CHAPTER I

INTRODUCTION

1.1 Background of the Study

The term “portfolio” refers to any combination of financial assets such as stocks, bonds
and cash. Portfolios may be held by individual investors or managed by financial
professionals, hedge funds, banks and other financial institutions. It is a generally
accepted principle that a portfolio is designed according to the investor's risk tolerance,
time frame and investment objectives. The monetary value of each asset may influence
the risk/reward ratio of the portfolio. When determining asset allocation, the aim is to
maximize the expected return and minimize the risk. This is an example of a multi-
objective optimization problem, and many efficient solutions are available, and the
preferred solution must be selected by considering a tradeoff between risk and return.

Investing in corporate securities is profitable as well as exciting. One should not forget
the element of risks from investing in individual security. Risk arises when there is a
possibility of variation around expected return from the security. As all securities carry
varying degrees of risks, holding more than one security at a time enables an investor to
spread his risks. The investor hopes that even if one security incurs a loss the rest will
provide some protection from an extreme loss. Thus, portfolios or combination of
securities are thought of as a device to spread risk over many securities.

In olden days, the traditional portfolio managers diversified funds over securities of large
number of companies based on intuition. They had no real knowledge of implementing
risk reduction. Since 1950, a body of knowledge has been built up which quantifies the
expected risk and the riskiness of the portfolio. The portfolio theory has been developed
to provide the management a technique to evaluate the merits and demerits of investment
portfolio.

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Portfolio management refers to the act of selecting the right investment policy for the
individuals in terms of minimum risk and maximum return. In the 1969s, the investment
community discussed the risk, however there is no specific measure for it. Investors need
to quality the risk in order to build a portfolio model. There are many finance companies
operating recently in Nepal. A portfolio is a collection of financial investments like stock,
bonds, commodities, cash and cash equivalent. People generally believe that stocks,
bonds and cash comprise the core of the portfolio. The art of selecting the right
investment policy for the individuals in terms of minimum risk and maximum return is
called portfolio management. The art of selecting the right investment policy for the
individuals in terms of minimum risk and maximum return is called portfolio
management.

Portfolio management refers to managing an individual’s investments in the form of

bonds, shares, cash, mutual funds etc. so that he earns the maximum profits within the
stipulated time frame. Portfolio management refers to managing money of an individual
under the expert guidance of portfolio managers.

In a layman’s language, the art of managing an individual’s investment is called portfolio

management.

Portfolio management is the art and science of selecting and overseeing a group of
investments that meet the long-term financial objectives and risk tolerance of a client, a
company, or an institution.

Portfolio management requires the ability to weigh strengths and weaknesses,

opportunities and threats across the full spectrum of investments. The choices involve
trade-offs, from debt versus equity to domestic versus international and growth versus
safety.

Types of Portfolio Management which are mentioned below:

 Active Portfolio Management

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The aim of the active portfolio manager is to make better returns than what the market
dictates. Those who follow this method of investing are usually contrarian in their
approach. Active managers buy stocks when they are undervalued and start selling when
they climb above the norm. Active portfolio management involves the quantitative
analysis of companies to determine the cost of stock in relation to its potential. To do this,
the active manager shuns the efficient market hypothesis and instead relies on ratios to
support his claim.

To downsize risk, the active manager prefers to diversify investments amongst the
various sectors. The issue with active portfolio management is that it all comes down to
the manager's skill. But should you find one with the necessary know-how, the value
investing method will likely bring in good gains.

 Passive Portfolio Management

At the opposite end of active management comes the passive investing strategy. Those
who subscribe to this theory believe in the efficient market hypothesis. The claim is that
the fundamentals of a company will always be reflected in the price of the stock.
Therefore, the passive manager prefers to dabble in index funds which have a low
turnover, but good long-term worth. With index funds, your cash is invested
percentagewise in proportion to the market capitalization. What this means is that if a
company represented 2% of the 500 Index, then Rs. 2 would be invested in the company
for every Rs.100 put into the 500 fund.

The point of opting for the lower yield is to combat the cost of management fees, while
profiting through stability.

 Discretionary Portfolio Management

A discretionary manager is given full leeway to make decisions for the investor. While
the individual goals and timeframe are considered, the manager adopts whichever

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strategy he thinks best. Once the cash has been handed to the professional, the investor
sits back and trusts that the profits will roll in.

 Non-Discretionary Portfolio Management

The non-discretionary manager is simply a financial counselor. He advises the investor

which routes are best to take. While the pros and cons are clearly outlined, it is up to the
investor to choose his own path. Only once the manager has been given the go ahead,
does he make a move on the investor's behalf.

Whether you decide to use a portfolio manager or choose to take on the role yourself, it is
important to opt for a viable strategy and ensure that it is put forward in a logical way.
The merit of maintaining a sensible portfolio is that it cuts down the confusion while
providing investments that fit the individual's goals.

Hence, SWOT analysis is a useful way that helps Portfolio Management to analyze the
strengths, weaknesses, opportunities and threats that influence and affect the progress of
the concerned issue. It is primarily a strategic management tool that enables one to plan
efficiently regarding the four aspects described above with respect to a project or a
business venture.

Self-analysis plays a significant part in personal progress but is often the most
complicated process to accomplish. The difficulty in conducting a self-analysis lies in the
fact that one hardly tries to find faults with oneself. However, with the proper
identification of the strengths and weaknesses that are internal in nature, it has been
observed that one becomes able to perform better and combat the threats and overcome
the weaknesses using the strengths one has and efficient utilization of the opportunities
one can avail. The basic to better performance thus lies in the fact lies in the
identification of one’s strengths, weaknesses and threats and opportunities in Portfolio
Management

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1.2 Profile of ICFC Finance Limited

A finance company is an organization that makes loans to individuals and businesses.

Unlike a bank, a finance company does not receive cash deposits from clients, nor does it
provide some other services common to banks, such as checking accounts. Finance
companies make a profit from the interest rates (the fees charged for the use of borrowed
money) they charge on their loans, which are normally higher than the interest rates that
banks charge their clients.

ICFC Finance Limited, registered in 2003 under Company Act 2053 and Bank & Finance
Ordinance, 2060 commenced its operations from July 17, 2004. Headquartered at
Bhatbhateni, Kathmandu Nepal. ICFC has been promoted primarily to cater to the
financial needs of small and medium enterprises.

