ANUJA

Chapter-1
INTRODUCTION
1.1 Title of the Study
The title of the study is “Impact of Capital Adequacy Norms on Capital Structure of the Banks in
Nepal”.
1.2 Background of the Study
“Capital” is one of the most important concepts in banking. A bank's capital is equal to

its assets minus its liabilities. It is the margin by which its creditors would be covered if assets
were liquidated and its liabilities paid off. Actually no organization can exist without capital-
whether it is a general store or a big business house. Every organization should have enough
capital to run business. Although the banks are the major source of capital, they also have to
raise capital to run business. Especially, the bank capital has significant role to play as the banks
have obligations to mass people, its depositors. Thus, the banks should hold an adequate capital
to secure the interest of depositors. Capital adequacy has become one of the most significant
factors for assessing the soundness of banking sector.
Prior to 1988, there was no uniform international regulatory standard for setting bank capital
requirements. In 1988, the Basel Committee on Banking Supervision (BCBS) developed the
Capital Accord, which is known as Basel I, to align the capital adequacy requirements applicable
especially to banks in G-10 countries. Basel I introduced two key concepts. First, it defined what
banks could hold as capital, as well as designating capital as Tier 1 or Tier 2 according to its loss
absorbing or creditor-protecting characteristics. The second key concept introduced in Basel I
was that capital should be held by banks in relation to the risks that they face. The major risks
faced by banks relate to the assets held on balance sheet. Thus, Basel I calculated banks’
minimum capital requirements as a percentage of assets, which are adjusted in accordance to
their riskiness and assigning risk weights to assets. Higher weights are assigned to riskier assets
such as corporate loans, and lower weights are assigned to less risky assets, such as exposures to
government.
The BCBS released the "International Convergence of Capital Measurements and Capital
Standards: Revised Framework", popularly known as Basel II, on June 26, 2004. This framework
was updated in November 2005 and a comprehensive version of the framework was issued in
June 2006. Basel II builds significantly on Basel I by increasing the sensitivity of capital to key
bank risks. In addition, Basel II recognizes that banks can face a multitude of risks, ranging from
the traditional risks associated with financial intermediation to the day-to-day risks of operating a
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business as well as the risks associated with the ups and downs of the local and international
economies. As a result, the new framework more explicitly associates capital requirements with
the particular categories of major risks that banks face.
The Basel Committees on Banking Supervision's (BCBS) recommendations on capital accord are
important guiding framework for the regulatory capital requirement to the banking industry all
over the world and Nepal is no exception. Realizing the significance of capital for ensuring the
safety and soundness of the banks and the banking system, at large, Nepal Rastra Bank (NRB)
has developed and enforced capital adequacy requirement based on international practices with
appropriate level of customization based on domestic state of market developments. The existing
regulatory capital is largely based on the Basel committee's 1988 recommendations.
With a view of adopting the international best practices, NRB has already expressed its intention
to adopt the Basel II framework, albeit in a simplified form. In line with the international
development and thorough discussion with the stakeholders, evaluation and assessment of impact
studies at various phases, this framework has been drafted. This framework provides the
guidelines for the implementation of Basel II framework in Nepal. Reminiscent of the
International convergence of capital measurements and capital standards, this framework also
builds around three mutually reinforcing pillars, viz. minimum capital requirements, supervisory
review process and disclosure requirements.
1.3 Significance of the Study
Capital requirement is the amount of capital a bank or other financial institution has to hold by

