LOAN MOBILIZATION OF BANK

OF
KATHMANDU LIMITED

A Project Work Report

Submitted by
SAGAR KARKI
T.U. Reg. No.: 7-2-577-104-2018
Symbol No: - 705770048
Nepalaya College

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kalanki, Kathmandu
May, 2023
 Declaration

I hereby declare that the project work entitled A CASE STUDY ON LOAN
MOBILIZATION OF BANK OF KATHMANDU LIMITED submitted to the
Faculty of Management, Tribhuvan University, Kathmandu is an original piece of
work under the supervision of (supervisor), faculty member, Nepalaya 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.

………………………..
Sagar Karki
T.U. Reg. No.: 7-2-577-104-2018
Symbol No.: 705770048
Date:

ii
 RECOMMENDATION

The project work report entitled A CASE STUDY ON LOAN MOBILIZATION

OF BANK OF KATHMANDU LIMITED submitted by SAGAR KARKI of
NEPALAYA COLLEGE, Kathmandu is prepared under my supervision as per the
procedure and format requirements laid by the Faculty of Management, Tribhuvan
University, as partial fulfillment of the requirements for the degree of Bachelor of
Business Studies (BBS). I, therefore, recommend the project work report for
evaluation.

……………….
(Raju Kafle)
Project Work Supervisor, Academic Director
Nepalaya College

Date:

iii
ACKNOWLEDGEMENTS

This report has been prepared to fulfill the partial requirements for the Degree
of Bachelor’s of Business Studies (B.B.S), Tribhuvan University, Nepal. In the
process of preparation of this Term Paper, I got a lot of inspiration, Co-
operation and Suggestion from various persons.

Firstly, I owe a debt of gratitude to my respected adviser Mr. Buddhi Sagar

Parajuli, Research Committee of NEPALAYA COLLEGE for his valuable
support and suggestion in the process of preparation of this thesis. I am
extremely indebted by their efforts despite of their busy schedule.

I am also indebted to my respected teachers of NEPALAYA COLLEGE, who

have assisted from their respected sectors. I am also thankful to the library
members of SDC and Central Library of T.U.

I would like to express heartful thanks towards all the members of my family
who provided regular inspiration and continuous contribution for my success.

Sagar Karki

iv
 TABLE OF CONTENTS

Title Page i

Declaration ii

Supervisor’s Recommendation iii

Endorsement iv

Acknowledgements v

Table of Contents vi

List of Tables viii

List of Figures ix

Abbreviations x

CHAPTER 1 INTRODUCTION

1.1 Meaning of Bank 1

1.2 Introduction of Bank of Kathmandu (BOK) 2

1.3 Statement of Problem 5

1.4 Objectives of Study 6

1.5. Rationale of the Study 6

1.6 Review of Literature 6

1.7 Research Methodology 10

1.7.1 Research Design 10

1.8. Limitation of the Study 11

1.9 Organization of Study 12

CHAPTER 2 RESULTS AND FINDINGS

2.1 Data Presentation 13

2.2 Major Findings of the Study 21

v
 CHAPTER 3 SUMMARY AND CONCLUSION

3.1 Summary 23

3.2 Conclusion 23

3.3 Recommendation 24

Bibliography

vi
 LIST OF TABLES

Table No. TOPICS PAGE NO

Table No. 2.1 Capital Structure of BOK 13

Table No. 2.2 The present five years performance of BOK that is under: 14
Table No. 2.3 Good Loans of BOK 15
Table No.2.4 Substandard Loans of BOK 16
Table No.2.5 Doubtful Loans of BOK 17
Table No. 2.6 Loss Loans of BOK 18
Table No. 2.7 Allocation of Loan and advances of BOK 19
Table No-2.8 Showing Ratio of Deposit and Loan of the bank. 20
Table No. 2.9 Loan Creation of BOK 21

vii
 LIST OF FIGURES

Figure No. TOPICS PAGE NO

Chart No. 2.1 Good Loan of BOK 16

Chart No. 2.2 Substandard Loans of BOK 17
Chart No. 2.3 Doubtful Loans of BOK 17
Chart No. 2.4 Loss Loans of BOK 18
Chart No.2.5 Allocation of Loan and advances of BOK 19
Chart no. 2.6 Bar diagram represent total deposit and Loan. 20
Chart No. 2.7 Loan Creation of BOK 21