It consists of one head office located in Bhatbhateni, Kathmandu Nepal. Gwarko,

Jorpati, New Road, Pepsicola, Mitranagar, Gangabu, Dilibazar, Boudha are the branches
of ICFC. Jorpati, New Road, Maitidevi, Boudha was the ATM location of ICFC finance.
ICFC has, authorized capital of Rs2000 million, and issued capital Rs882.17 million.

Similarly, ICFC Finance Limited is issuing a total of 2 Lakh units of debentures at par
value of Rs.1000 per unit. The total value of the issue is Rs.20 Crore and will provide
12% interest. The debentures will mature in 7 years i.e., 2083. 80,000 units (40% of the
issue) is for the public while 120,000 units (60% of the issue) will be privately placed.

Mission

ICFC seeks to facilitate the increasing credit demands of its customers through innovative
and sophisticated financial instruments through state-of-the-art technology and best
international practices.

Objectives

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With the advent of WTO and the integration of the global economy, financial markets are
ever becoming more and more specialized and complex. This complexity gives rise to
different challenges and opportunities. ICFC seeks to identify and exploit these
challenges and opportunities to benefit its customers through value added services.

Technology

The company is striving to achieve a paperless working environment with modern

banking Technology. For day-to-day efficient operation, we are using the latest
virtualization technology with renowned core banking software PUMORI PLUS IV,
which provides real-time services to our valuable customers across all branches. The
system provides easy access and use of database information for proper decision-making
purposes. The system also includes a recovery system for disaster and accidental failure.
The company is also extensively wired with the latest networking safeguard technologies.

To achieve the objective of an organization the company has highly competitive and
energetic human resources. The Company currently employs an adequate number of staff
with a high level of academic qualification and professional skills to ensure smooth
operation of its services. All the staff have undergone extensive training, both practical
and theoretical - which enables them to deliver the best value-added services to their
clients.

Brard of Directors of ICFC Finance Limited

Table no 1. List of board of directors are as follows:

Chairman Ram Babu Pant

Director Shyam Singh Pandey
Director Sushil Kumar Aryal
Director Achyut Prasad Acharya
Director Tanka Ram Gautam
Director Hemsikha Joshi Garg

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 Management team of ICFC Finance Limited.

Table No 2. Lists of management team of ICFC finance are listed below:

Chief executive officer Sunil Pant

Deputy General Manager Amit Shrestha
Assistant General Manager Lachhaman Prasad Jaisi

Services

The ICFC finance provides the following services.

ATM services

ICFC Finance Limited is committed to providing its valued customers with a large
network of Self-Service Terminals like Automated Teller Machines (ATMs). For
convenience, numerous ATMs have been installed inside and outside Kathmandu valley
as well.

Cards Accepted by ICFC ATMs

 SCT
 Visa
 Maestro
 Union Pay
 DISCOVER
 Diners Club INTERNATIONAL
 Services Rendered by ICFC ATMs

Fast Cast

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  Withdrawal
 Balance Enquiry
 POS Transactions

Mobile Banking Services

Mobile banking is the latest innovation in our mobile banking facility that aims to deliver
unmatched modern day banking experience to our customers. It is a unified digital
banking solution that empowers you with the services of mobile banking, internet
banking and digital payments; all in one place delivered right through your mobile phone.
You can now literally bank at your fingertips and discover quick, simple and convenient
ways to get complete control over your accounts through your mobile.

Mobile banking app is a user-friendly mobile banking app and is available for all major
smart phones platforms and supports both the SMS and GPRS access channels giving
you the option to use either one depending on the availability of network and internet
access.

Safe Locker Deposit Facility

ICFC announces that we have launched Safe Locker Deposit Vault facilities for your
valuable items and accessories from various branches of ICFC.

You can have Locker facility from following listed branches of ICFC:

 Head Office, Thirbum Sadak,Bhatbhateni

 Boudha Branch
 Maitidevi Branch
 Pepsicola Branch

Utility Bill Payment

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Customers can make payment of utility bills through e-sewa from the counter of ICFC
Finance Limited.

C-ASBA Facility

ICFC gives access of CASBA facility to our entire customer who wishes for IPO/FPO
and Right Share investment

Inter Banking Transaction Services

ICFC finance provides inter banking facilities regarding an arrangement between two
banks in which one holds funds in an account for another institution. The interbank
deposit arrangement requires that the holding bank opens a due to account for the other.
This is a general ledger account with funds payable to the party. Inter banking services
are as follows,

 Electronic Cheque Clearing System (ECC):

Electronic Cheque Clearing (NCHL-ECC) is an image-based, cost-effective, MICR

(Magnetic Ink Character Recognition) cheque processing & settlement solution where an
original paper cheque is converted into an image for electronic processing of the financial
transactions between participating member Banks/FIs. The physical movement of the
cheques are truncated or stopped at the level of the presenting bank in the NCHL-ECC
System. The cheque does not physically travel to the clearing house or to the paying
branch as it used to do in the manual clearing process, resulting in faster and easier
processing of the cheque transactions.

 Inter Bank Payment System (IPS)

NCHL-IPS is a system to safely and efficiently transfer funds from one account to any
other account held at any of the participating member banks & financial institutions
(BFIs). It supports account to account payments (Direct Credit) and collection (Direct

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Debit) related transactions. The underlying transaction could be for various purposes
defined as products.

 Inter Bank Payment System ePayment (connectIPS ePayment):

Connect IPS e-Payment is a single electronic platform for the bank customers to initiate
their payment transactions directly from the bank accounts. It works as a payment
processor for creditor/ merchant payments and supports account to account fund
transfers. However, the user needs to enroll within connect IPS, link its bank account and
verify the linked account from its bank, as a one-time process. The services that are
currently available through connect IPS e-payment include Government payments,
Online Fund transfer, Credit card bill payments, Mobile wallet top-up and Share brokers
payments. Other services will be added in the near future.

Class “C” financial institution Sub-Section (1) ICFC finance limited undertakes the
following function carried out according to Bank and Financial Institution act (BAFA)
2073 CHAPTER 7 SECTION 49 subject to this Act and the Memorandum of Association
and Articles of Association, the limitation and conditions imposed, and directives issued
by the Rastra Bank: -

 To disburse credit for hire-purchase, leasing, housing loans.