its financial regulator. It is usually expressed as a capital adequacy ratio of liquid assets that must
be held compared to the amount of money that is lent out. These requirements are put into place
to ensure that these institutions are not participating or holding investments that increase the risk
of default and that they have enough capital to sustain operating losses while still honoring
withdrawals. A key part of bank regulation is to make sure that firms operating in the industry
are prudently managed. The aim is to protect the firms themselves, their customers and the
economy, by establishing rules to make sure that these institutions hold enough capital to ensure
continuation of a safe and efficient market and able to withstand any foreseeable problems. The
proposed study helps to protect the depositors and creditors and also increases the public
confidence in the banking system.
1.4 Objectives of the Study
The study was focused on the impact of capital adequacy norms issued by Nepal Rastra Bank on
the capital structure of the sample banks. In details, the objectives of the study were:
i. To analyze the impact on the core capital and supplementary capital of those sample
banks.
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ii. To analyze the impact on minimum capital to be maintained based on risk weight assets.
iii. To find out the capital adequacy ratios of sample banks.
iv. To suggest the mechanism to maintain the capital adequacy ratio as per NRB norms.
1.5 Statement of the Problem
Adequacy of bank capital is the most important aspect of a bank. The bank should pay attention
to many things for the adequacy of capital. Banks and Financial Institutions work on both core
and supplementary capital to maintain the appropriate capital adequacy ratio. The central bank of
the country time and again issues directives to instruct the banks and other financial institutions
regarding the core capital and total capital to be maintained by them.
Pursuant to E. Pra. Directive No.1/069 of Unified Directives published by Nepal Rastra Bank,
the “A” class commercial banks shall maintain 6% of Core Capital and 10% of Total Capital
Fund based on their risk-weighted assets. Nepal Rastra Bank has also directed commercial banks
to increase their capital adequacy ratio if their liquid assets fall below 20 percent of total
deposits. According to NRB, the capital adequacy rule requires that the ratio of its capital to risk-
weighted assets be at least 10%. Further, the paid up capital of the “A” class commercial banks
shall have to be increased to Rs. 2 billion by Ashad end 2070 (mid July 2013). Though, NRB has
set the paid up capital limit to Rs. 2 billion, it has also instructed the banks to increase the capital
base without limiting to Rs. 2 billion.
How are the capital structures of the banks affected by these norms issued by NRB? How the
capital adequacy ratios are calculated? What are the impacts on the minimum capital that is to be
maintained based on risk-weighted assets? The study has attempted to find out the answers to the
above mentioned questions.
1.6 Research Methodology
Research methodology refers to the methods/ways that are used in conducting research or
performing research operation. Research methodology is a technique of analyzing the obtained
data to solve the research problem.
1.6.1 Research Design
Research design is a plan for the collection and analysis of data. “Research design is a plan,
structure and strategy of investigation conceived so as to obtain answers to the research questions
and to control variances” (Kerlinger 1978). Research design is thinking before doing.
This study was based on historical data and no variables are in control of researcher and no
variables in this research have been manipulated during the study period.
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1.6.2 Population and Sample
Capital adequacy framework is applicable to all "A" Class financial institutions licensed to
conduct banking business in Nepal under the Bank and Financial Institution Act (BAFIA), 2063.
This capital adequacy framework is applicable uniformly to all "A" class financial institutions on
a stand-alone basis and as well as on a consolidated basis, where the bank is member of a
consolidated banking group. For the purpose of capital adequacy, the consolidated bank means a
group of financial entities, parent or holding company of which a bank is a subsidiary. All
banking and other relevant financial activities (both regulated and unregulated) conducted within
a group including a bank shall be captured through consolidation. However, the following banks
will be taken as sample of the study.
Nepal SBI Bank Ltd.
Everest Bank Ltd.
Himalayan Bank Ltd.
1.6.3 Sources of Data
The data for the study have been collected from secondary sources including the directories
available with the Nepal Rastra Bank and the annual reports of the companies. The details on the
capital structure of the banks have been collected from the unaudited financial reports of the
sample banks.
1.6.4 Data Processing and Analysis
Various financial and statistical tools have been used to analyze the data. The change in the
capital structure of the banks before and after the implementation of capital adequacy norms
have been evaluated by using different quantitative/mathematical tools. The data have been
presented with the help of tables and graphs.
1.7 Limitation of the Study
The study was related to the change in the Capital Structure of the “A” class commercial banks
as the impact of capital adequacy norms. However, the study was limited to the following points.
i. The study covered the capital adequacy norms issued by Nepal Rastra Bank only.
ii. The study covered the time period of three years only.( 2067-2069)
iii. The study was mostly based on secondary data.
iv. Only three “A” class commercial banks were considered in the study.
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1.8 Literature Review
Central bank is the national institution that governs and controls the monetary system of the
country. Nepal Rastra Bank (NRB), the Central Bank of Nepal, was established in 1956 under
the Nepal Rastra Bank Act, 1955, to discharge the central banking responsibilities including
guiding the development of the embryonic domestic financial sector.
Commercial banks are the profit earning organizations that mobilize fund from depositors to the
investors. Capital is inevitable for the existence of any organization. It must be sufficient to
protect the depositors as well as to cover the associated risks of the organizations. The risk could
either be credit risk or market risk.
To reflect this dynamic environment, the functions and objectives of the Nepal Rastra Bank
have been recast by the new NRB Act of 2002, the preamble of which lays down the primary
functions of the Bank as:
i. To formulate necessary monetary and foreign exchange policies to maintain the stability in
price and consolidate the balance of payments for sustainable development of the economy
of Nepal.
ii. To develop a secure, healthy and efficient system of payments.
iii. To make appropriate supervision of the banking and financial system in order to maintain
its stability and foster its healthy development.
iv. To further enhance the public confidence in Nepal's entire banking and financial system.
The Bank is eminently aware that, for the achievement of the above objectives in the present
dynamic environment, sustained progress and continued reform of the financial sector is of
utmost importance. Continuously aware of this great responsibility, NRB is seriously
pursuing various policies, strategies and actions.
Among the various directives, policies, and strategies, Capital Adequacy Norms issued by Nepal
Rastra Bank confirms that the banks are maintaining capital required on the basis of risk-
weighted assets. It protects the interest of the public deposit and safeguards the banks in their
critical financial condition.
1.9 Introduction to the Sample Banks
Nepal SBI Bank is a public limited company incorporated at the Office of Company Registrar,
Kathmandu Nepal on April 28, 1993 under Regd. No. 17-049/50 and was licensed by Nepal
Rastra Bank on July 6, 1993 under license No NRB/L. Pa. /7/2049/50 and classified as ‘A’ class
licensed institution on April 26, 2006 under license No. NRB/I.Pra.Ka.7/062/063. The Bank was
established as a subsidiary of State Bank of India. The Bank is listed in Nepal Stock Exchange
Limited.
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Nepal SBI Bank had started its operation with the paid up capital of Rs. 84,000,000. At the end
of the fiscal year 2069-70 (July 15, 2013), the paid up capital has reached to Rs. 2,355,738,504.
Now, the core capital of the bank is Rs. 3,785,482,444 and the supplementary capital is Rs.
1,103,155,547. The capital adequacy ratio of bank is 13.39%.
Himalayan Bank Limited is a public limited liability company domiciled in Nepal, with its
registered office as G.P.O. Box No. 20590, Karmachari Sanchaya Kosh Building, Thamel,
Kathmandu, Nepal. The Bank was established in 1993 as a Joint-venture of Habib Bank Limited,
Pakistan & is licensed by Nepal Rastra Bank, the central bank of Nepal, to carry out commercial
banking activities in Nepal as class ‘A’ financial institution under the Bank and Financial
Institution Act, 2063. The Bank is listed in Nepal Stock Exchange Limited.
Himalayan Bank had started its operation with the paid up capital of Rs. 60,000,000. The paid up
capital of the bank at the end of fiscal year 2069-70 (July 15, 2013) is Rs. 2,760,000,000. The
core capital is Rs. 4,972,173,697 and supplementary capital is Rs. 1,442,263,755. The capital
adequacy ratio of the bank is 11.55%.
Everest Bank Ltd. was founded in 1994. It is a limited liability company domiciled in Nepal. Its
registered office is at Lazimpat, Kathmandu, Nepal. The bank listed with Nepal Stock Exchange
provides full banking services as licensed by Nepal Rastra Bank. The bank has entered into
Technical Service Agreement for the equity and management participation with Punjab National
Bank Ltd, New Delhi, India.
Everest Bank had started its operation with the paid up capital of Rs. 30,000,000. The paid up
capital at the end of fiscal year 2069-70 (July 15, 2013) was Rs. 1,761,126,410. The core capital
of Everest Bank Ltd at the end of fiscal year 2068-69 (July 15, 2013) is Rs. 4,639,762,000 and
the supplementary capital is Rs. 1,137,920,000. The capital adequacy ratio of the bank is
11.59%.
The sample banks have adopted different policies like issuance of right shares, bonus shares,
debentures and bonds etc. to increase their capital base as per the directions issued by Nepal
Rastra Bank in its Capital Adequacy Norms.
1.10 Organization of the Study
The study will consist of five chapters.
Chapter 1: It will include general background of the study, statement of problem, objectives of
the study, significance of the study and limitation of the study.
Chapter 2: This chapter will consist of review of literature. This is another way to describe the
purpose of the study.
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Chapter 3: It will describe about the research methodology. It will include research design and
research tools.
Chapter 4: Fourth chapter of the study will be data analysis and presentation. This will be the
major part of the study. Obtained data will be analyzed by using various statistical and
mathematical tools and will be presented in table and graphs.
Chapter 5: This chapter will include summary, conclusion and recommendation. The main aim
of this part will be to recommend concerned authority about the initiatives to be taken by them in
this regard.
1.11 Work Schedule
Phase 1: In this phase related literature and necessary data will be collected by visiting libraries
and the concerned institutions like Nepal Rastra Bank, Nepal SBI Bank and sample banks.
Phase 2: Data will be analyzed in this phase by using different tools and techniques.
Phase 3: The analysis will be interpreted through different tables and graphs.
Phase 4: Organizing all for dissertation.
On an average, each phase will be completed in one month. As such, total estimated time for the
completion of this study is four months.
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Chapter- 2
LITERATURE REVIEW
2.1 Conceptual Review
2.1.1 Origin and Development of Banks
The History of Banking begins with the first prototype banks of merchants in the ancient world,
which made grain loans to farmers and traders who carried goods between cities. This began
around 2000 BC in Assyria and Babylonia. Later, in ancient Greece and during the Roman
Empire, lenders based in temples made loans and added two important innovations: they
accepted deposits and changed money. Archaeology from this period in ancient China and India
also shows evidence of money lending activity.
The first bank called the “Bank of Venice” was established in Venice in 1157 then “Bank of
Barcelona” was established in 140 and “Bank of Genoa” was established in 1407. In 12694,
“Bank of England was established as a joint stock bank.
Nepal, also, has a long history of using of money. History unveils that the first Nepali
coins to be introduced were Manank during the reign of the King Mandev and
Gunank during the reign of the King Gunakamdev. Afterwards the coins were
reintroduced during the reign of Amshuverma. After the unification of Nepal, the
great King Prithivi Narayan Shah started the coin Mohar. The Taksar was
established in 1789 to issue coins scientifically. In 1876, during Rana Regime an
office named Tejarath Adda was established in Kathmandu to provide loans against
deposit of gold and silver. But the office did not have right to accept deposits.
The history of banking in Nepal is believed to be started from the time of Prime Minister
Ranoddip Singh in 1877 A.D. He introduced many financial and economic reforms. The
Tejaratha Adda was established at that time and its basic purpose was to provide credit facilities
to the general public at a very concessional interest rate. The Tejarath Adda disbursed credit to
the people on the basis of collateral of gold and silver. All employees of government were also
eligible for this type of loan,which was settled by deducting from their salary. Tejaratha Adda
extended credit only; it did not accept deposits from the public.
But the real banking started with the establishment of Nepal bank limited in 1994 B.S which was
founded by Judda Samsher. It was the first bank of Nepal. Its main function was to provide
loans and accept deposits. Later Nepal Rastra Bank was established as a central bank in 2013
B.S. The bank was completely government ownership bank and it also started to issues notes
since 2016 B.S. Then after, several commercial banks have been established in the recent years.
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2.1.2 Meaning and Development of Central Bank
A central bank, reserve bank, or monetary authority is an institution that manages a state's
currency, money supply, and interest rates. Central banks also usually oversee the commercial
banking system of their respective countries. In contrast to a commercial bank, a central bank
possesses a monopoly on increasing the amount of money in the nation, and usually also prints
the national currency, which usually serves as the nation's legal tender.
Prior to the 17th century most money was commodity money, typically gold or silver. However,
promises to pay were widely circulated and accepted as value at least five hundred years earlier
in both Europe and Asia. The Song Dynasty was the first to issue generally circulating paper
currency, while the Yuan Dynasty was the first to use notes as the predominant circulating
medium. In 1455, in an effort to control inflation, the succeeding Ming Dynasty ended the use of
paper money and closed much of Chinese trade. The medieval European Knights Templar ran an
early prototype of a central banking system, as their promises to pay were widely respected, and
many regard their activities as having laid the basis for the modern banking system.
As the first public bank to "offer accounts not directly convertible to coin", the Bank of
Amsterdam established in 1609 is considered to be the precursor to modern central banks. The
central bank of Sweden ("Sveriges Riksbank" or simply "Riksbanken") was founded in
Stockholm from the remains of the failed bank Stockholms Banco in 1664 and answered to the
parliament ("Riksdag of the Estates"). One role of the Swedish central bank was lending money
to the government.
In England in the 1690s, public funds were in short supply and were needed to finance the
ongoing conflict with France. The credit of William III's government was so low in London that
it was impossible for it to borrow the £1,200,000 (at 8 per cent) that the government wanted.
In order to induce subscription to the loan, the subscribers were to be incorporated by the name
of the Governor and Company of the Bank of England. The bank was given exclusive possession
of the government's balances, and was the only limited-liability corporation allowed to issue
banknotes. The lenders would give the government cash (bullion) and also issue notes against
the government bonds, which can be lent again. The £1.2M was raised in 12 days; half of this
was used to rebuild the Navy.
In 1694, the Bank of England was converted into the central bank of England. This was done by
establishing the Governor and the Company of the Bank of England. At present, this bank is
known as the Central Bank of England.
Although central banks today are generally associated with fiat money, the 19th and early 20th
centuries central banks in most of Europe and Japan developed under the international gold
standard, elsewhere free banking or currency boards were more usual at this time. Problems with
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collapses of banks during downturns, however, were leading to wider support for central banks
in those nations which did not as yet possess them, most notably in Australia.
The US Federal Reserve was created by the U.S. Congress through the passing of The Federal
Reserve Act in the Senate and its signing by President Woodrow Wilson on the same day,
December 23, 1913. Australia established its first central bank in 1920, Colombia in 1923,
Mexico and Chile in 1925 and Canada and New Zealand in the aftermath of the Great
Depression in 1934. By 1935, the only significant independent nation that did not possess a
central bank was Brazil, which subsequently developed a precursor thereto in 1945 and the
present central bank twenty years later. Having gained independence, African and Asian
countries also established central banks or monetary unions.
2.1.3 Importance & Functions of Central Banks
Central banking functions have evolved gradually over decades. Their evolution has been guided
by ever-changing need to find new methods of regulating, guiding and helping the financial
system (particularly, the banks). In other words, the evolution of central banking functions has
tended to coincide with the evolution of the financial systems of the world economies. Let us
recount the leading functions.
Note Issue
It is considered one of the primary functions of a central bank. The entire financial system of a
country, with ever-increasing volume and variety of the financial instruments, institutions and
markets, needs a stable supply of legal tender money. This legal tender should tend to vary, both
in volume and composition to the changing requirements of the economy. Accordingly, the
central bank of the country is granted the sole right to issue currency (including that of the
government of the country) and (ii) a monopoly of issuing bank notes (which are its promises to
pay).
Banker's Bank
The second main function of a central bank is that of being a bank of the banks. This function
includes the following interrelated sub-functions.
(a) The first sub-function is its being a custodian of the cash reserves of the commercial banks.
The exact form of this function has varied from country to country and in terms of legal
provisions. Historically, commercial banks discovered that it was convenient and economical to
hold deposit balances with the central bank for making payments to each other. In some
countries, however, the banks are compelled by law to hold deposit balances with the central
bank and this gives it an additional tool to regulate credit creation by them. The legal provision
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to this effect was first introduced in US. Later, it was adopted in India also. RBI has found it a
very effective regulatory tool and has used it very extensively.
To begin with, bank deposits were categorised into demand deposit liabilities and time deposit
liabilities. The minimum cash balances to be maintained with RBI were to be between 2% and
8% of the time deposit liabilities and between 5% and 20% of demand deposit liabilities. The
choice of exact percentages and their revision was left to the discretion of the RBI. Later on, the
provision relating to minimum cash balances (called 'cash reserve ratio', or CRR) was modified
to the effect that now a uniform percentage (between 3% and 15%) is applicable to all bank
deposits. Again, the choice of exact percentage and its revision is left to the discretion of the
RBI.
(b) The second sub-function is that of clearance. When individual banks maintain deposit
balances with the central bank and use them to make payments to each other, the system of
interbank clearance emerges. The interbank clearance and remittances result in appropriate
adjustments in the deposit balances of the banks with the central bank. Actually, the basic
motive, which induces the commercial banks in maintaining deposit balances with the central
bank, is the convenience and economy of making payments to each other. This function was first
developed by the Bank of England in mid 19 th century. Currently, it is one of the primary
functions of every central bank of the world.
2.1.4 The Central Bank
The central bank is the final source of the supply of legal tender. It is the lender of the last resort.
For this reason, it should be able to adjust the availability of currency with the market in line
with the changing needs of the latter. When the economy expands and it needs additional money
and credit, the central bank can adopt a policy of pumping in additional currency in the market.
Similarly, it can try to curtail the supply of available currency when the economy in a phase of
contraction. The central bank adjusts the volume of currency in two ways.
(i) The banks can approach it for cash loans. It can tighten the terms of issue of such loans
(including the rate of interest to be charged) if it wants to restrict the money supply.
Alternatively, it can make it easier and cheaper for the banks to borrow if it wants to increase the
supply of money and credit.
(ii) The amount of money needed by the market is also reflected in the bills drawn by the seller
upon the buyers and the central bank can take steps to alter the money supply in the market by
adjusting the volume of bills discounted/ re-discounted by it. For example, when the volume of
bills drawn is increasing during an expansionary phase of the economy, the central bank can
adopt the policy of discounting more of them and pumping additional currency in the market.
Similarly, when the economy is passing through a phase of contraction, the volume of bills
drawn decreases. In this case, the central bank can drain the market of excess money supply by
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collecting the earlier discounted bills and discounting less of fresh bills. In addition, it can also
adopt the policy of adjusting its discount rate to encourage or discourage the discounting of bills,
as the need be.
Banker to the Government
The central bank of the country happens to be a banker to the government. This function
normally involves two things: (i) providing ordinary banking services to the government, and (ii)
being a public debt agent and underwriter to the government. Let us consider each of these with
reference to the Reserve Bank of India.
Custodian of Foreign Exchange Reserves
Central bank of a country is also a custodian of its official foreign exchange reserves. This
arrangement helps the authorities in managing and co-ordinating the monetary matters of the
country more effectively. This is because there is a direct association between foreign exchange
reserves and quantity of money in the market. The foreign exchange reserves are influenced by
international capital movements, international trade credits and so on. Because of the interaction
between the domestic money supply, price level and exchange reserves, the central bank
frequently faces several contradictory tendencies which have to be reconciled.
Regulation of Exchange Rate
A related function, which is assigned to the central bank, is the regulation and stabilization of the
exchange rate. This task is facilitated when the central bank is also the custodian of official
foreign exchange reserves. The need for a stable exchange rate is more in the case of a paper
standard than under a metallic standard. In this context, we should specifically note two things:
(i) the justification for having a stable exchange rate and avoiding violent and wide fluctuations
in it; and (ii) the need to assign this task to an expert and competent agency.
As regards expertise and competence central bank of the country is the best agency to which the
task of regulating and stabilizing exchange rate should be assigned. The central bank happens to
be the apex institution of the entire financial system of the country. It is in possession of
maximum data and has the expertise 'of estimating the financial trends and the type of corrective
measures needed. Moreover, it possesses several regulatory powers over the financial system. It
can contemplate and take the complementary measures needed for ensuring the success off the
steps taken in the area of exchange rate.
A stable exchange rate is of great help in promoting external trade and orderly capital flows. The
volatility of exchange rate tends to increase if there is complete capital convertibility (that is,
capital can flow in and out of the country without specific permission of the authorities). If the
central bank is given the authority to regulate the use of foreign exchange (that is, if it has the
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authority to apply exchange control to the extent it decides), the task of stabilizing exchange rate
becomes easier for it.
Credit Control
Over the years, credit control has become a leading function of a modern central bank. In earlier
days, the term credit control referred to the regulation of only the "volume" of money and credit.
Currently, the term is used in a wider meaning and covers not only the "volume" of money and
credit, but also its components, its flows, its allocation between alternative uses and borrowers,
terms and conditions attached to credit and so on.
The need for credit control arises because it is observed that "money cannot manage itself. Left
to unregulated market forces, flows of money and credit have the tendency to accentuate cyclical
fluctuations. Moreover, in underdeveloped countries, unregulated credit flows strengthen inter-
sectoral imbalances, speculative forces and other distortions. Details of credit control and
instruments used by the central bank will be discussed later in this Unit.
Other Functions
It is believed that an underdeveloped country requires an all-frontal approach in solving its