viii
ABBREVIATION

BOK - Bank of Kathmandu

ABBS - Anywhere Bank Branch Service

PNB - Punjab National Bank

SCT - Smart Choice Technology

ATM - Automatic Teller Machine

NRB - Nepal Rastriya Bank

NIDC - Nepal Industrial Development

Corporation

NIC - National Industrial Corporation

ADB - Agricultural Development Bank

HSBC - Hong Kong and Shanghai Banking

Corporation

L.C. - Letter of Credit

NBL - Nepal Bank Limited

CDs - Certificates of Deposits

GNP - Gross National Product

B.B.S. - Bachelor of Business Studies

USD - United States Dollar

NRs - Nepalese Rupees

Nov. - November

Dec. - December

Feb - February

ix
 CHAPTER 1

Introduction
1.1 Meaning of Bank

Bank is a financial institution which transacts with the money and its values. In this
present age of competition, the bank is proved as the heart of business organizations.
The growth of any business organization is impossible without banking services. The
bank is the indispensable part of business organization as well as individuals. Banks
lend the loan and accept deposits from public. Individuals, people and organization
can extend their area and raise their economical status through the help of bank.

In short, the bank is an institution dealing with money and credit. It accepts deposits
from public and makes the fund available to those who need them. The bank collects
money and provides favorable interest to the collected deposits. This collected amount
is re-invested into various sectors.

According to Horace White "Bank is a manufacturer of credit and machine for

facilitating exchange".

According to Crowther "The banker's business is to take the debts of other people to
offer his own in exchange and there by create money".

Banking has come to the present advanced form through various stages since the time
immemorial. The first bank called "Bank of Venice" was established in Venice, Italy
in 1157 to finance the monarch. Following its establishment, the banks established
were the Bank of Barcelona and the Bank of Genoa in 1401 and 1407 respectively. In
Nepal, the first commercial bank was established in 1938 AD (1994 BS, Kartik 30 th).
Nepal Rastra Bank was established in 1957AD (2013 BS, Baisakh 14th).

1.1.1 Historical Development of Commercial Banks in Nepal

In Nepalese context it is very difficult to draw the actual history of the traditional
banking system due to lack of historical records of banking. The historical records
show that Gunakam Dev, the king of Kathmandu borrowed money to rebuild his
kingdom.

1
In Nepal modern banking system was introduced only with the establishment of Nepal
Bank Ltd. which is also regarded as the pioneer institution of country.

Prior to establishment of this bank, during the Prime Minister Randeep Singh,
Tejarath Adda, an organized finance institution was established in Kathmandu to deal
with credit. However, the services it offered were not sufficient. It was not collecting
deposit from public but provided loans to public and employees. In real means, the
formation of high committee board

"Udhyog Parisad", during the late Rana period, was indeed a land mark in opening
new avenue in field of banking industry of commerce. Accordingly, Nepal Bank Ltd
was established in 30th Kartik 1994 B S (1938 AD) under Nepal Bank Act 1994(1938)
joint venture between government and private sectors which replace Tejjrath Adda by
taking over its operation and overcoming its limitations. Due to unstable political
environment, banking activities were limited even after the democratic movement of
2007 BS (1951 AD)

Nepal Rastra Bank come into existence in 14 th Baisakh 2013 (1957) as country's
central bank with objectives to supervise, regulates and control the functions of
commercial banks and other financial institution. The Nepal Rastra Bank gave its
attention towards development of banking system by formulating relevant policies
and procedures. In this connection, Commercial Bank Act 2031 (1974) was
promulgated by the Government and credit control regulation was formulated. After
the restoration of democracy in Nepal; there is tremendous development in banking
sector. Different types of banking activities are being operated.

Though financial sector in Nepal is small, it is steadily growing. At present, banking

system of Nepal is comprised of Nepal Rastriya Bank, 13- commercial bank, 4-
development banks and other financial other financial institutions. These
organizations are conducting limited banking activities such as financial transactions,
postal savings in the rural areas.

1.2 Introduction of Bank of Kathmandu (BOK)

Bank of Kathmandu Limited Baiṃk Aph Kāṭhamāḍauṃ Limiţēḍ is formed

following the merger of Bank of Kathmandu (BOK) and Lumbini Bank, has become a
prominent name in the Nepalese banking sector. BOK started its operation in March
1995 with the objective to stimulate the Nepalese economy and take it to newer

2
heights. BOK also aims to facilitate the nation’s economy and to become more
competitive globally. BOK has today become a landmark in the Nepalese banking
sector by being among the few commercial bank which is entirely managed by
Nepalese professionals and owned by the general public.

Bank of Kathmandu Limited has 79 Branches, 72 ATM, 7 extension counter & 24

Branchless Banking Service Point across the country.

Bank of Kathmandu was established on 28 th Falgun 2051 B.S., Under Joint

Investment of the Siam commercial Bank. Bank of Kathmandu is a popular Bank in
Nepal, having in view the non-existence of modern banking system in Nepal and to
remove all the inconsistency to the people. Bank of Kathmandu Limited was
established with an authorized capital of Rs.1 billion. Out of the total authorized
capital 30% was invested by the Siam commercial bank and 20% by the Nepali public
shares. It has paid up capital of Rs.23 corers and 40 Lakhs. Out of total capital 45%
was invested by the Nepalese capital owner as a director of management. Bank capital
has been increased with the increased ratio of banking activities.