 To make arrangements for jointly disbursing credits based on consortium
financing in collaboration with other banks or financial institutions in accordance
with the mutual agreement entered into for the division of the collateral pari
passu.
 To accept loans having mortgaged its movable and immovable assets.
 To properly manage its assets, to sell or rent or lease them out.
 To issue, accept, make payment, discount or purchase and sell bills of exchange,
promissory notes, cheques, travelers' cheques or other financial instruments.
 To carry on the transaction of foreign currencies by obtaining approval from the
Rastra Bank’
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  To disburse installment or hire-purchase loan to any person, firm, company or
institution for motor vehicles, machinery, tools, equipment, durable household
goods or similar other movable property.
 To provide leasing finance to any person, firm, company or institution to hire
vehicles, machines, tools or instruments, household durable goods, or similar
types of movable assets or to accept or provide such goods on hire.
 To issue guarantees on behalf of its customers and to cause to be executed
necessary bonds with such customers, to acquire their movable or immovable
assets as collateral or on mortgage, or the assets of third persons as collateral in
consideration thereof,
 To sell off or leasing out whole or part of its assets.
 To prescribe prices of goods on consent with the finance company and seller in
case any goods procured must be sold to other purchaser on current price or
deferred price.
 To carry out other functions as may be prescribed by the Rastra Bank.

1.3 Objectives of the Study

Undoubtedly the role of the finance company in mobilizing and utilizing scare
and scattered resources of nation is praiseworthy one. The basic objective of the
study is to have true insight into portfolio management of finance companies. The
specific objectives of this study are given below:
1. To examine net profit of an organization
2. To examine the deposits, mix of the organization.
3. To examine the loan and advances of an organization
4. To determine an operating income and expenses
5. To examine the net worth of an organization.
6. To evaluate the book value and market value of assets

1.4 Rational of the Study

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To the important sector of the economy the focus of the study is to highlight the portfolio
management of finance company with the expectation the study can bridge the gap
between deposit and investment. In the other hand, the study would provide information
to management of the finance company that would help to take collective actions.

In the Context of Nepal, there is less availability of research works, journals, and articles,
in portfolio management of finance company as well as other financial institutions. As is
well known, the success and prosperity of the finance company heavily rise upon the
successful investment of the collected resources. The main significance of this study if
investment portfolio analysis of Nepalese finance company is to help how to minimize
risk on investment and maximize return through portfolio analysis.

The study of finance companies' portfolio management, credit management, risk return
pattern, investment trends.

 It will be helpful to concerned financial institutions for developing policies and

strategies
 It will be valuable property for decision making.
 It will provide detailed information about the company’s strengths and
weaknesses.
 It helps to communicate to all the stakeholders

1.5 Review

This chapter deals with theoretical aspect of the topic on portfolio management. It
provides the foundation for developing a comprehensive theoretical framework and
knowledge of the status relevant to the field of research in order to explore the relevant
facts for the reporting purpose. For this, NRB's directives books, journals, articles, annual
reports, and some related research papers have been reviewed. This chapter has been
broadly classified into two sectors: theoretical perspective and review of related Studies.

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The stream which deals with managing various securities and creating an investment
objective for individuals is called portfolio management. Portfolio management refers to
the art of selecting the best investment plans for the individual concerned which
guarantees maximum returns with minimum risks involved.

Portfolio management is generally done with the help of portfolio managers who, after
understanding the client’s requirements and his ability to undertake risks design a
portfolio with a mix of financial instruments with maximum returns for a secure future.

According to Haines 2009 “Effective product portfolio management requires a close

degree of oversight, continuous monitoring and review of past and current performance,
and determination to rebalance and rationalize the portfolio as necessary “

According to OGC 2004. “Portfolio management is a corporate, strategic level process

for coordinating successful delivery across an organization’s entire set of programmers
and projects. The total set of programmers and projects within an organization is known
as the ‘portfolio’ and this represents a complete picture of the organization’s commitment
of programmed and project resources and investment to delivering its strategic
objectives”

Portfolio management requires making decisions about investment mix and policy,
matching investments to objectives, asset allocation for individuals and institutions, and
balancing risk against performance. The concept explores these in more detail and offers
a few case studies on how companies across different sectors benefit from it.

This chapter deals with the theoretical aspects of the topic on portfolio management it
provides the foundation for developing a comprehensive theoretical frame work and
knowledge of the status relevant to the field of research in order to explore the relevant
facts for the reporting purposes for this ICFC Finance Limited directives, books, journals,
articles, annual reports and some related research paper have been reviewed. This chapter
has been broadly classified into two sectors; theoretical prospective and the reviewed of
the related studies. The extensive review of literature is aimed at improving our
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understanding of theoretical and practical concepts underpinning the process of project
portfolio section during the literature review

1.7 Research Methods

Research methodology is the path through which researchers need to conduct their
research. It shows the path through which these researchers formulate their problems and
objective and present their result from the data obtained during the study period. This
research design and methodology chapter also shows how the research outcome at the
end will be obtained in line with meeting the objective of the study. This chapter hence
discusses the research methods that were used during the research process. It includes the
research methodology of the study from the research strategy to the result dissemination.
I

In this chapter, the author outlines the research strategy, research design, research
methodology, the study area, data sources such as primary data sources and secondary
data, population consideration and sample size determination such as questionnaires
sample size determination and workplace site exposure measurement sample
determination, data collection methods like primary data collection methods including
workplace site observation data collection and data collection through desk review, data
collection through questionnaires, data obtained from experts opinion, workplace site
exposure measurement, data collection tools pretest, secondary data collection methods,
methods of data analysis used such as quantitative data analysis and qualitative data
analysis, data analysis software, the reliability and validity analysis of the quantitative
data, reliability of data, reliability analysis, validity, data quality management, inclusion
criteria, ethical consideration and dissemination of result and its utilization approaches.
To satisfy the objectives of the study, a qualitative and quantitative research method is
apprehended in general. The study used these mixed strategies because the data were
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obtained from all aspects of the data source during the study time. Therefore, the purpose
of this methodology is to satisfy the research plan and target devised by the researcher.