problems of poverty and growth. Though regulation of the volume of money and credit and its
other dimensions, the central bank plays a key role in its growth policy, much more is needed to
make it really effective. Viewed in this manner, the functions of a central bank come to cover a
much wider field than is conventionally considered in the case of central banks of developed
countries.
2.1.5 Meaning of Commercial Banks
Investopedia (2013) explains 'Commercial Bank' as those institutions which provide banking
sevivces like underwriting, acting as an intermediary between an issuer of securities and the
investing public, facilitating mergers and other corporate reorganizations, and also acting as a
broker for institutional clients. Some commercial banks, such as Citibank and JPMorgan Chase,
also have investment banking divisions, while others, such as Ally, operate strictly on the
commercial side of the business.
Clark (1999) has defined commercial bank as bank that concentrates on cash deposit and
transfer services to the general public, often to be found on the High Street. It may be joint-
venture bank or a private bank.
A financial institution that provides services, such as accepting deposits, giving business loans
and auto loans, mortgage lending, and basic investment products like savings accounts and
certificates of deposit. The traditional commercial bank is a brick and mortar institution with
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tellers, safe deposit boxes, vaults and ATMs. However, some commercial banks do not have any
physical branches and require consumers to complete all transactions by phone or Internet. In
exchange, they generally pay higher interest rates on investments and deposits, and charge lower
fees.
Because a commercial bank is required to hold only a fraction of its deposits as reserves, it can
use some of the money on deposit to extend loans. When a borrower receives a loan, his
checking account is credited with the amount of the loan; total demand deposits are thus
increased until the loan is repaid. As a group, then, commercial banks are able to expand or
contract the money supply by creating new demand deposits.” (Encyclopedia Britannica, 2002)
Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits
and loans from corporations or large businesses, as opposed to individual members of the public
(retail banking).
In the US the term commercial bank was often used to distinguish it from an investment bank
due to differences in bank regulation. After the great depression, through the Glass–Steagall Act,
the U.S. Congress required that commercial banks only engage in banking activities, whereas
investment banks were limited to capital markets activities. This separation was mostly repealed
in the 1990s.
Commercial banks are generally engaged in the following activities:
 processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or

other means
 issuing bank drafts and bank cheques
 accepting money on term deposit
 lending money by overdraft, installment loan, or other means
 providing documentary and standby letter of credit, guarantees, performance bonds,
securities underwriting commitments and other forms of off balance sheet exposures
 safekeeping of documents & other items in safe deposit boxes
 sales, distribution or brokerage, with or without advice, of: insurance, unit trusts and
similar financial products as a “financial supermarket”
 cash management and treasury
 merchant banking and private equity financing
 traditionally, large commercial banks also underwrite bonds, and make markets in
currency, interest rates, and credit-related securities, but today large commercial banks
usually have an investment bank arm that is involved in the mentioned activities
Commercial banks perform many functions. They satisfy the financial needs of the sectors such
as agriculture, industry, trade, communication, so they play very significant role in a process of
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economic social needs. The functions performed by banks, since recently, are becoming
customer-centred and are widening their functions. Generally, the functions of commercial banks
are divided into two categories: primary functions and the secondary functions. The following
chart simplifies the functions of commercial banks.
Commercial banks perform various primary functions, some of them are given below:
 Commercial banks accept various types of deposits from public especially from its
clients, including saving account deposits, recurring account deposits, and fixed deposits.
These deposits are payable after a certain time period
 Commercial banks provide loans and advances of various forms, including an overdraft
facility, cash credit, bill discounting, money at call etc. They also give demand and
demand and term loans to all types of clients against proper security.
 Credit creation is most significant function of commercial banks. While sanctioning a
loan to a customer, they do not provide cash to the borrower. Instead, they open a deposit
account from which the borrower can withdraw. In other words, while sanctioning a loan,
they automatically create deposits, known as a credit creation from commercial banks.
Along with primary functions, commercial banks perform several secondary functions, including
many agency functions or general utility functions. The secondary functions of commercial
banks can be divided into agency functions and utility functions.
The agency functions are the following:
 To collect and clear cheque, dividends and interest warrant.

