considered to be raw data which must be
processed to put for any use. Data analysis helps in interpretation of data and take a
decision or answer the research question. Data analysis starts with the collection of data
followed by sorting and processing it. Processed data helps in obtaining information from
it as the raw data is non-comprehensive in nature. Presenting the data includes the pictorial
 representation of the data by using graphs, charts, maps and other methods. These methods
help in adding visual aspect to data which makes it much easier and quick to understand

2.1.1 Financial Statement Analysis

Financial analysis is done by applying various financial tools in order to clear picture on
the viability of the project. The financial analysis is done to ascertain the liquidity,
profitability, leverage, debt servicing and interest servicing ability of the firm. The concept
of financial statement analysis has been already discussed in previous chapter. Here, we
study and analyze the data by using accounting tools.
2.1.1.1 Assets Management Ratio
Asset management means manage or utilization of all about asset. It is also known as
turnover or efficiency ratio or assets management ratio. It measures how efficiently the
firm employs the assets. Turnover means, how much number of times the assets flow
through a firm's operations and into sales greater rate of turnover or conversion indicates
more efficiency of a firm in managing and utilizing its assets, being other things equal.
There are some ratios examined under.

i) Credit and Advances to Fixed Deposit Ratio

Credit and advances clearly state that it is the assets of the bank a fixed deposit is the
liability. It is also known as loan and advance ratio. So, this is the ratio between assets and
liability. This helps to show the ratio of Loan and advances to fixed deposit. We can also
conclude that what part of credit and advances is initiated against fixed deposit.
Credit∧ Advances
Credit & advances to fixed deposit =
¿ Deposit

Table No. 1: Credit and Advances to Fixed Deposit Ratio

(Amount in 1000 Millions)
Year Credit and Fixed Ratio(Times)
advances Deposit
2014/1 20.62 9.44 2.18432
5
 2015/1 28.59 11.71 2.44150
6
2016/1 40.90 12.65 3.23320
7
2017/1 51.84 24.33 2.13070
8
2018/1 83.43 43.34 1.9250
9
Mean 2.38294
Standard deviation 2.0357%
(Sources: Annual report of Sanima Bank Limited from 2014/15 to 2018/19)

From the above table it is visualized that credit and advances to fixed deposit ratios are
increasing and decreasing trend in overall. The ratio of credit and advances to fixed
deposit ratio of Sanima bank in 2014/15 is 2.18432 after that the ratio increased to 2.4415
times in 2015/16. The increasing trend continued till 2016/17 to 3.23320 and then
decreased to 1.9250 times in 2018/15. The mean average ratio is 2.38294 times at research
period. Credit and advances to fixed deposit ratio is represented in figure as follow:

Loan and Advances to Fixed Deposit Ratio

3.5
3
2.5
Ratio in Times

2 Ratio (Times)
1.5
1
0.5
0
2014/15 2015/16 2016/17 2017/18 2018/19
Years

Figure No.1:Credit and Advances to Fixed Deposit Ratio

ii) Credit and Advances to Total Deposit Ratio
Credit and advances are the investing activities of the bank and total deposit is the deposit
amount of the bank collected from its customers or depositors. So, we are trying to find
out the ratio between credit and advances to total deposit. This ratio measures the extent to
which the bank is successful to manage its total deposit on loan and advances for the
purpose of income generation. A high ratio indicates better mobilization of collected
deposit and vice-versa. However, it should be noted that too high ratio might not be better
from liquidity point of view.

Credit∧ Advances
Credit & Advances to total deposit ratio =
Total deposit

Table No.2:Credit and Advances to Total Deposit Ratio

(Amount in 1000 Millions)
Year Credit and Total Ratio(Times)
advances Deposit
2014/15 20.62 24.87 0.82911
2015/16 28.59 34.05 0.83964
2016/17 40.90 46.42 0.88108
2017/18 51.84 58.23 0.89026
2018/19 83.43 89.23 0.93499
Mean 0.875016
Standard Deviation 0.89324%
(Sources: Annual report of Sanima Bank Limited from 2014/15 to 2018/19)
Above table shows that the total loan advances to total deposit ratio of Sanima bank is
constant not more fluctuating trend. The highest ratio is 0.93499 times in year 2018/19 and
lowest ratio is 0.82911 times in year 2014/15. The average mean ratio is 0.875016 times in
the study period. This means the bank is able to proper mobilize the collected deposits. So,
all of the year, the bank tries to meet the NRB requirements or it has to utilize its deposit
 to provide loan. This means that credit management is in good position of the bank. Loan
advances and total deposit are presented in the line figure.