As it is indicated in the title, this chapter includes the research methodology of the
dissertation. In more details, in this part the author outlines the research strategy, the
research method, the research approach, the methods of data collection, the selection of
the sample, the research process, the type of data analysis, the ethical considerations and
the research limitations of the project. The research conducted with respect to this
dissertation was an applied one, but not new. Rather, numerous pieces of previous
academic research exist regarding the role of DMOs in promoting and managing the
portfolio of bank and financial not only for finance companies in specific. This chapter
focuses and deals with a following aspects or methodology

Research Methodology
Research Design
Population Sampling

Methodology

Quantitative Research

Qualitative data is defined as the data that approximates and characterizes. Qualitative
data can be observed and recorded. This data type is non-numerical in nature. This type
of data is collected through methods of observations, one-to-one interviews, conducting
focus groups, and similar methods. Qualitative data in statistics is also known as
categorical data. The data that can be arranged categorically based on the attributes and
properties of a thing or a phenomenon.

Qualitative Research

Qualitative data collection is exploratory; it involves in-depth analysis and research.

Qualitative data collection methods are mainly focused on gaining insights, reasoning,
and motivations; hence they go deeper in terms of research. Since qualitative data cannot
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be measured, researchers prefer methods or data collection tools that are structured to a
limited extent.

Research Design

The design of a piece of research refers to the practical way in which the research was
conducted according to a systematic attempt to generate evidence to answer the research
question. The term "research methodology" is often used to mean something similar,
however different writers use both terms in slightly different ways: some writers, for
example, use the term "methodology" to describe the tools used for data collection, which
others (more properly) refer to as methods

The research design is intended to provide an appropriate framework for a study. A very
significant decision in research design process is the choice to be made regarding
research approach since it determines how relevant information for a study will be
obtained; however, the research design process involves many interrelated decisions.

This study employed a mixed type of methods. The first part of the study consisted of a
series of well-structured questionnaires for management, employee’s representatives, and
technician of industries and semi-structured interviews with key stakeholders in
participating organizations. The other design used is an interview of employees to know
how they feel about safety and health of their workplace, and field observation at the
selected industrial sites was undertaken.

Hence, this study employs a descriptive research design to agree on the effects of
occupational safety and health management system on employee health, safety, and
property damage for selected manufacturing industries.

Population and Sampling

A sample is a random selection of members of a population. It is a smaller group drawn

from the population that has the characteristics of the entire population. The observations
and conclusions made against the sample data are attributed to the population. The
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information obtained from the statistical sample allows statisticians to develop
hypotheses about the larger population.

Sampling is a process used in statistical analysis in which a predetermined number of

observations are taken from a larger population. The methodology used to sample from a
larger population depends on the type of analysis being performed, but it may include
simple random sampling or systematic sampling.

Among the different financial institution functioning in Nepal ICFC finance has been
selected as a sample for the study. Since the sample of financial institution is performing
well and this will provide traditional as well as modern facilities.

Sampling Design

A sample design is the framework, or road map, that serves as the basis for the selection
of a survey sample and affects many other important aspects of a survey as well. In a
broad context, survey researchers are interested in obtaining some type of information
through a survey for some population, or universe, of interest. One must define a
sampling frame that represents the population of interest, from which a sample is to be
drawn. The sampling frame may be identical to the population, or it may be only part of it
and is therefore subject to some under coverage, or it may have an indirect relationship to
the population.

Sampling Units: Portfolio management

Sampling Size: Last five years of portfolio management data.

Data Analysis:

Data analysis is defined as a process of cleaning, transforming, and modeling data to

discover useful information for business decision-making. The purpose of data analysis is
to extract useful information from data and take the decision based upon the data
analysis. Hence, data analysis is a process of inspecting, cleaning, transforming, and

17
modeling data with the goal of discovering useful information, informing conclusions,
and supporting decision-making. Data analysis has multiple facets and approaches,
encompassing diverse techniques under a variety of names, and is used in different
business, science, and social science domains. in today's business world, data analysis
plays a role in making decisions more scientific and helping businesses operate more
effectively.

1.7.1 Types of Data

Primary Data

A primary data source is an original data source, that is, one in which the data is collected
firsthand by the researcher for a specific research purpose or project. Primary data can be
collected in several ways. However, the most common techniques are self-administered
surveys, interviews, field observation, and experiments. Primary data collection is quite
expensive and time consuming compared to secondary data collection. Notwithstanding,
primary data collection may be the only suitable method for some types of research.

Secondary Data

Secondary data is usually defined in opposition to primary data. The latter is directly
obtained from first-hand sources by means of questionnaire, observation, focus group, or
in-depth interviews, whereas the former refers to data collected by someone other than
the user. In other words, secondary data refers to data that has already been collected for
some other purpose. Yet, such data may be very useful for one’s research purposes.
Secondary sources of data like annual reports and different articles are taken into
consideration for this study. Information is gathered from published financial statements
i.e., Balance Sheet, Profit and loss account, cash flows, statement changes equity and
Notes of accounts

Data Collection Procedure

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This study aims to answer the problems and statement as mentioned in chapter one and
management of portfolio are done accordingly.

1.8 Limitation of the Study

 This study is simply a partial study for the fulfillment of BBS Degree. The
limitation of this study is as follows:
 This study is mainly focused on secondary data.
 Due to an insufficient time limit all the dimensions of the subject matter and
resources cannot be covered.
 The study covered only five fiscal years.

CHAPTER II

RESULT AND ANALYSIS

2.1 Data Presentation

Data Presentation forms an integral part of all academic studies, commercial, industrial
and marketing activities as well as professional practices. Presentation requires skills and
understanding of data. It is necessary to make use of collected data which is raw data. It
must be processed to be used for any application. Data analysis helps in the interpretation
of data and helps take a decision relation portfolio management of ICFC Finance limited.
This can be done by using various Data processing tools and Software’s. Analysis starts
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with the collection, followed by processing. This processing can be done by various data
processing methods. Processed data helps in obtaining information from it, as the raw
form is non-comprehensive in nature. Presenting the data includes the pictorial
representation by using graphs, charts, maps and other methods. These methods help in
adding the visual aspect which makes it much more comfortable and easier to understand.
This visual representation is also called data visualization. Representation depends on the
available data point, data set, format, file format, available tools etc.