 To make payments of rent, insurance premium, etc.
 To deal in foreign exchange transactions.
 To purchase and sell securities.
 To act as trusty, attorney, correspondent and executor.
 To accept tax proceeds and tax returns.
 The utility functions are the following:
 To provide safety locker facility to customers.
 To provide money transfer facility.
 To issue traveller's cheque.
 To act as referees.
 To accept various bills for payment: phone bills, gas bills, water bills, etc.
 To provide merchant banking facility.
 To provide various cards: credit cards, debit cards, smart cards, etc.
15
2.2 Overview: Capital and Capital Adequacy
“Capital is a stock of resources that may be employed in the production of goods and services
and the price paid for the use of credit or money, respectively.” (Microsoft Encarta Reference
Library, 2003)
Rosenberg (1982) has defined capital in relation with banking as a long-term debt plus owners’
equity.
The efficient functioning of markets requires participants to have confidence in each

other's stability and ability to transact business. Capital-rules help foster this
confidence because they require each member of the financial community to have,
among other things, adequate capital. This capital must be sufficient to protect a
financial organization’s depositors and counterparties from the risks of the
institution's on-balance sheet and off-balance sheet risks. Top of the list are credit
and market risks; not surprisingly, banks are required to set aside capital to cover
these two main risks. Capital standards should be designed to allow a firm to absorb
its losses, and in the worst case, to allow a firm to wind down its business without
loss to customers, counterparties and without disrupting the orderly functioning of
financial markets.
Minimum capital fund standards are thus a vital tool to reducing systemic risk. They also play a
central role in how regulators supervise financial institutions. But capital requirements have so
far tended to be simple mechanical rules rather than applications of sophisticated risk-
adjusted models. Such capital standard is widely known as capital adequacy.
Patheja (1994) has defined banks capital as common stock plus surplus plus undivided
profits plus reserves for contingencies and other capital reserves. In addition since a bank’s
loan-loss reserves also serves as a buffer for absorbing losses, a broader definition of bank
capital include this account.
Verma & Malhotra (1993) has indicated that the general public is interested in the
higher profitability and safety of the funds of a bank, because the public expects the
shareholders to assume all the risks. Lower profitability of a bank fills the faith of
the prospective depositors and all their incentive for investing in the various deposit
schemes.
The Basel Committee sets a standard for all the banking norms, which will be accepted by
central banks of all big industrialist countries. Regarding the capital funds the committee has
issued the Basel Capital Accord. The first Basel Capital Accord was issued in 1988 and was
implemented by 1992. The committee has now issued New Basel Capital Accord which will be
implemented by 2006 to overcome the drawbacks of the present capital accord. Central Banks of
16
developing and underdeveloped countries follow these standards. NRB also follows these
standards and accordingly sets standard for commercial banks in Nepal.
According to the directive issued by NRB, the bank capital has been categorized into
two parts: core capital and supplementary capital. This categorization is also known
as Tier-1 capital for core capital and Tier-2 capital for supplementary capital.
The Tier-1 capital consists of the following components of capital:
i. Share Capital,
ii. Share Premium,
iii. Non-Redeemable Preference Shares,
iv. General Reserve Fund,
v. Cumulative Profit/Loss (up to previous FY), and
vi. Current Year Profit/Loss (as per Balance Sheet).
The Tier-2 capital consists of the following components:
i. Loan Loss Provision,

ii. Exchange Equalization Reserve,
iii. Assets Revaluation Reserve,
iv. Hybrid Capital Instruments,
v. Unsecured Subordinated Term Debt,
vi. Interest Rate Fluctuation Fund, and
vii. Other Free Reserves.
The total of Tier-1 and Tier-2 capital is considered for calculating capital adequacy ratio. The
capital adequacy ratio is based on total risk-weighted assets.
Clark (1999) has defined capital adequacy as legal requirement that a financial institution (such
as a bank) should have enough capital to meet all its obligations and fund the services it offers.
Besis (1998) has claimed that capital adequacy aims at setting minimum level of capital as a
function of risks. Thus capital should be risk based.
Maisel (1981) “Capital is adequate either when it reduces the chances of future insolvency of an
institution to some predetermine level of alternately when the premium paid by the banks to an
insurer is ‘fair’, that is, when it fully covers the risks borne by the insurer. Such risks, in turn,
depend upon the risk in the portfolio selected by the bank, on its capital and on terms of the
insurance w.r.t. when insolvency will be determined and what loss will be paid”.
The capital adequacy ratio is yielded by the following formula:
17
2.3 Review of NRB Capital Adequacy Norms for Commercial Banks
With an objective to develop a healthy, competent and secured banking system for
economic prosperity of the country and to safeguard the interest of depositors, NRB
issued the directive no. 1 regarding minimum capital fund to be maintained by
commercial banks. NRB issued these capital adequacy norms by using the power given by
Commercial Bank Act, 2031 (with amendments) Clause 14(Ka). These
norms were issued under the Nepal Rastra Bank Act, 2012 (with amendments)
Clause 23 Sub-clause 1 - Provision for developing and regulating banking system.
The norms have prescribed the minimum capital fund requirement, on the basis of the risk-weighted
assets. The banks are required to maintain the prescribed proportion of minimum capital fund on the
basis of weighted risk assets as per the following time-table:
Time Table Core Capital Total Capital Fund

For FY 2058/59 (2001/02) 4.5% 9.0%
For FY 2059/60 (2002/03) 5.0% 10.0%
From FY 2060/61 (2003/04) onwards 6.0% 12.0%
As stated earlier, for the purpose of calculation of Capital Fund, the capital of the
banks is divided into two components Core Capital and Supplementary Capital.
Core capital which is widely known as Tier-1 capital consists of share capital, share
premium, non-redeemable preference shares, general reserve fund and accumulated
profit/loss. Supplementary capital, which is also known as Tier-2 capital consists of
loan loss provision, exchange equalization reserve, assets revaluation reserve, hybrid
capital instruments, unsecured subordinated term debt, interest rate fluctuation fund,
and other free reserves. The sum of these two components is considered to be total
capital fund.
For the purpose of calculation of capital fund, the risk-weighted assets have been
classified into two parts - On-Balance Sheet Risk-Weighted Assets and Off-Balance
Sheet Risk-Weighted Items. The weightage of the risk assigned to them are shown
in the Appendix A and Appendix B respectively. The amount of risk-weighted assets
calculated by multiplying the amount of the asset with the weightage assigned to
18
them and the total of which will be extracted for the purpose of calculation of capital
adequacy ratios.
As per the norms, the capital fund ratio would measure the total capital fund on the
basis of total risk-weighted assets. The capital fund ratio shall be determined as
follows:
The sum of risk-weighted assets is the sum of total on-balance sheet risk-weighted assets and
total off-balance sheet risk-weighted items.
The banks shall, at the end of Ashoj (mid October), Poush (mid January), Chaitra
(mid April) and Ashad (mid July) of each fiscal year, prepare the Statements of
Capital Fund and other relevant statements on the basis of the financial statements as
per the prescribed Form No. 1 and Form No. 2 and submit to the Banking Operation
Department and Inspection and Supervision Department of this bank within one month from the
end of each quarter. The prescribed form no. 1 and 2 are illustrated in Appendix C and Appendix
D respectively.
In the event of non-fulfillment of Capital Fund Ratio in any quarter, the banks shall fulfill the
shortfall amount within next 6 (six) months. Until the fulfillment of such Capital Fund, the banks
shall not declare or distribute dividend to its shareholders under Section 18 of Commercial Bank
Act, 2031. The shortfall in the Capital Fund may be rectified by issuing new shares and/or
reallocating assets.
If any bank does not fulfill the minimum Capital Fund within the specified period, NRB may
initiate any of the following actions:
i. Suspension of declaration / distribution of dividend (including bonus shares).