Bank of Kathmandu Limited has become a notable name in the Nepalese banking
scenario today with a high ranking performance and we would like to express our
sincere gratitude to our shareholders, customers and other stakeholders for their
constant belief, support and co-operation in leading the bank to the present pinnacle of
achievement. We would like to reiterate here that whatever activity we undertake, we
put in conscious efforts to glorify our corporate slogan, ‘We make your life easier’.

We would also like to elucidate that Bank of Kathmandu Limited is committed to

delivering quality service to customers, providing best interest rates on products and
services, generating good return to shareholders, providing attractive incentives to
employees, and serving the community through stronger corporate social
responsibility endeavors. We were awarded the coveted title of ‘Bank of The Year’ in
2010 and strive to become the best bank in Nepal.

Bank of Kathmandu Limited today has created a milestone in the Nepalese banking
sector by being among the few commercial banks which is entirely managed by
Nepalese professionals and owned by the general public and by becoming one of the
largest private sector commercial banks in the country in terms of capital base,
number of branch locations, ATM networks and customer base.

3
Core Values

The Bank has defined following core values for achieving the vision and mission:

 Embrace a commitment to excellence

 Develop knowledgeable, competent and professional employees

 Deliver quality services

 Provide value to the stockholders

 Be accountable for delivering what we promise

 Demonstrate honesty and integrity in all actions

 Be balanced in customer orientation and risk consciousness

 Be efficient and technology oriented

1.2.1 Mission and Vision

Vision

To become a significant contributor to the economic development of Nepal by

distinguishing the Bank as an efficient, competitive, safe and top-quality financial
institution.

Mission Statement

To offer financial services and become the “Bank of Choice” by dedicating the
progress and growth of the institution to the community, customers, employees and
stockholders by:

 Promoting economic growth and becoming a caring corporate citizen

 Providing excellent customer services by offering personalized quality services
and products
 Including modern technologies of banking that add value to customer services
 Following strict risk-control mechanisms
 Enhancing shareholders value
 Providing challenging career and learning opportunities for our employees

4
1.2.2 Board of Directors

The directors of the bank are prominent figures, widely acclaimed for their rich pool
of knowledge and experiences in business and financial sector. The Board of
Directors practice high standards of corporate governance, which includes the
principles of transparency, accountability, social responsibility, zero tolerance
compliance culture, business and customer confidentiality and intolerance of conflict
of interest. The following personalities are our board of directors:

S.N Name Designation

1 Mr. Prakash Shrestha Chairman

2 Mr. Sanjay Bahadur Shah Director

3 Mr. Kedar Nath Gautam Director

4 Mr. Radhesh Pant Director

5 Professor Hem Raj Subedi, Ph.D. Director

6 Mr. Govinda Prasad Sharma Regmi Director

7 Mr. Saurav K.C. Director

8 Mr. MadanLal Joshi Director

1.3 Statement of Problem

The main objective of any organization such as banks is profit maximization.

loan mobilization is the key factor to attain this objective. Therefore, if the bank
fails to utilize its funds suitably then it is not possible to maximize the profit.

Though the banking system is making much progress, it is facing many

problems. Being an under developed country, there is lack of saving habit in
people. Many people are still below the poverty line. People are still illiterate
and not conscious about the banking system and its importance.

 How to study of loan mobilization position of BOK?

 How to find out the loan creation of BOK?
 How to analyze the financial performance?

5
1.4 Objectives of Study

The joint venture banks have become a base for the development of Nepal by
providing a large contribution towards different sectors i.e. industry, tourism,
agriculture, trade, commerce, hydroelectricity etc. So the activities of such joint
venture bank highly affect the economy as well as economy other environment of the
country. Thus, the financial performance of Joint venture banks must be evaluated
occasionally and this study is based on the same objective. The overall objectives of
the study are:

 To study of loan mobilization position of BOK.

 To find out the loan creation of BOK.
 To analyze the financial performance.
 To check the BOK bank’s profitability.

1.5. Rationale of the Study

This report is prepared to analyze the loan mobilization position of Nepal investment
bank. This report comprises the date from 2016 to 2019. This would help the bank to
observe the trend of the loan mobilization position hold in those periods. Besides that,
this study also evaluates the role of short term obligation and the bank ability to pay
the currently maturity obligation. Moreover, the study will check the profitability of
the bank. This will help the bank to take the corrective actions if there are any errors
on the past performance and the study aims to recommend correcting the division if
the standard has not been met.