2.2Analysis of Results

Deposits

Bank deposits consist of money placed into banking institutions for safekeeping. These
deposits are made to deposit accounts such as savings accounts, checking accounts, and
money market accounts. The account holder has the right to withdraw deposited funds, as
set forth in the terms and conditions governing the account agreement. Generally, there
are three types of deposits which are as follows:

Savings Deposits

Deposit Savings accounts offer account holders interest on their deposits. However, in
some cases, account holders may incur a monthly fee if they do not maintain a set
balance or a certain number of deposits. Although savings accounts are not linked to
paper checks or cards like current accounts, their funds are relatively easy for account
holders to access.

Fixed Deposits

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which

provides investors a higher rate of interest than a regular savings account, until the given
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maturity date. It may or may not require the creation of a separate account. It is known as
a term deposit or time deposit.

Other Deposits:

The deposits rather than saving deposits and fixed deposits are called other deposits,
which are call account deposits, current accounts deposits.

Table NO 3. ICFC Finance had collection deposit types of five fiscal year

Types of Deposits Years

in (%) 2079/78 2078/77 2077/76 2076/75 2075/74
Saving Deposits 26 27.27 56 53 69
Fixed Deposits 62 56.4 44 47 31
Other Deposits 12 16.73 0 0 0
Source: Annual Report of ICFC Finance Limited

In the given table the deposits percentage of ICFC Finance limited of different deposit
types of five constructive years, in year 2074/75 to 2076/77 finance company had no
collection of deposits in other deposits (call account deposit and current account
deposits). We can observe that the percentage of fixed deposit ratio had been increasing
year by year.

Chart Title
80
70
60
50 Saving Deposits
Axis Title 40 Fixed Deposits
Others Deposits
30
20
10
0

2078/79 2077/78 2076/77 2075/76 2074/75

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Figure no 1 Types of Deposits for five fiscal years

In the given figure the deposits percentage of ICFC Finance limited of different deposit
types of five constructive years, in year 2074/75 to 2076/77 finance company had no
collection of deposits in other deposits (call account deposit and current account
deposits). We can observe that the percentage of fixed deposit ratio had been increasing
year by year.

Loan

A loan is when money is given to another party in exchange for repayment of the loan
principal amount plus interest. Loan terms are agreed to by each party before any money
is advanced. A loan may be secured by collateral such as a mortgage or it may be
unsecured such as a credit card. Revolving loans or lines can be spent, repaid, and spent
again, while term loans are fixed-rate, fixed-payment loans.

Working Capital Loan

A working capital loan is a loan that is taken to finance a company's everyday operations.
These loans are not used to buy long-term assets or investments and are, instead, used to
provide the working capital that covers a company's short-term operational needs. Those
needs can include costs such as payroll, rent, and debt payments. In this way, working
capital loans are simply corporate debt borrowings that are used by a company to finance
its daily operations.

Real Estate Loan

A commercial real estate loan is a mortgage secured by a line on commercial property as

opposed to residential property. Commercial real estate (CRE) refers to any income-
producing real estate that is used for business purposes; for example, offices, retail,
hotels, and apartments.

Housing Loan

22
A sum of money borrowed from a financial institution or bank to purchase a house.
Home loans consist of an adjustable or fixed interest rate and payment terms.

Margin Lending Loan

Margin loan availability describes the amount in a margin account that is currently
available for purchasing securities on margin or the amount that is available for
withdrawal. A margin account makes loans available to the customer of a brokerage firm
using the customer's securities in their account as collateral.

Table No 4 Types of Loan of ICFC Finance Limited

Types of Loan Years

in (%) 2079/78 2078/77 2077/76 2076/75 2075/74
Working Capital Loan 45 44.19 49 53 55
Real Estate Loan 7.65 7.92 7 9 7
Housing Loan 10.42 10 9 8 8
Margin Lending Loan 4.12 4.15 6 9 12
Others Loan 32.67 35.76 29 21 18
Source: Annual Report of ICFC Finance Limited

By the observation on above table shows the different categories of loan and advances
invest by ICFC Finance Limited, finance company had invested their amount in
increasing as well as decreasing trend.

23
 60

50

40

30

20

10

2079/78 2078/77 2077/76 2076/75 2075/74

Working Capital Loan Real Estate Loan Housing Loan
Margin Lending Loan Others Loan

Figure No.2 Types of Loan of ICFC Finance Limited

Quality of Assets

Asset Quality is an evaluation of a particular asset, stating the amount of credit risk
associated with it. Assets of a company/individual determine their condition and ability to
repay their loans in future and conduct smooth functioning of their operations.

Performing Loan

A loan that is not near to default. According to the International Monetary Fund, a
performing loan is any loan in which: interest and principal payments are less than 90
days (about 3 months) overdue; less than 90 days (about 3 months)' worth of interest has
been refinanced, capitalized, or delayed by agreement; and continued payment is
anticipated. All conditions must be present for a loan to be performing.

Non-Performing Loan

A non-performing loan (NPL) is a loan in which the borrower is in default due to the fact
that they have not made the scheduled payments for a specified period. Although the
exact elements of nonperforming status can vary depending on the specific loan's terms,

24
"no payment" is usually defined as zero payments of either principal or interest. The
specified period also varies, depending on the industry and the type of loan.

Table No 5 Quality of Assets

Quality Of Assets Years

in (%) 2079/78 2078/77 2077/76 2076/75 2075/74
Performing loan 99.47 99.02 99.98 99.25 98.5
Non-performing loan 0.53 0.08 0.02 0.75 1.45
Source: Annual Report of ICFC Finance Limited

By observing the above table of ICFC Finance Limited the quality of assets the finance
companies are in good position from five constructive year’s high percentage of
performing loan will leads to more earning.

120

100

80

60

40

20

0
2079/78 2078/77 2077/76 2076/75 2075/74

Performing loan Nonperforming loan

Figure no 3 Quality of Assets

By observing the above figure of ICFC Finance Limited the quality of assets the finance
companies are in good position from five constructive year’s high percentage of
performing loan will leads to more earning.

25
Price Earnings Ratio

The price-earnings ratio relates a company's share price to its earnings per share. A high
P/E ratio could mean that a company's stock is over-valued, or else that investors are
Expecting high growth rates in the future.