Credit to Deposit Ratio (C/D Ratio)

0.96
0.94
0.92
0.9
Ratio in Times

0.88
0.86 Ratio (Times)
0.84
0.82
0.8
0.78
0.76
2014/15 2015/16 2016/17 2017/18 2018/19
Years

Figure No.2: Credit and Advances to Total Deposit Ratio

iii) Credit and Advances to Total Assets Ratio

Credit and advances to total assets ratio is determined to find out the relationship between
credit & advances to total assets. Credit and advances are the part of total assets. This ratio
helps to find out that how much proportion of credit & advances to total assets.
Credit∧ Advances
Credit & Advances to Total Assets = ×100 %
Total Assets
Table No.3: Credit and Advances to Total Assets Ratio
(Amount in 1000 millions)
Credit
Total
Year and Ratio (Times) Ratio (%)
Assets
advances
2014/15 20.62 29.38 0.70183 70.18
2015/16 28.59 40.3 0.70942 70.94
2016/17 40.9 55.96 0.73088 73.09
2017/18 51.84 69.99 0.74067 74.07
 2018/19 83.43 109.06 0.76499 76.50
Standard Deviation 10.254%
Mean 72.96%
(Sources: Annual report of Sanima Bank Limited from 2014/15 to 2018/19)
From the above table it shows that Sanima Bank has generally mixed or fluctuating trends
of credit and advances to total assets ratio under the study period. The ratios are 70.18%,
70.94%, 73.09%, 74.07% and 76.50% in their respective years. The highest ratio is
76.50% in the year 2018/19 and the lowest ratio is 70.18% in year 2014/15. The average
mean ratio is 72.96% at the time of study. It shows that the bank has capability in utilizing
total assets in the form of credit and advances. Consistency in the utilization of assets in
the form of credit and advances is satisfactory because the fluctuation of the ratio is
minimum. Loan and advances to total assets ratio is represented in figure as below.

Credit to Total Assets Ratio

0.77
0.76
0.75
0.74
Ratio in Times

0.73
0.72 Ratio(Times)
0.71
0.7
0.69
0.68
0.67
2014/15 2015/16 2016/17 2017/18 2018/19
Years

Figure No. 3: Credit and Advances to Total Assets Ratio

2.1.1.2 Leverage Ratio

These ratios are also called capital structure ratio or solvency ratio. These ratios indicate
mix of funds provided by owners and lenders. As a general rule, there should be an
appropriate mix of debt and owner's equity in financing the firm's assets. To judge the
 long-term financial position of the firm, leverage ratios are calculated. This ratio highlights
the long-term financial health, debt servicing capacity, strength and weaknesses of the
firm. Following ratios are included under these leverage ratios:

i) Total Debt to Equity Ratio

Total debt is the liability of the firm and it is payable toward its creditors. Debt includes
the value of deposits from customers, loan & advances payable, bills payable and other
liabilities. Equity is the share capital and reserve of the firm. This ratio shows the
comparison in between total debt and equity.
Total debt = Debentures & Bonds + Borrowings + Deposits + Bills Payable + Proposed &
Undistributed Dividends + Income Tax Liabilities
Total Equity = Share Capital + Reserve and Surplus

Total Debt
Total debt equity ratio =
Equity
Table No. 4: Total Debt to Equity Ratio (Amount in 1000 Millions)
Total
Year Total Debt Ratio (Times)
Equity
2014/15 26.54 28.33 9.36957
2015/16 36.87 34.30 10.74956
2016/17 50.53 53.57 9.43327
2017/18 60.93 90.60 6.72572
2018/19 94.08 11.98 7.84826
Mean 8.83
Standard
7.6721%
Deviation
(Sources: Annual report of Sanima Bank Limited from 2014/15 to 2018/19)
Above table shows Debt to total equity ratio is in increasing trend till 2015/16 and in
decreasing trend from them onwards till the study period of 2018/19. The ratios are
9.36957, 10.74956, 9.43327, 6.72572 and 7.84826 times in the year 2014/15, 2015/16,
2016/17 ,2017/18 and 2018/19 respectively. The average mean ratio is 8.83 times. Excess
 amount of debt capital structure results heavy burden in payment of interest. Risk of
liquidation increase if the debt cannot be repaying in time. High earnings ratio nay
provides high return to the equity shareholders if the bank makes profit. Ratio is
represented in figure below.