1.6 Review of Literature

This chapter deals with the theoretical aspects of the topic of Loan mobilization of
BOK in more detail and descriptive manner. For this study, journals, articles, and
some research reports related with this topic have been reviewed. This study has to
refer almost all books related with this topic published. Some of the prior reports by
students of BBS regarding this topic have also been reviewed.

1.6.1. Conceptual framework

One of the sensitive factor or element in the bank is loan mobilization. Loan
mobilization refers to the convertibility assets into cash. It means how fast the assets

6
can be change into cash. There are many assets which are easily converted into cash
by the bank. Such as cash in hand, cash at bank, cash at central bank, investment in
government securities. But some assets are difficult to get converted into cash such as
loan and fixed assets.

The trend of commercial banking is changing rapidly. Competition is getting stiffer

and, therefore, banks need to enhance their competitiveness and efficiency by
improving performance. Normally, the financial performance of commercial banks
and other financial institutions has been measured using a combination of financial
ratios analysis, benchmarking, measuring performance against budget or a mix of
these methodologies (Avkiran, 1995).

Gopinathan (2009) has presented that the financial ratios analysis can spot better
investment options for investors as the ratio analysis measures various aspects of the
performance and analyzes fundamentals of a company or an institution.

They concluded that neural network method outperforms the multiple linear
regression method however it need clarification on the factor used and they noted that
multiple linear regressions, not withstanding its limitations, can be used as a simple
tool to study the linear relationship between the dependent variable and independent
variables.

Neceur (2003) using a sample of ten Tunisian banks from 1980 to 2000 and a panel
linear regression model, reported a strong positive impact of capitalization to ROA.
There are number of studies, which examine the bank performance using CAMEL
framework, which is the latest model of financial analysis.

Elyor (2009) and Uzhegova (2010) have used CAMEL model to examine factors
affecting bank profitability with success. The CAMEL Framework is the most widely
used model (Baral, 2005). The Central bank of Nepal (NRB) has also implemented
CAMEL Framework for performance evaluation of the banks and other financial
institutions. CAMEL stands for capital adequacy, asset quality.

1.6.2 Review of related studies

Bank needs to maintain some reasonable amount of loan mobilization to fulfill

different commitments. Such as provide money to depositors when they demand for

7
administrative expenses, for maintaining cash reserve ratio in the central bank etc. so,
loan mobilization is defining bank’s capacity to pay cash in exchange of deposits.
Loan mobilization needs of commercial banks are unique because in no other types of
business there will be such large portion of deposits payable on demand. Inadequate
loan mobilization does damage credits standing of other organization as well but a
banks fails to pay the deposits on demands, the bank loose the faith of the public.
Bank may maintain the loan mobilization in the form of :
         Cash and bank balance
         Placement money at short calls or short notice
         Investments in gov. securities and other securities convertible into cash

International federation of accountants has recommended the measuring the loan

mobilization of bank by:
 Cash and liquid securities
 Interbank money deposit liabilities

In last five years prior to this thesis, some students of B.B.S. program have been
found conducting research about the loan mobilization of BOK. Some of them which
are supposed to be relevant have been reviewed and presented in this section.
The main objectives of this study are as follows:

Ramesh Khatiwada (2001) conducted a study in a topic of “Impact of Deposit, interest

rate, loan and to depends upon the related topic managements and Dividend and
Earning Announcement on Shareholder’s Return and stock prices in Nepal”. He
collected the data of 5-year data in this banks. The study carried out with the
following objectives;

 To take information about its different account (deposit)

( and features.
 To take information about its customer’s view on interest rates.
 To analyze the relationship between interest rate on deposits & interest rates
on loans and advances.
 To give valuable suggestion on related topic to its managements
 To analyze the interest rate policy.
 This report is conducted under the weak financial support.

8
  The comprehensibility and the accuracy of the study is based upon the data
provided by the BOK and response made by the respondent on the
questionnaire.

1.6.3 Research Gap

The purpose of the research work is quite different from the above studies. The
present study focuses on loan mobilization if Kumari Bank in comprehensive manner
considering some major aspects. This study has tried to indicate the effectiveness of
investment policy of concerned bank.
 Long-term effect of bonus share issue, as well as immediate, is
significantly positive. In most of the cases the aggregate market valuation
of the corporate firm’s equity capital increased as the result of bonus issue.
81.2 percent of the bonus issue cases are recorded different level gain over
the base data price, after
 There is a great misconception about bonus share that the general investors
think that they receive extra/additional share with same value.
 The immediate share price rise after bonus announcement is significant.
Bonus share announcement of banking sector is considering positively by
the investors but shows reluctant for the non-banking sectors. None of the
case have been observed under banking sector that the price decreased
immediately after bonus announcement.
 The share price of the non-banking sectors shows inconsistency as
compare to the banking sector. Therefore, investing on non-banking sector
is riskier than the banking sector.
 Adjusting of the general market movement in share prices.
 This report is prepared under the prescribed format by T.U. for the purpose
of field report writing of bachelor degree.
 This study is limited to BOK, Nepal and finding from this study may not
be generalized for all financial institution.