Market Price Per S h are

P/ E Ratio=
Earning Per S h are

Year Price Earnings Ratio (%)

2074/75 17.04
2075/76 11.98
2076/77 13.37
2077/78 10.32
2078/79 15.36
Tableno6.The price earnings ratio ICFC Finance Limited is as follows

(Source: Annual Report of ICFC Finance Limited)

In the above given table, the P/E ratio of ICFC Finance in fiscal year 2074/75 is 17.04
similarly in the fiscal year 2075/76 P/E decreases to 11.98 and in next fiscal year 2076/77
slightly increases to 13.37 then after the fiscal year 2077/78 the P/E ratio decrease 10.32

26
hence lastly in fiscal year 2078/79 the ratio is gradually increase a move into 15.36
respectively.

P/E Ratio

24.03%

16.82%
12.86%
11.26%

0.00%2079/78 2078/77 2077/76 2076/75

2075/74

Figure No, 4 Price Earnings Ratio

In The above figure the trend line of P/E Ratio of ICFC Finance Limited is shown. In
fiscal year 2074/75 the P/E Ratio is 17.04. Then in fiscal year 2075/76 the price earnings
ratio decreased to 11.98, continuously in 2076/77 P/E Ratio had slightly increased up to
13.37% again in fiscal year 2077/78 P/E Ratio is slightly decreased to 10.32. Lastly in
fiscal year 2078/79 the PE Ratio had increase highly into 15.36 times.

Earnings Per Share

Earnings Per Share (EPS) is a company's net profit divided by the number of common
shares it has outstanding. EPS indicates how much money a company makes for each
share of its stock and is a widely used metric to estimate corporate value. a higher EPS
indicates greater value because investors will pay more for a company's shares if they
think the company has higher profits relative to its share price.

Net income
EPS=
Number ofshare outstanding
27
Table no 7. The Earning Per Share ICFC Finance Limited is as follows.

Years Percentage (%)

2074/75 21.44
2075/76 24.03
2076/77 12.86
2077/78 16.82
2078/79 11.26
(Source: Annual Report of ICFC Finance Limited)

In the above given table, the Earning per share of ICFC Finance in fiscal year 2074/75 is
21.44% similarly in the fiscal year 2075/76 EPS increases to 24.03 and in next fiscal year
2076/77 decreases to 12.85% then after the fiscal year 2077/78 the EPS is increases to
16.82 hence lastly in fiscal year 2078/79 the ratio is gradually decrease and move into
11.26% respectively.

percentage

24.03%
21.44%
16.82%
12.86%
11.26%

2079/78 2078/77 2077/76 2076/75

2075/74

28
Figure No, 5 Earning per Share

In the observation of above figure the EPS ICFC Finance limited had been gradually
decreasing because of an increasing the number of shareholders of the organization, In
fiscal year 2074/75 is 21.44% similarly in the fiscal year 2075/76 EPS increases to 24.03
and in next fiscal year 2076/77 decreases to 12.85% then after the fiscal year 2077/78 the
EPS is increases to 16.82 hence lastly in fiscal year 2078/79 the ratio is gradually
decrease and move into 11.26% respectively.

Cash Reserve Ratio:

The Cash Reserve Ratio refers to a certain percentage of total deposits the commercial
banks are required to maintain in the form of a cash reserve with the central bank. The
objective of maintaining the cash reserve is to prevent a shortage of funds in meeting the
demand by the depositor. The amount of reserve to be maintained depends on the bank’s
experience regarding the cash demand by the depositors. If there had been no government
rules, the commercial banks would keep a very low percentage of their deposits in the
form of reserves.

Cash Reserve Ratio= Reserve Requirement× Total Deposits

Table no 8. The Cash Reserve Ratio ICFC Finance Limited is as follows.

Years Percentage (%)

2074/75 4
2075/76 4.29
2076/77 4.10
2077/78 4.12
2078/79 3.68
(Source: Annual Report of ICFC Finance Limited)

In the above given table, the Cash Reserve Ratio of ICFC Finance in fiscal year 2074/75
is 4% similarly in the fiscal year 2075/76 CRR increases to 4.29% and in next fiscal year
29
2076/77 decreases to 4.10% then after the fiscal year 2077/78 the CRR is slightly
increases to 4.12% hence lastly in fiscal year 2078/79 the ratio is gradually decrease and
move into 3.68% respectively. According to Nepal Rastra Bank the finance companies
had to maintain 3% CRR from fiscal year 2077/78 monetary policy.

Percentage

percentage, percentage,
2078/79, 0.0368,2074/75,
18% 0.04, 20%

percentage,
2077/78, percentage,
0.0412, 20% 2075/76,
0.0429, 21%

percentage,
2076/77, 0.041, 20%

Figure No, 6 Cash Reserve Ratio

In the above given figure, the Cash Reserve Ratio of ICFC Finance in fiscal year 2074/75
is 4% similarly in the fiscal year 2075/76 CRR increases to 4.29% and in next fiscal year
2076/77 decreases to 4.10% then after the fiscal year 2077/78 the CRR is slightly
increases to 4.12% hence lastly in fiscal year 2078/79 the ratio is gradually decrease and
move into 3.68% respectively. According to Nepal Rastra Bank the finance companies
had to maintain 3% CRR from fiscal year 2077/78 monetary policy
30
Share Holders Fund

Shareholders' funds refer to the amount of equity in a company which belongs to the
shareholders. The number of shareholders' funds yields an approximation of theoretically
how many the shareholders would receive if a business were to liquidate. The number of
shareholders' funds can be calculated by subtracting the total amount of liabilities on a
company's balance sheet from the total amount of assets.

Shareholder’s (Fund) Equity = Total Assets – Total Liabilities

Table no 9. The Share Holders Fund of ICFC Finance Limited is as follows.

Year Share Holder Fund (%)

2074/75 15.25
2075/76 18.06
2076/77 8.98
2077/78 16.28
2078/79 11.26
(Source: Annual Report of ICFC Finance Limited)

In the above given table, the shareholders fund of ICFC Finance in fiscal year 2074/75 is
15.25%. Similarly in the fiscal year 2075/76 shareholders fund increases to 18.06% and
in next fiscal year 2076/77 decreases to 8.98% then after the fiscal year 2077/78 the
shareholders fund is slightly increases to 16.28% hence lastly in fiscal year 2078/79 the
ratio is gradually decrease and move into 11.26% respectively.