Debt to Equity Ratio

12

10

8
Ratio in Times

6 Ratio (Times)

0
2014/15 2015/16 2016/17 2017/18 2018/19
Years

Figure No.4: Total Debt to Equity Ratio

ii) Total Debt to Total Assets
A metric used to measure a company's financial risk by determining how much of the
company's assets have been financed by debt. Calculated by adding short-term and long-
term debt and then dividing by the company total assets. In general, creditors prefer a low
debt ratio & owner prefer a high debt ratio to magnify their earning on one hand and to
maintain their concerned control over the firm on the other hand.
Total Debt
Total debt to Total Assets Ratio =
Total Assets
Table No.5:Total Debt to Total Assets Ratio
(Amount in 1000 millions)

Year Total Debt Total Assets Ratio(Times)

2014/15 26.544 29.38 0.90347

2015/16 36.871 40.3 0.91491
2016/17 50.534 55.96 0.90304
 2017/18 60.935 69.99 0.87062
2018/19 94.08 109.06 0.862644
Mean 0.89
Standard
6.562%
Deviation
(Sources: Annual report of Sanima Bank Limited from 2014/15 to 2018/19)

In the above table the ratios are found as 0.90347, 0.91491, 0.90304 ,0.87062 and
0.862644 times from 1st to 5th year of the study periods 2014/15 to 2018/19 respectively.
The average mean ratio in 5 years research period is 0.89 times. It means almost 8% of
total assets is financed by the outsider’s finds. Ratio is represented in figured as below.

Debt to Total Assets Ratio

0.92
0.91
0.9
0.89
Ratio in Times

0.88
Ratio(Times)
0.87
0.86
0.85
0.84
0.83
2014/15 2015/16 2016/17 2017/18 2018/19
Years

Figure No. 5: Total Debt to Total Assets Ratio

iii) Total Assets to Total Book Net Worth Ratio

The ratio is calculated to find out the proportion of owner's fund to finance for the total
assets. Total assets comprise of the total value of the asset side of balance sheet whereas
net worth is the sum of the paid-up capital plus reserve and retained of the bank. It is
calculated to see the amount of assets financed by net worth.
 2.1.1.3 Loan and Advances Analysis
i) By Product Type
Loan and advances of Sanima Bank Limited by product wise for the financial year
2018/19 is as follows:
(Amounts in Millions)
Loan Type Amount
Term loans 17,267
Overdraft 8,238
Trust receipt/Import loans 2,154
Demand and other working capital loans 14,527
Personal residential loans 5,873
Real estate loans 5,870
Margin lending loans 299
Hire purchase loans 4,929
Deprived sector loans 2,121
Bills purchased 6
Staff loans 751
Other 20,115
Total 82,149
 Loan By Product Type

Term loans Overdraft

Trust receipt/Import loans Demand and other working cap-
ital loans
11% Personal residential loans Real estate loans
5%
1%
9% Margin lending loans Hire purchase loans
50% 4% Deprived sector loans Bills purchased
4%
0%
3%
1%
0% Staff loans Other
12%
Total

Figure: Pie chart of loan by product type in FY 2018/19

From the above table and Pie Chart, it is observed that the major portfolio of investment of
bank is in terms of term loan and demand and other working capital loan. Most risky loan
of the bank is real state loan and import loan. So, the bank should diverse its investment in
the form of loan from real state and personal loan to purposeful business loan as directed
by NRB Directives 2075.

ii) By Currency Type

Loan and advances of Sanima Bank Limited by currency wise for the financial year
2018/19 is as follows: (Amounts in Millions)

Currency Type Amount

Nepalese rupee 80,833
Indian rupee 0
United State dollar 1,539
Great Britain pound 0
Euro 62
Japanese yen 0
Chinese yuan 0
Other 0
 Total 82,435

Loan By Currency Type

Nepalese rupee
0%
2%
Indian rupee
United State dollar
Great Britain pound
Euro
Japenese yen
Chinese yuan
Other
98%