1.7 Research Methodology

9
Research methodology is the method, guideline and the steps that are followed in
analysis and it is the way of presenting collected data with meaningful analysis. It
refers to the various sequential to be adopted by a researcher in studying a problem
with certain objects. The data prepared by highly skilled manpower is called
"Secondary Data". In other words, the data, which are initially collected by someone
but obtained from some published or in published sources, are called "Secondary
Data".

1.7.1 Research Design

Research design is a plan, structure and strategy to obtain the objectives of the study.
The research design is of both descriptive and perspective nature. For analysis,
primary data collected from a set of designed questionnaire is used. Along with
primary data historical secondary data has been employed to analyze the used
variables, which is related to Deposit practices of joint venture banks. The annual
reports, financial statements and other relevant materials of the companies will be
studied.

1.7.2 Population and Sample

In this we will discuss about the research method used in field work assignment. This
report writing is based on secondary data loan mobilization of BOK Limited. It is
attempted to provide basic knowledge of fixed deposit and procedure for its operation.
For this purpose, necessary data and information are collected and presented in this
report. Several articles bulletins publication and thesis reports are studied to undertake
this report writing.
At present, there are 28 commercial banks operating in Nepal out of 161 financial
institutions in 2020. Out of various bank functioning in the country, Himalayan Bank
Limited has been chosen as samples to conduct the research due to the time
constraint.

1.7.3 Nature and sources of Data

The study is based on primary as well as mostly on secondary data. First of all, I
visited the BOK Limited. I met the manager of this office. I studied fixed deposit of
BOK as well as consulted different people, working procedure of the deposit by
setting beside & observing their job also. After then I went to campus, consulted

10
different books & past year’s report writing which made me easy to write this report. I
took not only actual data from BOK about the deposit but analyzed the data also.
There are two types of data:

Secondary source:

For this purpose, various websites were surfed, published sources (brochures) of the
organization were collected, and reports of students and newspaper article were used.
Then a thorough study of all the collected secondary data were done and important
information were highlighted and noted down.

1.7.4 Data collection procedure

Several articles, bulletins and prospectus along with other related materials of BOK
Limited were studied and revised thoroughly. Then, most essential and necessary data
were chosen and collected. After the collection of all required data, these were
processed and actual writing of this field report has been preceded.

1.7.5 Data processing

The collected data are processed by tabulation and arranging in a required from for
the sequential analysis of data. Pie chart is also used to processing the data. Then
through a study of all the collected secondary data were done and important
information were highlighted and noted down.

1.7.6 Tools and techniques used

The collected & observed data are tabulated with necessary amounts of each head. For
analysis of the data different tools are used. These tools are as follows.

 Financial Tools

 Statistical Tools

1.8. Limitation of the Study

This study is simply conducted for the partial fulfillment of the requirement for the
degree of the bachelor in business studies (BBS). And only the secondary data is used
and analyzed which could not disclose the actual result. And being the first endeavor,
the report can comprise some mistakes which may cause to misinterpretation of the
results.

11
The other limitation of the study is listed below:

 Data contains mostly of the annuals reports of the bank through fiscal year
2016/17 to 2020.
 Only five years’ observation covering from fiscal year 2016/17 to 2020
analyzed.
 Analysis is based on the ratio and trend lines of the corresponding ratios only.
 For the forecast of the loan mobilization requirement, daily and monthly data
is needed. But due to time and cost constraints, only the annual data is used for
analysis.
 Only the secondary data is used.

1.9 Organization of Study

The whole study has been divided into three chapters. The present chapter includes
introduction, statement of the problem, and significance of the study, objectives of the
study and limitations of the study, importance of the study, Review of Literature,
Research Methodology and organization of the study.
Second chapter deals with the presentation and analysis of data through definite
course of research methodology. The main working of this chapter is to analyze
different financial ratios related to the investment and fund mobilization of BOK.
Major findings of the study are also included in this chapter.

The last chapter provides summary and conclusion; suggestions and recommendations
for improving the future performance of the sample banks have also been outlined.
Bibliography and appendices have been presented at the end of the thesis.