ii. Suspension of opening new branch.
iii. Suspension of access to refinancing facilities of Nepal Rastra Bank.
iv. Restriction on lending activities of the bank.
v. Restriction on accepting new deposits.
vi. Initiation of any other actions by exercising the authority under Section 32 of Nepal
Rastra Bank Act, 2012.
19
Chapter- 3
RESEARCH METHODOLOGY
Research Methodology is a way to find out the result of a given problem on a specific matter or
problem that is also referred as research problem. In Methodology, researcher uses different
criteria for solving/searching the given research problem. Different sources use different type of
methods for solving the problem. If we think about the word “Methodology”, it is the way of
searching or solving the research problem. (Industrial Research Institute, 2010).
According to Goddard & Melville (2004), answering unanswered questions or exploring which

currently not exist is a research. The Advanced Learner’s Dictionary of current English lays
down the meaning of research as a careful investigation or inquiry especially through search for
new facts in any branch of knowledge. Redmen & Mory (2009), define research as a
systematized effort to gain new knowledge.
Research Methodology can be understood as a science of studying how research has been done.
This chapter looks into the research design, nature and sources of data, data collection
procedure and tools & technique of analysis. For the purpose of achieving the objectives of
the study, the applied methodologies are used. The research methodology used in the present
study is briefly mentioned below.
3.1 Research Design
Analysis of the capital funds of the commercial banks of Nepal is the major attempt of this
research study. Sample banks are considered for the purpose. The research design is basically
focused on analytical study. Ratio analyses have also been done for analyzing the research. The
research examines the relationship of bank capital to various other stakes, like deposits, and credits.
3.2 Population and Sample
The number of commercial banks operating in Nepal has reached 30. Collection of data from all
of these banks was not possible for the research study. Thus, three sample banks have been
selected for the analysis. These banks are Nepal SBI Bank Ltd., Himalayan Bank Ltd, and
Everest Bank Ltd. as such, the population of the study comprises of all the commercial banks and
the sample banks are Nepal SBI Bank Ltd., Himalayan Bank Ltd, and Everest Bank Ltd.
3.3 Data Collection Procedure
The data used in this study are collected from the secondary sources. Directves of Nepal Rastra
Bank, annual reports of the samples banks, various publications of Nepal Rastra Bank, the
20
Bankers Association, magazines, the other publications, various books and periodicals and the
internet have been used.
3.4 Data Analysis Tools
The data and information have been presented in different forms before analyzing them. They
are arranged systematically in the forms of tables, graphs, charts.
For the analysis of the research financial and statistical tools have been used.
3.4.1 Financial Tools
Ratio analysis is the best tool for financial analysis. Ratios can be taken as expression of
relationships between two items or group of items and therefore may be calculated in any
number and ways so far meaningful co-relationship is obtainable.
Pandey (1995) emphasizes that a ratio is used as a benchmark for evaluating the financial
position and performance of a firm.
The following ratios have been used for the analysis of the data.
3.4.2 Capital Adequacy Ratio
Capital adequacy ratio is based on total risk-weighted assets (TRWA) of the bank. Capital
adequacy ratios are a measure of the amount of a bank's capital expressed as a percentage of
its risk weighted credit exposures. This ratio is used to examine adequacy of total capital fund
and core capital, which is yielded by the following formulae:
Measurement of core capital adequacy ratio:
Measurement of Total Capital Adequacy Ratio:
3.4.3 Capital to Deposit Ratio
Capital to Deposit ratio is another important tool in measuring the adequacy of the bank.
21
Patheja (1994) has stressed that the capital to deposit ratio has enjoyed the longest use of any
ratio devised to measure and determine capital adequacy.
The formula used to derive this ratio can be written as follows:
3.4.4 Credit to Deposit Ratio
This ratio is considered the most important while analyzing the liquidity position of the bank. It
measures the ratio of fund that a bank has utilized in credit out of the deposit total collected. More
the Credit to Deposit ratio more the effectiveness of the bank to utilize the fund it collected.
The formula used to calculate this ratio can be written as follows:
22
Chapter- 4
DATA PRESENTATION AND ANALYSIS
Data and information collected in the previous sections should be presented in the readable
format so that the analysis and interpretation becomes easier. This chapter deals with the
presentation, analysis and interpretation of data and information of the sample banks.
The data should be analyzed to interpret and draw conclusion. Data analysis includes organizing
of the data, tabulating and using of statistical tools to analysis them. The data obtained from
these sample banks are analyzed according to the research methodology mentioned in Chapter 3.
4.1 Presentation of Data
The data collected should be presented in such a way that it is understandable to the reader and
the analyst s. The data collected for this report has been presented in tabular form. Graphs and
charts are also used to present the data.
4.1.1 Capital Fund
Capital fund of any bank is the summation of Core Capital and Supplementary Capital. Core
Capital is also known as Tier-1 Capital and Supplementary Capital is also known as Tier-2
Capital. The capital Fund of the sample banks have been presented as follows:
4.1.1.1 Capital Fund of Everest Bank Ltd.
Everest Bank started its operation in 10.08.1994 with 20% ownership of Punjab National Bank
of India. Investment of other entities contributes 80% of total capital fund. Some of these entities
are Rajdhani Investment Fund, Snow Lion Hotel etc. General public have also invested in this
organization which occupies about 68% of total investment fund.
Everest Bank had started its operation with the paid up capital of Rs. 30,000,000. The paid up
capital at the end of fiscal year 2069-70 (July 15, 2013) is Rs. 1,761,126,410. The core capital of
Everest Bank Ltd at the end of fiscal year 2069-70 (July 15, 2013) is Rs. 4,639,762,000 and the
supplementary capital is Rs. 1,137,920,000.
Table 4.1
Capital Fund of EBL
Amount in Rs. million
At the end of Fiscal Year Core Capital Supplementary Capital Total Capital Fund
23
2010/11 2927.16 678.67 3605.84
2011/12 3990.92 583.82 4574.75
2012/13 4639.76 1137.92 5777.68
(Source: Annual Reports of EBL)
The above table shows that the capital fund of EBL has increased significantly over the period of
three years. In the fiscal year 2012/13, supplementary capital has remarkably increased whereas
the same has decreased in fiscal year 2011/12. However, core capital has been steadily increasing
since the start of review period.
The data can also be presented in the chart form as follows:
Figure 4.1
The above figure shows that there has been steady growth trend of capital fund of EBL
throughout the review period. Although the supplementary capital’s growth is negative in FY
2011/12, the core capital significantly increased. In the year 2012/13, both the forms of capital
increased.
4.1.1.2 Capital Fund of Himalayan Bank Ltd.
Himalayan Bank Ltd. started its operation from 18.01.1993 in joint venture with Habib Bank
Limited of Pakistan. Habib Bank Ltd. holds 20% of total shares and 15% is distributed among
the general public. Similarly, other entities hold the remaining 65% of total shares. Other entities
include Karmachari Sanchaya Kosh (14%), N. Trading Co. Pvt. Ltd. (12.71%), Mutual Trading
24
Co. Pvt. Ltd. (12.62%), Ava International Pvt. Ltd. (11.38%), Chhaya International Pvt. Ltd.
(8.89%), Sumit Kumar Agrawal (2.65%), Syakar Co. Ltd. (0.99%) and Sharma & Co. Pvt. Ltd.
(0.66%).
Himalayan Bank started its operation with the paid up capital of Rs. 60,000,000. The paid up
capital of the bank at the end of fiscal year 2068-69 (July 15, 2012) is Rs. 2,760,000,000. The
core capital is Rs. 4,972,173,697 and supplementary capital is Rs. 1,442,263,755.
The capital Fund of Himalayan Bank during the three years is shown in the table below:
Table 4.2
Capital Fund of HBL
2010/11 3916.97 794.27 4711.24
2011/12 4600.15 683.75 5283.90
2012/13 4972.17 1442.26 6414.43
(Source: Annual Reports of HBL)
The core capital of the Bank has increased to Rs. 4600.15 million from Rs. 3916.97 million from
the FY 2010/11 to FY 2011/12. On the contrary, supplementary capital has decreased to Rs.
683.75 million from Rs. 794.27 million yet giving rise to the total capital fund from Rs. 4711.24
million to Rs. 5283.90 million. Both core capital and supplementary capital has increased in FY
2012/13 making the total capital fund Rs. 6414.43 million.
The data can also be presented in the chart form as follows:
Figure 4.2
25
From the above figure, we can conclude that HBL has been able to increase its capital fund
significantly in FY 2012/13. However, the growth in FY 2011/12 was not so remarkable.
Further, the supplementary capital’s growth is observed to be negative in FY 2011/12 whereas
the same has considerably increased in FY 2012/13.
4.1.1.3 Capital Fund of Nepal SBI Bank Ltd.
Nepal SBI Bank started its operation from 07.07.1993 with 50% ownership of State Bank of
India. Similarly, Employee Provident Fund holds 15% of total shares leaving the remaining 30%
to the general public. Nepal SBI Bank started its operation with the paid up capital of Rs.
84,000,000. At the end of the fiscal year 2068-69 (July 15, 2012), the paid up capital has reached
to Rs. 2,355,738,504. Now, the core capital of the bank is Rs. 3,785,482,444 and the
supplementary capital is Rs. 1,103,155,547.
Since the study limits within 3 years of operation the Capital Fund of Nepal SBI Bank in these
three years is shown below.
Table 4.3
Capital Fund of NSBL
2010/11 2834.11 329.28 3163.39
26
2011/12 3185.11 714.03 3899.14
2012/13 3785.48 1103.15 4888.63
(Source: Annual Reports of NSBL)
In these three years the capital of NSBL has grown from Rs. 3163.39 million to Rs. 4888.63
million. The core capital increased from Rs. 2834.11 million to Rs. 3785.48 million where as the
supplementary capital increased from Rs. 329.28 million to Rs. 1103.15 million.
The three years’ data can also be viewed in the chart form:
Figure 4.3
The above figure shows that both the forms of capital i.e. core capital and supplementary capital
of NSBL has been increasing throughout the study period. Although the core capital has not
increased much in FY 2011/12, supplementary capital has increased by more than double in the
same year.
4.1.2 Risk Weighted Assets of Three Banks
The risk-weighted assets are derived by calculating the amount from the respective on- and off-
balance sheet items with the prescribed weightage. The assets are categorized into four types
while assigning weightage to them. NRB has assigned weightage of 0%, 20%, 50% and 100%
according to their nature of risk bearing which is based on the standard of Basel Committee.
Table 4.4
27
Risk Weighted Assets of three Banks
At the end of Fiscal Year EBL HBL NSBL