Figure: Pie chart of loan by currency type in FY 2018/19

From the above table and pie chart, it is observed that major loan of bank is disbursed in
Nepalese currency which reduces risk of fluctuation in exchange rates.
iv) By Collateral Type
Loan and advances of Sanima Bank Limited by Collateral wise for the financial year
2018/19 is as follows: (Amounts in Millions)
Collateral Type Amount
Movable/immovable assets 80,548
Gold and silver 79
Guarantee of domestic B/Fis 0
Government guarantee 0
Guarantee of international rated bank 0
Collateral of export document 608
Collateral of fixed deposit receipt 530
 Collateral of Government securities 1
Counter guarantee 0
Personal guarantee 28
Other collateral 641
Total 82,435

Loan By Collateral Type

Movable/immovable assets Gold and silver

Guarantee of domestic B/Fis Government guarantee
Guarantee of international Collateral of export doc-
1%
1%
0%
0%
1% rated bank ument
Collateral of fixed deposit Collateral of Government
receipt securities
Counter guarantee Personal guarantee
98%
Other collateral

Figure: Pie chart of loan by collateral type in FY 2018/19

From the above table and pie chart, it is observed that the major portion of loan disbursed
is secured by movable and immovable assets.The loan disbursed on the basis of counter
guarantee, personal guarantee and export document is less which reduces credit risks of
chances of default by borrower.

2.2 Major Findings

 Credit and advances to fixed deposit ratio of Sanima is fluctuating trend. The average
mean ratio is 2.38294 times during the study period. Credit and advances to total deposit
ratio is little fluctuating trend. The mean ratio is 0.87 times during the study period.
Similarly, credit and advance to total assets ratio is also in fluctuating trend. The average
mean ratio percentage is 72.96% during the study period. The ratio indicates the high
contribution made by lending and investing activities. Thus, credit management is in
good position.
 The debt-to-equity ratio of Sanima Bank is in fluctuating trend during the study period.
The average mean ratio is 8.83 times. Excess amount of debt capital structure results
heavy burden in payment of interest. Risk of liquidation increase if the debt cannot be
repaying in the time.
 The debt to assets ratio of Sanima is low or in other words they have not excessively
geared capital structure. On an average 8.9% of assets are financed through debt capital
that is outsiders cost bearing fund, which implies that the bank has low riskier debt
financing position. Total asset to net worth of Sanima Bank is in fluctuating trend. The
average mean ratio is 8.9 times at the study period. It is in good company.
 Profitability ratios are very helpful to measure the overall efficiency in operation of a
financial institution.
 Operating profit to loan and advances ratio of Sanima Bank is in increasing trend. The
average mean ratio percentage over the study period is 3.99%. This shows the better
profitability position of the bank.
 Return on loan and advance ratio of Sanima Bank is also in increasing trend during the
study period. It indicates contribution in return is increasing by loan and advance. The
average mean ratio percentage is 2.24%. This shows the normal earning capacity of
Sanima Bank in loan and advances.
 Loan loss provision to total loan advances ratio of Sanima Bank is in fluctuating trend.
The mean ratio percentage is 0.36% during the study period. This shows that good quality
of assets in total volume of loan and advances. It indicates aggregate loan of banks are
safe.

Thus, credit management is in good position. So, the bank has met and maintained the
NRB requirement in all year.
 CHAPTER III
SUMMARY, CONCLUSIONS AND RECOMMENDATION
The research is about the Analysis of Credit Risk Management of Sanima Bank. In this
chapter, summary conclusion and recommendations are included. All the summary and
conclusions are made accordingly from obtained data from analysis. Recommendation has
made which would be beneficial for the management of the bank and other stakeholders.

3.1 Summary
These findings may be useful for them who are concerned directly or indirectly with the
credit management of the bank especially reference to Sanima Bank. On the basis of above
analysis and findings of the study, following suggestions and recommendations can be
drawn out:
 Cash and bank balance of Sanima Bank is high. Banks efficiency should be
increased to satisfy the demand of depositor as low level of cash and bank balance
does not provide return to the bank. Therefore, some percentage of the cash and
bank balance should be invested in profitable sectors.
 Bank is suggested to make policy to ensure rapid identification of delinquent loans.
Bank should make immediate follow-up of loan until it is recovered. The recovery
of loan is very challenging as well as important part of the bank. Therefore, bank
must be careful to strengthen credit collection policy.
 NRB recommended following NRB directives which will help to reduce credit risk
arising from defaulter, lack of proper credit appraisal, defaulter by block-listed
borrowers and professional defaulter. Government has established credit
information bureau, which will provide suggestion to commercial bank. So,
 Sanima Bank Limited is suggested to collect as much information about borrowers
and only lend to non-risky area and to non-defaulter.
 Sanima Bank should be fulfilling some social obligations by extending their
resources to rural areas and promoting the development of poor and disadvantages
group. In order to do so, they should open their branches in the remote areas with
the objective to provide the banking services. The minimum deposit amounts
should be reduced.
 The economic liberalization policy adopted by Nepal Government has created an
environment of cutthroat competition in the banking sectors. In this context,
Sanima Bank is suggested to formulate strategies to minimize their operational
expenses to meet required level of profitability.
 According to NRB directives, all the commercial banks should increase the capital
up to Rs. 8000 million. Sanima have met the required capital as by the NRB
directives.