12
 CHAPTER 2

RESULTS AND FINDING S

2.1 Data Presentation

Commercial banks are profit oriented organization. Banks collect deposits through
various accounts and advance loans in productive sectors. The return thus gained is
the main source of banks income. So, bank should only invest after evaluating the risk
and return from a project. The policy that addresses their issues is called the credit
policy. Credit policy of the bank should be effective. While formulating credit policy,
all the internal and external, both factor needs to be examined minutely. Principle of
security, loan mobilization, profitability, diversification and national interest are some
of the principle that is basically followed by almost by every bank while making
credit policy. Therefore, credit polity of the bank refers to such policy of bank which
is related to the time, nature, intensity, profitability, risky ness and security of
investment options that the bank is interested to invest in. Credit policy is also
concerned with evaluating the credit worthiness of the consumer to whom the bank is
providing loan.

Hence the bank always should pay its attention to make its investment wide and to
lead the bank towards the way of economic of consolidation by creating the good
environment to recover the amount invested with the interest.

2.1.1 Capital Structure of BOK

The bank has following capital structure:
Table No. 2.1
Capital Structure of BOK
(In million)
Share Capital 2015 2016 2017 2018 2019 2020
Authorized Capital 400 750 750 600 600 1041
Issued Capital 264 465 466.8 466.8 529.8 616
Paid Up Capital 259.32 455 455 518 518 854
Preference share 140 140 140 140 140 140

Source: Annual report of BOK

13
 2.1.2 Performance of Bank

Table No. 2.2

The present five years performance of BOK that is under:
(in million)
Particulars (2015/16) (2016/17) (2017/18) (2018/19) (2019/20)

Paid Up Capital 259.32 315.00 315.00 315.00 378.00

General Reserve 44.34 64.46 91.9 126.1 173.6
Share Premium - 6.4 6.4 6.4 6.4
Capital Adjustment Reserve - 31.50 63.0 94.5 132.3
Other Reserves 14.27 14.59 17.0 17.0 23.9
Retained Profit 124.79 40.85 46.9 70.5 108.6
- - - 63.0 -
General Loan Loss Provision 95.75 141.12 221.8 305.5 375.2

Total Shareholders' Funds 538.47 613.95 762.0 998.0 1198.0

Total Deposits 5466.61 6694.96 8063.9 10097.7 13802.4
Total Loans And Advance 4044.23 5049.58 6095.8 7900.0 10136.2
Total Investments 1779.17 1653.98 2535.7 2128.9 4201.3
Profit & Loss Account
Total Income 540.93 635.33 785.1 859.0 1066.5
Interest Expenses -257.05 -305.64 -316.4 -299.6 -401.4
Employees Expenses -32.19 -37.64 -48.5 -55.1 -68.4
Operating Expenses -75.43 -93.59 -103.8 -129.1 -143.6
Non-Operating Expenses - - - - -
Operating Profit 176.27 196.74 316.4 375.2 453.1
Loan Loss Provision -34.73 -45.75 -81.8 -88.9 -70.5
- - - -5.5 -2.6
Staff Bonus -14.15 -15.10 -23.5 -28.1 -34.5
Profit Before Income Tax 127.38 135.89 211.1 252.7 345.5
Provision For Income Tax -42.04 -41.71 -67.5 -81.9 -108.3
Net Profit 85.35 94.18 143.6 170.8 237.2

Source: Annual report of BOK

14
From the above table of last five years it shows BOK’s continuous progress. In the
year 2019/20 BOK has earned Rs. 2372 lakh profit successfully which in comparison
to previous year increased by 38.88%. Total deposit reached to 138024 lakh with
increment of 38.69%. Similarly, total loans and advances with 28.65% increment rate
have reached to 101362 lakh this year.

2.1.3 Classification of Loans

The main income source of the bank comes through credits (loans). So, loans are the
most important in banking. In banking most of the banks fail due to its weak loan
flow. To regulate this and for he safety of the depositors NRB has issued directives
for the classification of loans under the following four headings and appropriate loan
loss provisions be made for the classified category.

a) Good loans: 1%
b) Substandard loans: 25%
c) Doubtful loans: 50%
d) Loss loans: 100%

2.1.3.1 Good Loans of BOK

The loans that are not overdue and overdue extent to three months are classified as
good loans. The provision of loss for such loan is to make for 1% of total of this
category.

Table No. 2.3

Good Loans of BOK
(in million)
Financial Year Amount
2015/16 37493.64
2016/17 49383.90
2017/18 59910.86
2018/19 74532.06
2019/20 97571.95

Source: Annual report of BOK

The above data is illustrated in the following line graph:

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16
 Chart 2.1
Good Loan of BOK
From the above table of last five years it shows good loans of BOK’s continuous
progress. In the year. 2015/16 total loan provide 37493.64 million then similarly
20016/17, 2017/18, 2018/19, 2019/120 increased representable in millions 49383.90,
59910.86, 74532.06, 97571.95 every year progress the good loan.

2.1.3.2 Substandard Loans of BOK

Substandard loans: the loans, which are overdue from three months to six months, are
classified as substandard loans. The provision of loss for such loan is too made for
25% of the loan amount.