31
 Share holder fund in (%)
18.06%
16.28%
15.25%

11.26%
8.98%

2079/78 2078/77 2077/76 2076/75

2075/74

Figure No, 7 Shareholders Fund

In the above given figure, the shareholders fund of ICFC Finance in fiscal year 2074/75 is
15.25%. Similarly in the fiscal year 2075/76 shareholders fund increases to 18.06% and
in next fiscal year 2076/77 decreases to 8.98% then after the fiscal year 2077/78 the
shareholders fund is slightly increases to 16.28% hence lastly in fiscal year 2078/79 the
ratio is gradually decrease and move into 11.26% respectively.

Total Deposits

The word deposit means to place something somewhere. As a financial term, a deposit is
money you've placed at the bank for safekeeping; to deposit money, you put it into the
bank, where there are various kinds of deposits included in the deposits section. Which is
current deposit, fixed deposit, saving deposit and other deposits ICFC Bank had collect
the below mention number of deposits on different fiscal years.

32
Table no, 10 Deposits collection of ICFC Finance Limited.

Year Deposits Rs (in millions)

2074/75 5970
2075/76 6798
2076/77 8879
2077/78 10933
2078/79 12639
(Source: Annual Report of ICFC Finance Limited)

In the above given table, the total deposits of ICFC Finance in fiscal year 2074/75 is 5970
million .Similarly in the fiscal year 2075/76 shareholders fund increases 6798 million to
and in next fiscal year 2076/77 is 8897 then after the fiscal year 2077/78 the shareholders
fund is slightly increases to 10933 hence lastly in fiscal year 2078/79 the amount is
gradually increase and move into 12639 respectively. It shows the amount of money
deposits is continuously increasing year by year.

Figure No, 8 Bar-diagram of total deposits of ICFC Financed Limited.

Deposits in (Million)
12639
10933
8879
6798
5970

2079/78 2078/77 2077/76 2076/75

2075/74

33
In the above given figure the total deposits of ICFC Finance in fiscal year 2074/75 is
5970 million .Similarly in the fiscal year 2075/76 shareholders fund increases 6798
million to and in next fiscal year 2076/77 is 8897 million then after the fiscal year
2077/78 the shareholders fund is slightly increases to 10933 million hence lastly in fiscal
year 2078/79 the amount is gradually increase and move into 12639 million respectively.
It shows the amount of money deposits is continuously increasing year by year.

Loan and Advances

A loan and advance are financial facilities provided by the banks and financial
institutions to help their customers in financial need. Finance is a life blood for any type
of business or a particular need. So, when one is not able to get a full amount of money
on his own. He can use this type of financial services provided by finance companies as
prescribe by Nepal Rastra Bank.

Table no, 11 Deposits collection of ICFC Finance Limited.

Year Loans and Advances (Million)

2074/75 4794
2075/76 5586
2076/77 7049
2077/78 8783
2078/79 9649
(Source: Annual Report of ICFC Finance Limited)

In the above given table of loans and advances ICFC Finance in fiscal year 2074/75 is
4794 million. Similarly in the fiscal year 2075/76 shareholders fund increases 5586
million to and in next fiscal year 2076/77 is 7049 million then after the fiscal year
2077/78 the shareholders fund is slightly increases to 8783 million hence lastly in fiscal
year 2078/79 the amount is gradually increase and move into 9694 million respectively. It
shows the loan and advance amount of money has continuously increased year by year.

34
Figure No, 9 Bar-diagram of loans and advances of ICFC Financed Limited.

Loans and Advances (Million)

9649
8783
7049
5586
4794

2079/78 2078/77 2077/76 2076/75

2075/74

In the above given figure of loans and advances ICFC Finance in fiscal year 2074/75 is
4794 million. Similarly in the fiscal year 2075/76 shareholders fund increases 5586
million to and in next fiscal year 2076/77 is 7049 million then after the fiscal year
2077/78 the shareholders fund is slightly increases to 8783 million hence lastly in fiscal
year 2078/79 the amount is gradually increase and move into 9694 million respectively. It
shows the loan and advance amount of money has continuously increased year by year.

Total Operating Income:

Operating income is an accounting figure that measures the amount of profit realized
from a business's operations, after deducting operating expenses such as wages,
depreciation, and cost of goods sold (COGS).

Operating income, also called income from operations, takes a company's gross income,
which is equivalent to total revenue minus COGS, and subtracts all operating expenses. a

35
business's operating expenses are costs incurred from normal operating activities and
include items such as office supplies and utilities

Operating Income=Gross Income−Operating Expenses.

Table no, 12 Operating Income of ICFC Finance Limited.

Year Operating Income Rs (Million)

2074/75 241
2075/76 307
2076/77 168
2077/78 207
2078/79 146
(Source: Annual Report of ICFC Finance Limited)

In the table above given above of Operating Income ICFC Finance in fiscal year 2074/75
is 241 million. Similarly in the fiscal year 2075/76 shareholders fund increases 307
million to and in next fiscal year 2076/77 is 168 million then after the fiscal year 2077/78
the shareholders fund is slightly increases to 207 million hence lastly in fiscal year
2078/79 the income is gradually in and move into 146 million respectively. It shows the
operating income amount of money is fluctuating year by year.

Operating Income Rs (Million)

307

241
207
168
146

2079/78 2078/77 2077/76 2076/75

2075/74

36
Figure no 10 Operating Income

In the above figure given of Operating Income ICFC Finance in fiscal year 2074/75 is
241 million. Similarly in the fiscal year 2075/76 shareholders fund increases 307 million
to and in next fiscal year 2076/77 is 168 million then after the fiscal year 2077/78 the
shareholders fund is slightly increases to 207 million hence lastly in fiscal year 2078/79
the income is gradually in and move into 146 million respectively. It shows the operating
income amount of money is fluctuation year by year

