FIXED DEPOSIT OF GLOBAL IME BANK LIMITED

A Project work report

Submitted by
MINITA SHAKYA
T.U. Reg. No. 7-2-455-30-2019
Pinnacle College
Lagankhel,Lalipur
Group: Finance

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In partial Fulfillment of the requirements for the Degree of

BACHELOR OF BUSIESS STUDIES (B.B.S)

April, 2024
Table of contents
Chapter I
Introduction…………………………………………………………………...1

1.1 Background of the Study...........................................................1

1.2 Profile of Organization..............................................................2
1.3 Statement of the Problem..........................................................3
1.4 Objectives of the Study..............................................................3
1.5 Rationale of Study......................................................................3
1.6 Limitation of study.....................................................................4
1.7 Review of Literature..................................................................4
1.7.1 Theoretical Review 4

1.7.2 Empirical Review 5

1.8 Methods of study........................................................................5

1.8.1 Research Gap 5

1.8.2 Research Design 5

1.8.3 Population and sample 6

1.8.4 Methods of Data Collection 6

1.8.5 Methods of Data Analysis 6

1.9 Organization of the Study..........................................................6

Chapter-I: Introduction 7

Chapter-II: Result and Analysis 7

Chapter-III: Summary and Conclusion 7

Chapter II

Result and
Analysis………………………………………………………………………………8

2.1 References...................................................................................9
 CHAPTER I : INTRODUCTION

I.1 Background of the Study

A Fixed Deposit is an investment instruments that banks and non-banking financial
companies offer their customers. Fixed deposits provides investors a higher rate of
interest than regular savings account, until the given maturity date. They are available
for different periods, ranging from very short-term tenures of 7-14 days to long
tenures of 10years. FD is sometimes known as a term deposit or time deposit. A bank
is a place where the mint makes money. (Samuelson, 1948). Bank is an institution that
works for making the monetary transactions sound and effective. Bank is only the
deposit taking financial institutions. It accepts deposits from the general public and
make funds available to those who needed. Bank take different types of deposits and
provide interest rate to that deposit according to the maturity and nature of the
deposits. The most developed financial system of the world characteristically falls
into three parts:-

 Central Bank
 Commercial Bank
 Other Financial Institution

The formal banking system in Nepal was started with the establishment of Nepal
Bank Limited in 1994 B.S. Kartik 30 with capital of RS.10 million and paid of capital
was 892 thousand with 10 shareholders, having felt the need of a central bank, Nepal
Rastra Bank (NRB) was established on 2013 Baisakha 14 under NRB Act 2012.
Rastriya Banijya Bank was established in 2023 B.S. as a fully government owned
commercial bank.

On the basis of purpose, bank deposit account is classified into savings, current, fixed
and recurring deposit account. FD is one of the financial instruments which have fix
maturity period. It provides higher interest rate to the investors more than any other
forms of deposit. Commercial banks are giving interest rate around 7% for the fixed
deposits.

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I.2 Profile of Organization
Global IME Bank Ltd. (GIBL) emerged after successful merger of Global Bank Ltd
(an “A” class commercial bank), IME Financial Institution (a “C” class finance
company) and Lord Buddha Finance Ltd. (a “C” class finance company) in year 2012.
Two more “B” class development banks (Social Development Bank and Gulmi Bikas
Bank) merged with Global IME Bank Ltd in year 2013. Later, in the year 2014,
Global IME Bank made another merger with Commerz and Trust Bank Nepal Ltd. (an
“A” class commercial bank). During 2015-16, Global IME Bank Limited acquired
Pacific Development Bank Limited (a "B" Class Development Bank) and Reliable
Development Bank Limited (a "B" Class Development Bank). During 2019-20,
Global IME Bank Limited acquired Hathway Finance Limited (a “C” class finance
company), merged with Janata Bank Nepal Limited (an “A” class commercial bank)
in year 2019 and merged with Bank of Kathmandu on January 9, 2023, to become the
biggest bank in Nepal.