Table No.2.4
Substandard Loans of BOK
(in million)
Financial Year Amount
2015/16 1578.33
2016/17 419.54
2017/18 110.82
2018/19 44.08
2019/20 106.69

Source: Annual report of BOK

The above data is illustrated in the following line graph:

Chart No. 2.2

Substandard Loans of BOK

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18
2.1.3.3 Doubtful Loans of BOK

The loans, which are overdue from 6 months to 1 year, fall in this category. The loan
loss provision to be made for this type of loan is 50% of the loan amount.

Table No.2.5
Doubtful Loans of BOK
(in million)
Financial Year Amount
2015/16 133.28
2016/17 380.55
2017/18 404.94
2018/19 19.77
2019/20 6.84
Source: Annual report of BOK

The above data is illustrated in the following line graph:

Chart No. 2.3

Doubtful Loans of BOK

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20
2.1.3.4 Loss Loans of BOK

Loans, which are overdue from 1 year, are loan loss. This type of loans is hard to
recover. Full loan loss provision 100%is to be made for this type of loan.

Table No. 2.6

Loss Loans of BOK
(in million)
Financial Year Amount
2015/16 164.96
2016/17 311.8
2017/18 531.78
2018/19 1224.21
2019/20 1178.83

Source: Annual report of BOK

The above data is illustrated in the following line graph:

Chart No. 2.4

21
Loss Loans of BOK

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 2.1.4 Allocation of Loan and advances of BOK
Table No. 2.7
Allocation of Loan and advances of BOK
S.N Particular 2015/16 2016/17 2017/18 2018/19 2019/20
1. Performing Loans
Good loan 37493.64 49383.90 59910.86 74532.06 97571.95
2. Non-performing
Loans
Sub-standard 1578.33 419.54 110.82 44.08 106.69
Doubtful 133.28 380.55 404.94 19.77 6.84
Bad 164.96 311.8 531.78 1224.21 1178.83

Source: Annual report of BOK

Chart No.2.5
Allocation of Loan and advances of BOK

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2.1.5 Comparative Study between Deposit and Loan

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Deposit is one of major source of the fund for the bank. These funds should be
properly invested. Bank should not invest in such place where there is greater risk and
loan mobilization cannot be maintained. Bank should invest in such a place where
loan mobilization and profit can be made proportionally otherwise public might lose
their faith from the bank in both the condition that is in lack of loan mobilization in
time of withdrawal and at time of low profit. So if the bank invests its fund to the
secure place that is considered to be good.

Table No-2.8
Showing Ratio of Deposit and Loan of the bank.
(Rs. in million)
F/Y Total Deposit Total Loan Ratio
2015/16 54666.09 41863.29 76.58
2016/17 66949.63 50495.81 75.42
2017/18 80639.02 60958.41 75.59
2018/19 100976.90 79000.90 78.24
2019/20 138024.45 101362.54 73.44
Source: Annual report of BOK

Chart no. 2.6

Bar diagram represent total deposit and Loan.

The above table and bar diagram present the total Loans made by bank, total deposit
made by the customer and its ratio from the fiscal year 2016/17 to 2019/20. In the
fiscal year 2015/16 the loan was 41863.29 million which 76.58% of the total deposit.
In the fiscal year 2016/17, 2017/18 and 2018/19 the amount of loan was Rs.
101352.54

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Million, Rs. 60958.41million and Rs. 79000.90 million respectively and its ratio to
total deposit was 75.42%, 75.59%and 78.24% respectively. Similarly, in the fiscal
year 2019/120 the Loan was Rs. 101362.54 which was 73.44% of the total deposit.

2.1.6 Loan Creation of BOK

Table No. 2.9

Loan Creation of BOK
S.N. Factors of Creation Percentage %
1. Construction and Production 56.9
2. Business 22.2
3. Service Sector 11.4
4. Agriculture Sector 0.50
5. Others 9.0

Source: Annual Report of BOK 2016/17

Chart No. 2.7

The above table and its graphical representation shows BOK’s loan created
distributed to different sectors. In construction and production 56.9%, in business
22.2%, in service sector 11.4%, in agriculture sector 0.50%, and in other 9.0% of
total loan has been distributed in 2015.

2.2 Major Findings of the Study

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From the information gain by the secondary data of BOK has provided maximum
loan percentage on construction and production sector where as minimum loan
percentage

Strength of this Bank of Kathmandu Limited.

● Established under a joint venture.

● Goodwill and image of the bank.
● Well Capital structure.
● Dedicated and well-trained staffs.
● Has developed its own market.

Weakness of the Bank of Kathmandu Limited

● High cost of production.

● Limited market.
● Compression and inflation in business.