2010/11 34583.54 44124.52 27460.69
2011/12 41525.35 47934.90 34781.80
2012/13 49834.04 55520.65 39460.55
(Source: Annual Reports of EBL, HBL & NSBL)
4.1.3 Deposit Trends of Three Banks
Table 4.5
At the end of Fiscal Year HBL EBL NSBL

2010/11 40920.6 41127.9 42415.4
2011/12 47730.9 50006.1 53337.2
2012/13 53072.3 57720.4 58920.4
(Source: Annual Reports of NSBL, HBL & EBL)
During the period of 3 years, all the banks have been able to increase the deposit level. During
fiscal year 2010/11, the deposit base of all the three banks were almost at same level. However,
in the next fiscal year, NSBL has seen remarkable growth in terms of total deposit. HBL noticed
lowest growth in deposit among three banks.
The same can be viewed in the following diagram:
Figure 4.4
28
The above figure portrays that the deposit trend of all the three banks are in increasing trend.
Further, NSBL’s growth in deposit is noticeable whereas HBL’s growth is comparatively lowest
among the three banks. In the year 2010/11, all the three banks were at equal footing in terms of
maintaining total deposit.
4.1.4 Credit Trends of Three Banks
Table 4.6

2010/11 32968.2 31661.8 21718.7
2011/12 35968.4 36616.8 26463.6
2012/13 41057.4 44197.8 29193.9
Credit level of HBL and EBL were almost at same level in FY 2010/11 and FY 2011/12. However,
total advance of EBL increased more than that of HBL in FY 2012/13. However, in case of NSBL,
credit exposure increased substantially in FY 2011/12 in comparison to the growth witnessed in FY
2012/13.
The data can be viewed in the following diagram:
Figure 4.5
29
From the above figure, it can be viewed that total credit exposure of EBL was less than HBL as at
the end of FY 2010/11. However, EBL exceeded considerably the level of total credit of HBL by
the end of FY 2012/13. On the other hand, NSBL stands quite behind among the three banks in
terms of total lending.
4.2 Capital Adequacy Ratio of Three Banks
Table 4.7
(%)

2010/11 10.68 10.43 11.52
2011/12 11.02 11.02 11.21
2012/13 11.55 11.59 12.39
As per NRB’s guidelines regarding capital adequacy, A class bank must have capital adequacy ratio
of at least 10%. Here, all the three banks have maintained adequate capital as per the capital
adequacy framework laid down by Nepal Rastra Bank. Among these three banks, NSBL has highest
capital adequacy ratio.
4.3 Impact on Capital Fund of the Banks
30
4.3.1 Capital to Deposit Ratio of Three Banks
The capital to deposit ratios of the banks have been changing in different fiscal years as a result
of change in minimum capital to be maintained by the banks to meet the criteria imposed by the
central bank under Capital Adequacy Framework. The Capital to Deposit ratios of the three
banks can be presented as under:
Table 4.8
(%)

2010/11 11.51 8.76 7.45
2011/12 11.07 9.14 7.31
2012/13 12.08 10.01 8.29
HBL has highest capital to deposit ratio among all the three banks throughout the review period.
Having largest size of capital in comparison to other banks, the ratio stood at higher side. The
deposit volume of NSBL remained highest vis a` vis other banks, however, size of capital were at
lowest side throughout the study period among the three banks.
4.3.2 Credit to Deposit Ratio of Three Banks
With the increasing capital banks increased their credit lending which has resulted in increasing
Credit to Deposit ratios.
Table 4.9
(%)

2010/11 80.56 76.98 51.20
2011/12 75.35 73.22 49.61
2012/13 77.36 76.57 49.54
HBL has highest credit to deposit ratio during all the three years. Whereas, the ratio, in case of
NSBL, is at lower side in comparison to other banks as the bank has lowest level of advances and
highest level of deposit among all the three banks throughout the study period.
31
4.3.3 Changes in Capital Fund
Table 4.10
Change of capital fund of HBL during the review period:
At the end of Fiscal Year Capital Amount increased Percentage Increased

2010/11 4711.24 492.88 11.68
2011/12 5283.90 572.66 12.15
2012/13 6414.43 1130.53 21.39
HBL’s capital fund has been steadily increasing. Addition of capital fund is higher in the year
2012/13 making the total growth at 21.39% which is in line with the extension of credit exposure
in the same year.
Table 4.11
Change of capital fund of EBL during the review period:

2010/11 3605.84 348.70 10.70
2011/12 4574.75 968.91 26.87
2012/13 5777.68 1202.93 26.29
Capital fund of EBL witnessed heavy growth in the year 2011/12 and 2012/13 in comparison to
FY 2010/11. In the year 2010/11, capital adequacy ratio of EBL was at 10.43%, the notion
behind the increment in capital fund in FY 2011/12 is to bring the capital adequacy ratio at safer
side. Consequently, it came to 11.02% in FY 2011/12 and 11.59% in FY 2012/13.
Table 4.12
Change of capital fund of NSBL during the review period:

2010/11 3163.39 428.95 15.68
2011/12 3899.14 735.75 23.25
2012/13 4888.63 989.49 25.37
32
NSBL also added its capital fund in 2011/12 and 2012/13 to align the capital ratio to its
increasing credit exposure. However, NSBL has been maintaining its capital adequacy ratio
above 11% throughout the study period. With increment in capital fund by 25.37% in the year
2012/13, NSBL reached capital adequacy ratio at 12.39%.
4.3.4 Changes in Share Pattern
Table 4.13
Change of share capital of HBL during the review period:

2010/11 2000.00 400.00 25.00
2011/12 2400.00 400.00 20.00
2012/13 2760.00 360.00 15.00
HBL’s share capital has been steadily increasing. Highest growth of 25% was witnessed in the
FY 2010/11 whereas the lowest growth of 15% was recorded in the year 2012/13 among the
three review period.
Table 4.14
Change of share capital of EBL during the review period:

2010/11 1119.60 289.14 34.81
2011/12 1231.63 112.03 10.00
2012/13 1601.12 369.49 30.00
Share capital of EBL was increased by almost 35% in the year 2010/11 with an increase in
amount by Rs. 289.14 million. Similarly, total share capital of EBL came to Rs. 1601.12million
in the year 2012/13 which is 30% more than that of in the year 2011/12.
Table 4.15
Change of share capital of NSBL during the review period:
33

2010/11 1869.30 215.68 13.04
2011/12 2093.98 224.68 12.01
2012/13 2355.73 261.75 12.50
Growth of NSBL in terms of share capital is almost consistent right through the review period. In
the year 2012-13, NSBL’s total share capital reached Rs. 2355.73 million with increment in total
amount by Rs. 261.75 million over the total share capital of Rs. 2093.98 million in FY 2011/12.
4.4 Issue of Share and Debenture as a mechanism to maintain Capital

Adequacy Ratio
The banks have been issuing right shares, bonus shares and debentures to maintain the capital as
required by the Capital Adequacy Framework.
Table 4.16
Issuance of Shares by the three banks
(%)
At the end of Fiscal EBL HBL NSBL

Year Right Bonus Right Bonus Right Bonus
2010/11 0 10 0 20 0 12.5
2011/12 0 30 0 15 0 12.5
2012/13 0 10 0 5 0 12.5
The sample banks have not declared any right shares in the three fiscal years mentioned above.
However, they have been continuously distributing bonus share which has been proved to be an
effective measure to increase the capital base of the bank.
EBL distributed 10% bonus share in FY 2010/11, 30% in FY 2011/12 and 10% in FY 2012/13.
HBL declared 20% bonus share in FY 2010/11, 15% in FY 2011/12 and 5% in FY 2012/13.
Similarly, NSBL distributed 12.5% bonus share in all three fiscal years. Distribution of bonus
share helps to create positive attitude towards the banks among the investors and also increases
the capital base.
Table 4.16
Issuance of Debentures
34