3.2 Conclusion
The study is conducted on Analysis of Credit Risk Management of Sanima Bank Ltd.,
which is one of the leading commercial banks of Nepal. Sanima has been maintaining a
steady growth rate over this period. Sanima has earned a net profit of Rs.2,273.57 million
for the fiscal year 2018/19 and this comes to be significant increase as compared to the
same period in the previous fiscal year. Sanima earned an operating profit of Rs.3,256.33
million for the fiscal year 2018/19 and this comes to be 35.21% more as compared to the
same period in the previous fiscal year. Similarly, total deposit is Rs.89,373million for the
fiscal year 2018/19 and this comes to 14.80% more as compared to the same period in the
previous fiscal year. Similarly, total loan is Rs.95,029million which is increased by
23.51% compared to previous fiscal year.
Loan loss provision to total loans and advances ratio of Sanima Bank is in fluctuating
trend. This shows the good quality of assets in total volume of loans and advances. Ratio
in decreasing trend indicates that the bank is decreasing the non-performing loan from
total loan.
3.3 Recommendations
With the help of above research, I found some weakness of the bank in the field of Credit
Risk Management. So, to overcome such weakness researcher provides following
recommendation to the management of Sanima Bank Limited. They are as follows: -
 The Bank should have extensive policy and guidelines to mitigate creditrisks.
 The Bank’s credit policy should have strengthened minimizingcredit risk and
provided support to make qualitative analysisbased on sound credit principles and
procedures.
 Bank should havea policy to consider as security for pledge, hypothecated
ormortgage which have value considering physical control andlegal title.
 Bank should have considered eligible CRM as prescribed byCapital Adequacy
standard.
 Collateral taken as Deposit with ownBank, Deposit with other BFIs, National
Saving & DevelopmentBonds, and Gold & Silver should have considered as CRM
andadjusted on overall risk weighted exposure on credit risk in linewith the
standard.
 The Bank should have developed a risk assessment culture and has inplace the
required reports for assessing concentration of risks.Periodic performance reporting
based on Balanced Scorecard,in line with capital strength, to the Board is also in
place. Thesereports are periodically put up to the board. Board also reviewsthe
same and issues instructions, as appropriate, to the Bank’smanagement.

 The amount and type of collateral required depends on anassessment of the credit
risk of the counterparty. Guidelines should bein place covering the acceptability
and valuation of each typeof collateral.

The general creditworthiness of customers tendsto be the most relevant indicator of

credit quality of a loan.However, collateral provides additional security and the
Bankgenerally requests large borrowers to provide same. The Bankmay take
collateral in the form of a first charge over real estateand residential properties,
floating charges over all corporateassets and other liens and guarantees. The
Bank’s policy shouldpursue timely realization of the collateral in an orderly
manner.The proceeds are used to reduce or repay the outstanding claim.The Bank
generally does not use non-cash collateral for its ownoperations.
BIBLIOGRAPHY
Adhikari, B.R. (2010). Credit Management of Sanima Bank Limited, Unpublished thesis,
Tribhuvan University Nepal.
Bhandari, D.R. (2006). Banking and Insurance Management. Kathmandu: Ayush
Prakashan.
Burlakoti, D.R. (2009). Credit Management position of Sanima Bank Limited,
Unpublished thesis, Tribhuvan University Nepal.
Duchassi, Shawk and Seagle (2006). A Knowledge-Engineered System for Commercial
Loan Decisions. Website
Shrestha, B. (2017). Credit Risk Management of Sanima Bank Limited, Unpublished
thesis, Tribhuvan University Nepal.
Singh and Singh (2009). Financial Analysis for Credit Management in Banks. New
Delhi: Wiley Eastern Limited.
Websites:
 www.google.com
 www.nrb.org.np
 www.sanimabank.com
APPENDIX