37
2.3 Findings

 Based on above we can analysis that fixed deposit amount had been increased it
will help the organization to strength their capital base. It will help a finance
company to invest the money on a long-term basis and generate income.
 Based on categorization of loan the operation loan much higher investment of
financed by the organization, rather than other type of loan operating loan is also
a bridge gap loan which facilitates on solving the activities done in long term
projects and organization makes regular income, i.e., company is more focused on
personal loan, and margin lending loan.
 Quality of assets as per performing loan and non-performing loan. The investment
amount of a finance company is good categories of loan classification where there
are low chances of default.
 If the large no. of shareholders the earning per share will be fluctuate year by
year, because of increase or decrease in no. of shareholders.
 Cash reserve ratio, monetary policy according to the 2078/79 the bank and
financial institution had maintained 3% of total deposits. So, as per ICFC finance
limited the finance company any had maintain more than 3% to strength their
capital base.
 Types of deposits fixed, saving, call deposit are in increasing trend.
 Loan and advances are in increasing trend which will help to generate more
income interest income.
 Operating income is in increasing as well as decreasing trend.
 Shareholders' funds refer to the amount of equity in a company which belongs to
the shareholders. The number of shareholders' funds yields an approximation of
theoretically how many the shareholders would receive if a business were to
38
 liquidate as per annual report of ICFC FINANCE LIMITED it is gradually
changing year by year thus, it creates more secure to the investors.
 The P/E ratio helps investors determine the market value of a stock as compared
to the company's earnings. In short, the P/E ratio shows what the market is willing
to pay today for a stock based on its past or future earnings. A high P/E could
mean that a stock's price is high relative to earnings and possibly overvalued.
Conversely, a low P/E might indicate that the current stock price is low relative to
earnings.

39
 CHAPTER III

SUMMARY AND CONCLUSIONS

3.1 Summary

This chapter of the study focuses on facts and matters acquired from the various parts of
the study or deals with the result of the study. This part of the study includes a summary
of the study, findings and conclusion.

The financial system is the backbone of the national economy, which supports it to rise
the prosperity of financial system depends on its two major functions deposit collection
and lending. At present situation deposit collection is more challenging overall financial
activities. But the lending function is quite difficult, as banks are facing two major
challenges in lending. First of all, due to unfavorable political environment and violence
businessmen are reluctant to invest in business, current pandemic of COVID- 19 and
drastically changes in policies of government so the volume of loan and advances is not
in regular trend and if loan is given the problem of turning loan to non-performing is
another challenge banks are facing. The objectives of this research are to analyze the
situation of loans and advances, to analyze the lending activities, to analyze contribution
of loan and advances in total income, and to analyze the situation of non-performing loan
of ICFC Finance Limited. Among 21 finance companies, I had taken ICFC FINANCE
LIMITED as the sample for the study. The study has covered a period of 5 fiscal years
from 2074/75 to 2078/79

3.2 Conclusion

With financial institutions operating in Nepal, the market seems over crowed and the
banks are now finding a tough competition among themselves. Since the entry barriers

40
are not so high due to the government’s liberal policy, this competition is expected to be
more intense in the near future, as there is always the possibility of a new player entering
this sector. ICFC Finance has maintained a balanced ratio among its deposit liabilities.
Consequently, the bank does not seem to be able to balance to fund at NRB as reserve
ratio. The investment portfolio of the bank has been managed quite efficiently to
maximize the returns there from though the earnings of a finance company are slightly
changing year by year. The operational efficiency of the bank is found satisfactory
because of the series of operational income over the period. Based on this study, the
following conclusion can be made:

• The overall results are satisfactory. But in some case ICFC Finance Limited Ltd should
take certain steps to improve the bank's current financial condition. Therefore, some
recommendations are being put forward for its improvement along with its development
of the country.

• The proportion of the fixed deposit account is high in total deposit liability. So, it is
recommended that the finance Companies should utilize the amount collected from the
account Holders carefully. It should be invested in the higher yielding areas.

• The cash and bank balance in Ltd is satisfactory. It is higher a bit though. Finance
should analyze the opportunities for short-term investment.

• Finance company does not spend too much in the fixed assets because it yields only a
nominal Portion, almost no yield.

• The profitability ratio shows the profitability position of ICFC Finance is satisfactory. It
should give continuity to this growth trend in future.

• These ratios of P/E ratio and Earning Per share show that ICFC Finance is more
efficient in mobilizing the resources of owners and its operational efficiency is also
satisfactory.

41
• The finance companies have been successful in winning the trust of the customer, as
volume of expenses is no more difference and it's growing slowly than previous years.
There is a general rise and fall in expenses level during different years. It should give
basic priority to the customers and personnel first and then the organizational objectives,
which will help to develop an effective value chain in the organization.

• Branches existing in some limited areas will not enable a bank to boost up its campaign
of deposit mobilization and credit disbursement as desired. Therefore, ICFC Finance
Limited is recommended to open new branches at certain places every year after making
feasibility of studies. And, it has launched various ideas such as ICFC Credit card, debit
card extended banking hours, etc. to collect maximum amount of funds from public.

• Besides these, all the other functions of the company are satisfactory.

42
 BIBLIOGRAPHY

Joshi, Padam Raj. (2004). Fundamentals of Financial Management. Kathmandu: Asmita

Books Publishers and Distributors,

Thapa, k. (2008). Fundamentals of Investment. Kathmandu: Asmita Books Publishers and

distributors (P) Limited.

Joshi, Prem Raj. (2073). Principle of Accounting. Kathmandu: Samjhana Publication Pvt.

Ltd.

Paudel, Rajan B. (2018) Fundamentals of Corporate Finance. Kathmandu: Asmita Books

Publishers and Distributors.

Rana, Surya B. (2019) Foundations of Financial Markets and Institutions. Kathmandu:

Asmita Books Publishers and Distributors.

Adhikari, Devi Raj. Pandey, Dhurba Lal (2017) Business Research Methods. Kathmandu

Asmita Books Publishers and Distributors.

www.nrb.org.np

www.icfc bank.com

Annual report of ICFC Finance Limited

43
 Year Price Earnings Ratio (%)
2074/75 17.04
2075/76 11.98
2076/77 13.37
2077/78 10.32
2078/79 15.36
Appendix 1

The Price Earnings Ratio ICFC Finance Limited are as Follows

44
 Appendix 2

The Cash Reserve Ratio ICFC FINANCE LIMITED is as follows.

Years Percentage
2074/75 4%
2075/76 4.29%
2076/77 4.10%
2077/78 4.12%
2078/79 3.68%

45
 Appendix3

The Earning Per Share ICFC FINANCE LIMITED is as follows.

Years Percentage
2074/75 21.44%
2075/76 24.03%
2076/77 12.86%
2077/78 16.82%
2078/79 11.26%

46