2010/11 0 0 0
2011/12 0 0 400
2012/13 468.84 600 400
The banks have also started issuing debentures in the recent as a practice of debt financing to
increase the capital base. However, none of the sample banks issued debenture in FY 2010/11.
NSBL issued debenture of Rs.400 million in FY 2011/12. In FY 2012/13, all three banks have
issued debenture. In this year, EBL issued debenture of Rs.468.84 million, HBL issued Rs. 600
million and NSBL issued Rs.400 million.
35
Chapter- 5
SUMMARY, FINDINGS, RECOMMENDATIONS
5.1 Summary
The research study was focused at studying the impact of capital adequacy norms set by the
central bank on the commercial banks of Nepal. The research study had considered the case
study of three sample banks- Himalayan Bank Ltd, Everest Bank Ltd and Nepal SBI Bank Ltd.
Commercial banks drive economy by utilizing the fund of general public. They collect deposit
from them and lend to the creditors. Thus, capital must be maintained at the appropriate level so
as to protect the depositors from the associated risk which could be market risk, credit risk etc.
As the central bank it is the major responsibility of Nepal Rastra Bank to see whether or not the
commercial banks have been complying with the rules and regulations issued by it. Unified
Directives of Nepal Rastra bank is the sum total of all policies issued to guide the Banks and
Financial Institutions.
Directive No 1 of Unified Directives of Nepal Rastra Bank has the provision for Capital
Adequacy Framework. This framework allows banks to use their own internal models and
techniques to measure the key risk that they face, the probability of loss, and the capital required
to meet those losses.
The thesis report has studied the capital fund of HBL, EBL and NSBL and its impact on the
capital structure of these banks. The study was conducted by calculating capital adequacy ratios,
capityal tyo deposit ratios, credit to deposit ratios and checking out the trends of capital
increment and decrement. The result showed that the sample banks have meet the requirement of
Capital Adequacy Framework with positive impact in the performance of the banks and their
capital.
5.2 Findings
The major aim of the thesis report was to study the impact of capital adequacy framework on the
capital structure of the banks. The major findings of the study are as follows:
5.2.1 Impact on Capital Fund
The capital fund of the sample banks are in increasing trend. The banks have been increasing
their capital fund to meet the criteria set by the central bank.
The capital of EBL grew by 10.70% in FY 2010/11, 26.87% in FY 2011/12 and by 26.29% in
FY 2012/13. The capital of HBL grew by 11.68% in FY 2010/11, 12.15% in FY2011/12 and by
21.39% in FY 2012/13.
36
Similarly, the capital of NSBL grew by 15.68% in FY 2010/11, 23.25% in FY2011/12 and by
25.37% in FY 2012/13.
Share Capital covers major portion of capital fund of all these banks. Since, the capital is in
increasing trend, the share capital of these banks is also in increasing trend.
5.2.2 Impact on Capital Adequacy
The banks have successfully met the capital adequacy ratio as required by the capital adequacy
framework. Capital adequacy requirement imposed by central bank is 10% .
In the fiscal year 2010/11, the capital adequacy ratios of EBL, HBL and NSBL were 10.43,
10.68 and 11.52 respectively. The ratios were 11.02, 11.02 and 11.21 in FY 2011/12 and 11.59,
11.55 and 12.39 in FY 2012/13.
5.2.3 Impact on Risk Weighted Assets
The impact of Capital Adequacy Framework can be seen on the Risk Weighted Assets of the
banks. The Risk Weighted Assets of the sample banks are in increasing tendency. The banks
have increased the Risk Weighted Assets to comply with the requirement set by the central bank
in its Directive No.1.
The Risk Weighted Assets of EBL in FY 2010/11 is Rs. 34583.54 million, Rs. 41525.35 million
in FY 2011/12 and Rs. 49834.04 in FY 2012/13. The Risk Weighted Assets of HBL is Rs.
44124.52 in FY 2010/11, Rs. 47934.90 in FY 2011/12 and Rs. 55520.65 in FY 2012/13.
Similarly, the Risk Weighted Assets of NSBL in FY 2010/11 is Rs. 27460.69 million, Rs.
34781.80 million in FY 2011/12 and Rs.39460.55 in FY 2012/13.
5.2.4 Impact on Capital to Deposit Ratio
The Capital to Deposit ratio of HBL is found unsatisfactory. These ratios are in between 11.51%
to 12.08% which are above the accepted standard. It is accepted worldwide that Capital to
Deposit ratio should be in between 8% to 10%. However, in Nepal no policy has been issued to
govern capital to deposit ratio.
The Capital to Deposit ratios of EBL fall under accepted standard. The ratios are in between
8.76% to 10.01%. The Capital to Deposit ratios of NSBL fall below the standard in FY 2010/11
and FY 2011/12 with ratios of 7.45% and 7.31% respectively.
However, in FY 2012/13, the capital to deposit ratio is 8.29%.
37
5.2.5 Impact on Credit to Deposit Ratio
According to the policies issued by Nepal Rastra Bank, banks can have maximum 80% of CD
ratio. In FY 2010/11, CD ratio of HBL is found unsatisfactory. It was 80.50%. However, the
ratio was reduced to 75.35% and 77.36% in FY 2011/12 an FY 2012/13 respectively. The CD
ratio of EBL was 76.98% in FY 2010/11, 73.22% in FY 2011/12 and 76.57% in FY 2012/13.
CD ratio of NSBL was lowest among these banks with 51.20% in FY 2010/11, 49.61% in FY
2011/12 with 49.50% in FY 2012/13.
5.3 Conclusion
Central bank issues policies to govern the commercial banks. Unified Directives issued by Nepal
Rastra Bank is the sum total of all such policies. Directive number 1 of Unified Directives of
Nepal Rastra Bank has set norms for capital adequacy framework, it ensures commercial banks
maintain capital which is adequate to protect depositors and creditors and is commensurate with
the risk associated activities and profile of the commercial bank.
The sample banks have meet the requirement of capital adequacy framework. As a result, the
banks have been able to minimize the risk associated with it.
However, the capital to deposit ratio of HBL is above the accepted standard which seems to be
quite risky.
Credit to deposit ratio of NSBL is lower which can be increased to maximize the benefits and
market value within the set criteria of NRB.
The sample banks have been able to maintain adequate capital adequacy ratio which have helped
to gain public confidence.
5.4 Recommendation
Following recommendations have been proposed after the conduction of the thesis study.
i. Share capital is the major source of capital of the sample banks. The banks should also
consider other sources for capital else than share capital. Debt financing can be an example.
ii. Capital to Deposit ratio of HBL should be minimized to the reasonable/acceptable ratio to
protect shareholders.
iii. NRB should issue policy to guide this ratio based on international standard.
iv. CD ratio of NSBL is lesser than other banks. This shows that funds collected from
depositors are not utilized properly. Depositors fund should be adequately utilized and the
bank should concentrate more on credit and investment.
38
Bibliography
Unified Directives: Issued by Nepal Rastra Bank to the Licensed Banks and Financial
Institutions, 2012
Capital Adequacy Framework, 2007(Updated July 2008), Nepal Rastra Bank, Accord
Implementation Group
Bhattarai, Rabindra (2005), Capital Structure Management, Kathmandu, Asmita Books

Publishers and Distributors.
Kerlinger. Fred N (1978), Foundation of Behavioural Research, New Delhi, Surjit

Publication
Shrestha, Manoj Damaru (2003), Nepal Rastra Bank – Capital Adequacy Norms for
Commercial Banks and its Impact, An unpublished master's degree dissertation, Shanker Dev
Campus, TU
Pant, P. R. (2002), Research Methodology, Kathmandu, Buddha Academic Publishers and

Distributors Pvt. Ltd.
http://www.ekantipur.com/2010/02/12/top-story/banks-told-to-increase-capital-adequacy-
ratio/308203/
http://www.ekantipur.com/the-kathmandu-post/2012/02/28/money/guv-urges-banks-to-up-
capital-base/232100.html
http://www.nrb.org.np/aboutus/intro.php
http://www.everestbankltd.com
http://www.himalayanbank.com
http://www.nepalsbi.com.np
39
APPENDIX A
Risk-Weightage on On-Balance Sheet Assets
On-Balance Sheet Assets Risk Weightage
%
Cash Balance 0
Gold (tradable) 0
Balance with Nepal Rastra Bank 0
Investment in Govt. Securities 0
Investment in NRB Bonds 0
Fully secured loan against own Fixed Deposit Receipt 0
Fully secured loan against Govt. Securities 0
Balance with domestic banks and financial institutions 20
Fully secured loan against Fixed Deposit Receipt of other banks 20
Balance with foreign banks 20
Money at call 20
Loan against the guarantee of internationally rated*/foreign banks 20
Other investments with internationally rated*/foreign banks 20
Investments in shares, debentures and bonds 100
Other investments 100
Loan, advances and bills purchased/discounted** 100
Fixed assets 100
All other assets 100
*/ Internationally rated bank having rating of at least A+ by reputed Rating Agency or Banks
specified as First Class Bank by Nepal Rastra Bank from time to time.
** Except Loan and Advances provided against Fixed Deposit Receipt and Government Securities
40
APPENDIX B
Risk-Weightage on Off-Balance Sheet Assets
Off-Balance Sheet Assets Risk Weightage %
Bills collection 0
Forward foreign exchange contract 10
L/Cs with maturity of less than 6 months (full value) 20
Guarantees provided against counter guarantee of internationally 20
rated*/foreign banks
L/Cs with maturity of more than 6 months (full value) 50
Bid bond 50
Performance bond 50
Advance payment guarantee 100
Financial guarantee 100
Other guarantee 100
Irrevocable loan commitment 100
Contingent liability in respect of Income Tax 100
All other contingent liabilities 100
*/ Internationally rated bank having rating of at least A+ by reputed Rating Agency or Banks
specified as First Class Bank by Nepal Rastra Bank from time to time
41
APPENDIX C
Directives Form No. 1
Table of Capital Fund