Opportunities of the Bank of Kathmandu Limited

● New project to customers.

● Credit Card.
● Network style.
● Tele-banking facility.
● Impact of economic policy.
● Increase in number of investor and customers in the economy.

Threats of the Bank of Kathmandu Limited

● Growing competitions.
● Impending economic session.
● Political instability.
● Threats from media.

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 CHAPTER 3

SUMMARY AND CONCLUSION

3.1 Summary

As banking section starts with the wider range of involvement for the economic
development of every country. Mainly Nepal, which has been listed in under-
developed countries. One of the way of leading or to help in progressing the country
is also related to the economic development. If the country is economically well
developed, then it can develop within the short period of time rather than having the
economical problem. Under the company act 2021, BOK has started his banking
activities in 2051 B.S as the joint venture with the Punjab national bank. The main
objective of the bank is to provide banking services to the people of different sectors
in the short period of operation it has earned large number of customers through its
diversification of 14 branches. The customer satisfaction is the main key role to get
prosperity and progress of the bank as well as targeted customers.

3.2 Conclusion

Loan mobilization is one of the major functions of BOK. It is based on the different
segments like short term loan, long term loan, investment loan, Sapat & bills
purchased, bank loans, overdraft, pre export loan, purchase & discount bills, letter of
credit etc. Some portion or segment include ed to loan Mobilization fluctuate more &
in vast manner & some quite often is gentle increasing & decreasing manner & even
some reaches to negative parts as well. Each & every year we have come to know that
there are some up’s & down are in different segment of loan Mobilization. BOK only
accept the proposal after studying and analyzing in depth of the required loan
proposal according to the policies and strategies of bank. BOK also settle the loan or
credit within the maturity time in installment or in lump sum basis. At the time of
settlement of loan and credit issued by BOK, that customer who are unable to settle
their credits within maturity period, BOK facilitates them to provide various
opportunities and grace period to settle the very loan.

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3.3 Recommendation

BOK has yet to travel a long journey in the banking sector as it is now in early stage
of operation. It is improving its banking activities gradually, since its establishment
period. At present it has good loan mobilization and strong financial position. Now
BOK is a well-established joint venture commercial bank in Nepal. For maintaining
its increasing trend, the bank should follow many things. The following suggestions
have been made to facilitate the improvement program of BOK.

 The bank should implement the loan grating scission after analyzing
capital, capacity, Character, Collateral & condition of the clients.

 Power decentralization is much essential to do the work properly as it may

make able to introduce new techniques of loan management.

 The interest rate on loan must be higher than the interest rate provided on
deposit because due to this the banks earns reasonable profit.

 The bank for the development of deprived sector should give emphasis.
So, interest rate changed on deprived sector, loan should be minimized.

 Through this research, I found out that the bank deals very nicely with its
customers & all the customers are satisfied with its quick service in time.

 While charging interest on different types of loan for trading the bank
should meet charge interest rate higher than that of industry as it helps in
the growth in trading.

 We found that BOK is using advance technology motivating employees

providing better customer service giving more emphasis to internal
controls & starting marketing activities.

 Bank should attract more customers by providing different good services

& facilities to collect more negotiations.

Finally, the loan policy should give proper direction for use of fund, size of loan
control & influence in credit decision of then bank. Since, granting loan
eventually reads to loan passes, bank manger must attempt to minimize the losses.
Success depends upon technical knowledge & on an attitude to assess both the

29
credit worthiness of a potential borrower & the merits of the proposition to the
financial BOK as a commercial bank has discharged its activities for the
development and up liftmen of social, commercial industrial & finical sector. And
I wish this process would increase in future.

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 BIBLIOGRAPHY
Bajracharya, B.C. (2067). Business Statistics and Mathematics, M.K. Publishers and
Distributors.

Bhandari, Dilli Raj. Principle and Practice of Banking and Insurance, 3rd edition,
Aayush Publication, Kathmandu.

Dahal Bhuwan, Dahal Sarita. A Hand Book to Banking, 2nd edition, Union Press Pvt.
Ltd, Kathmandu.

Pant, Prem R. Fieldwork Assignment and Report Writing, 2nd edition, Buddha
Academic Enterprises Pvt. Ltd., Kathmandu.

Rejda, George E. Principles of Risk Management and Insurance, Pearson Education

Delhi.

Rose, Peter S. Commercial Bank Management, Irwin McGraw Hill, New Delhi.

Singh, Hirday Bir. Banking and Insurance, Asia Publication Pvt. Ltd., Kathmandu.
Annual reports of Bank of Kathmandu (2006-2011)

Press releases (November, November 21, December 04, December 24. 2009)

Web sites-

www.bok.com.np.com

www.nrb.org.np

Search Engines- www.google.com, www.yahoo.com

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