Particulars Previous Quarter Current Quarter
A) Core Capital
1) Paid-up Capital
2) Share Premium
3) Non-redeemable Preference Shares
4) General Reserve Fund
5) Cumulative Profit/Loss (up to previous FY)
6) Current Year Profit & Loss (as per Balance Sheet)
B) Supplementary Capital
1) Loan Loss Provision
2) Exchange Equalization Reserve
3) Assets Revaluation Reserve
4) Hybrid Capital Instruments
5) Unsecured Subordinated Term Debt
6) Interest Rate Fluctuation Fund
7) Other Free Reserves
C) Total Capital Fund (A + B)
D) Minimum Capital Fund Required to be
maintained on the basis of Risk Weighted Assets
Capital Fund (by………..Percent)
Core Capital (by………..Percent)
Capital Fund (excess/short) (by………..Percent)
Core Capital (excess/short) (by………..Percent)
42
APPENDIX D
Directives Form No. 2
Statement Table of Risk Weighted Assets
Risk Previous Quarter Curent Quarter
Weightage
On-Balance Sheet Assets Amount Risk Amount Risk
Weigted Weighte
Assets d Assets
Cash Balance
Gold (tradable)
Balance with Nepal Rastra Bank
Investment in Govt. Securities
Investment in NRB Bonds
Fully secured loan against own Fixed Deposit
Receipt
Fully secured loan against Govt. Securities
Balance with domestic banks and financial
institutions
Fully secured loan against Fixed Deposit Receipt
of other banks
Balance with foreign banks
Money at call
Loan against the guarantee of internationally

rated foreign banks
Other investments with internationally rated
foreign banks
Investments in shares, debentures and bonds
Other investments
Loan, advances and bills purchased/discounted
Fixed assets
All other assets
Total (A)
Off- Balance Sheet Assets
Bills collection
Forward foreign exchange contract
L/Cs with maturity of less than 6 months (full
value)
Guarantees provided against counter guarantee
of internationally ratedforeign banks
43
L/Cs with maturity of more than 6 months (full
value)
Bid bond
Performance bond
Advance payment guarantee
Financial guarantee
Other guarantee
Irrevocable loan commitment
Contingent liability in respect of Income Tax

All other contingent liabilities
Total (B)
Total Risk Weighted Assets (A+B)
44
APPENDIX E
Calculation of Capital Adequacy Ratios
i. EBL
At the end of Fiscal Year Total Capital Fund Risk Weighted Assets
2010/11 3605.84 34583.54
2011/12 4574.75 41525.35
2012/13 5777.68 49834.04
ii. HBL
2010/11 4711.24 44124.52
2011/12 5283.90 47934.90
2012/13 6414.43 55520.65
iii. NSBL
2010/11 3163.39 27460.69
2011/12 3899.14 34781.80
2012/13 4888.63 39460.55
Now,
Using the formula, we have
(%)

2010/11 10.43 10.68 11.52
2011/12 11.02 11.02 11.21
2012/13 11.59 11.55 12.39
45
APPENDIX F
Calculation of Capital to Deposit Ratios
Deposits of three banks

2010/11 40920.6 41127.9 42415.4
2011/12 47730.9 50006.1 53337.2
2012/13 53072.3 57720.4 58920.4
Using the formula, we have
Then, Capital to Deposit Ratios can be written as follows:
(%)

2010/11 11.51 8.76 7.45
2011/12 11.07 9.14 7.31
2012/13 12.08 10.01 8.29
46
APPENDIX G
Calculation of Credit to Deposit Ratios
Total Credit of three banks

2010/11 32968.2 31661.8 21718.7
2011/12 35968.4 36616.8 26463.6
2012/13 41057.4 44197.8 29193.9
Using formula, we have
Now, Credit to Deposit trends of three banks can be written as
(%)

2010/11 80.56 76.98 51.20
2011/12 75.35 73.22 49.61
2012/13 77.36 76.57 49.54
47
Table of Contents
Chapter-1 1
INTRODUCTION.............................................................................................................................1
1.1 Title of the Study.....................................................................................................................1
1.2 Background of the Study.........................................................................................................1
1.3 Significance of the Study.........................................................................................................2
1.4 Objectives of the Study............................................................................................................2
1.5 Statement of the Problem........................................................................................................3
1.6 Research Methodology............................................................................................................3
1.6.1 Research Design................................................................................................................3
1.6.2 Population and Sample.....................................................................................................4
1.6.3 Sources of Data.................................................................................................................4
1.6.4 Data Processing and Analysis...........................................................................................4
1.7 Limitation of the Study............................................................................................................4
1.8 Literature Review....................................................................................................................5
1.9 Introduction to the Sample Banks...........................................................................................5
1.10 Organization of the Study......................................................................................................6
1.11 Work Schedule.......................................................................................................................7
Chapter- 2 8
LITERATURE REVIEW.................................................................................................................8
2.1 Conceptual Review..................................................................................................................8
2.1.1 Origin and Development of Banks....................................................................................8
2.1.2 Meaning and Development of Central Bank......................................................................9
2.1.3 Importance & Functions of Central Banks.......................................................................10
2.1.4 The Central Bank............................................................................................................11
2.1.5 Meaning of Commercial Banks........................................................................................13
2.2 Overview: Capital and Capital Adequacy.............................................................................16
2.3 Review of NRB Capital Adequacy Norms for Commercial Banks.......................................18
Chapter- 3 20
RESEARCH METHODOLOGY....................................................................................................20
3.1 Research Design.....................................................................................................................20
48
3.2 Population and Sample..........................................................................................................20
3.3 Data Collection Procedure.....................................................................................................20
3.4 Data Analysis Tools...............................................................................................................21
3.4.1 Financial Tools................................................................................................................21
3.4.2 Capital Adequacy Ratio..................................................................................................21
3.4.3 Capital to Deposit Ratio..................................................................................................21
3.4.4 Credit to Deposit Ratio...................................................................................................22
Chapter- 4 23
DATA PRESENTATION AND ANALYSIS..................................................................................23
4.1 Presentation of Data..............................................................................................................23
4.1.1 Capital Fund...................................................................................................................23
4.1.1.1 Capital Fund of Everest Bank Ltd...........................................................................23
4.1.1.2 Capital Fund of Himalayan Bank Ltd.....................................................................24
4.1.1.3 Capital Fund of Nepal SBI Bank Ltd.......................................................................26
4.1.2 Risk Weighted Assets of Three Banks............................................................................27
4.1.3 Deposit Trends of Three Banks........................................................................................28
4.1.4 Credit Trends of Three Banks..........................................................................................29
4.2 Capital Adequacy Ratio of Three Banks.................................................................................30
4.3 Impact on Capital Fund of the Banks.....................................................................................30
4.3.1 Capital to Deposit Ratio of Three Banks..........................................................................31
4.3.2 Credit to Deposit Ratio of Three Banks............................................................................31
4.3.3 Changes in Capital Fund................................................................................................32
4.3.4 Changes in Share Pattern...............................................................................................33
4.4 Issue of Share and Debenture as a mechanism to maintain Capital Adequacy Ratio........34
Chapter- 5 35
SUMMARY, FINDINGS, RECOMMENDATIONS......................................................................35
5.1 Summary................................................................................................................................35
5.2 Findings.................................................................................................................................36
5.2.1 Impact on Capital Fund..................................................................................................36
5.2.2 Impact on Capital Adequacy..........................................................................................37
5.2.3 Impact on Risk Weighted Assets....................................................................................37
5.2.4 Impact on Capital to Deposit Ratio................................................................................37
49
5.2.5 Impact on Credit to Deposit Ratio..................................................................................37
5.3 Conclusion.............................................................................................................................38
5.4 Recommendation...................................................................................................................38
Bibliography 39
APPENDIX A 40
APPENDIX B 41
APPENDIX C 42
APPENDIX D 43
APPENDIX E 45
APPENDIX F 46
APPENDIX G 47
50
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Chapter-1

1.1 Title of the Study

1.2 Background of the Study

“Capital” is one of the most important concepts in banking. A bank's capital is equal to

1.3 Significance of the Study

Capital requirement is the amount of capital a bank or other financial institution has to hold by

1.4 Objectives of the Study

1.5 Statement of the Problem

1.6 Research Methodology

1.6.1 Research Design

Nepal SBI Bank Ltd.

Everest Bank Ltd.

Himalayan Bank Ltd.

1.6.3 Sources of Data

1.6.4 Data Processing and Analysis

1.7 Limitation of the Study

1.9 Introduction to the Sample Banks

1.10 Organization of the Study

The study will consist of five chapters.

1.11 Work Schedule

Phase 4: Organizing all for dissertation.

2.1 Conceptual Review

2.1.1 Origin and Development of Banks

2.1.3 Importance & Functions of Central Banks

2.1.4 The Central Bank

Banker to the Government

Custodian of Foreign Exchange Reserves

Regulation of Exchange Rate

It is believed that an underdeveloped country requires an all-frontal approach in solving its

2.1.5 Meaning of Commercial Banks

Commercial banks are generally engaged in the following activities:

 processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or

The agency functions are the following:

 To collect and clear cheque, dividends and interest warrant.

The efficient functioning of markets requires participants to have confidence in each

The Tier-1 capital consists of the following components of capital:

The Tier-2 capital consists of the following components:

i. Loan Loss Provision,

The capital adequacy ratio is yielded by the following formula:

Time Table Core Capital Total Capital Fund

i. Suspension of declaration / distribution of dividend (including bonus shares).

According to Goddard & Melville (2004), answering unanswered questions or exploring which

3.1 Research Design

3.2 Population and Sample

3.3 Data Collection Procedure

3.4 Data Analysis Tools

3.4.1 Financial Tools

3.4.2 Capital Adequacy Ratio

Measurement of core capital adequacy ratio:

Measurement of Total Capital Adequacy Ratio:

3.4.3 Capital to Deposit Ratio

The formula used to derive this ratio can be written as follows:

3.4.4 Credit to Deposit Ratio

The formula used to calculate this ratio can be written as follows:

DATA PRESENTATION AND ANALYSIS

4.1 Presentation of Data

4.1.1 Capital Fund

4.1.1.1 Capital Fund of Everest Bank Ltd.

Capital Fund of EBL

Amount in Rs. million

The data can also be presented in the chart form as follows:

4.1.1.2 Capital Fund of Himalayan Bank Ltd.

Capital Fund of HBL

Amount in Rs. million