Global Bank Limited (GBL) was established in 2007 as an “A” class commercial
Bank in Nepal which provides entire commercial banking services. The Bank was
established with the largest capital base at the time with paid up capital of NPR 1.0
billion. The paid of capital of the Bank has since been increased to NPR 36.1287
billion. The Bank’s shares are publicly traded as an ‘A’ category company in the
Nepal Stock Exchange. It is in line with the aim of the Bank to be “The Bank for All’
by giving necessary impetus to the economy through world class banking service.

I.3 Statement of the Problem

The study focuses on addressing the existing gaps and uncertainties in the
understanding of dividend policy dynamics. Despite its acknowledged significance in
corporate finance, there is a lack of comprehensive research that delves into the
nuanced factors influencing dividend decisions and their subsequent impact on
shareholder value and market dynamics. This research aims to identify and analyze
the key challenges faced by bank in formulating and implementing dividend policies,
as well as the implications of these policies on investor behavior and overall financial
market stability.

The given research tries to answer the following questions of the sample banks:

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  How does the dividend policy affect the overall value of the bank?

I.4 Objectives of the Study

The main objective of the study is to examine the impact of dividend policy of Global
IME on their stock market price. To achieve this goal following specific objectives
have been set down:

 To determine the relation between dividend policy and market price.

I.5 Rationale of Study

 The study helps in understanding how dividend policies impact investor’s
choices and preferences, influencing stock valuation and investment decisions.

 Dividend policy examines the relationship between dividend payment that has
been made and the overall valuation of a bank and also assesses how does this
affects its attractiveness to investors. Further, it plays a significant role in
reflecting and influencing a bank’s financial health and performance.

 Some of the direct and primary beneficiaries of the study could be named as
shareholder of the banks receiving a portion of bank’s profit in the form of
dividend which are distributed regularly. It also contributes to financial market
dynamics, impacting investor’s confidence and market behavior.

 This assists the policymakers by influencing economic stability through the

allocation of profits to shareholders.

I.6 Limitation of study

The Limitation of study are as follows:

 The lack of sufficient time and resources is one of the limitation of the study.
 The profound knowledge of the subject matter will remain elusive.
 This study has been confined to only GLOBAL IME Bank Limited.
 The entire research project will rely on secondary data obtained from bank.
Given the inherent nature of secondary data, the study is inevitably susceptible
to certain limitations

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I.7 Review of Literature
To develop a comprehensive understanding of the chosen subject, it is crucial to
thoroughly review relevant materials. The literature review is a fundamental aspect
that commences with the identification of a suitable topic and persists throughout the
entire research period, whether for a dissertation or a thesis. This process involves
examining research studies and pertinent propositions within the study's related areas,
allowing for a thorough understanding of past studies, their findings, and their
limitations. Literature review is an essential and obligatory step in research,
encompassing a survey of existing works on similar or related subjects. It is
imperative to ensure that the proposed study has not been previously conducted.
While entirely new and original issues are rare, the previous study should not be
duplicated exactly, unless the techniques used are aimed at scrutinizing questionable
conclusions or uncovering new information sources.

I.7.1 Theoretical Review

A review involves a systematic, thorough, and critical summary of the published
literature within your research field. It serves as a means to uncover the findings of
other studies related to your research problem, preventing the investigation of issues
that have already been conclusively addressed. Essentially, a literature review is an
evaluative report on information available in the literature pertinent to your chosen
area of study. The review summarizes, evaluates, and clarifies existing literature,
offering a theoretical foundation for your research and helping you, the author, define
your study's scope and nature.

I.7.2 Empirical Review

(MIller, 1961) This theory implies that the capital structure of a company has no
impact on the valuation of the firm. Whether a company is heavily indebted or has a
lower proportion of debt in its financing mix, it does not affect the overall value of the
firm.

The key idea is that the decision to retain earnings for reinvestment in profitable
projects or distribute them as dividends affects the company's growth and,
consequently, its market value. The selection of dividend policies invariably has a
significant impact on the enterprise's value. The model explicitly highlights the
crucial link between the internal rate of return (r) and the cost of capital (k) within the

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firm, underscoring the importance of this relationship in determining the optimal
dividend policy for maximizing shareholder wealth. (Walter, 1963)

I.8 Methods of study

This part outlines the method and procedures employed in the study or methodology
employed in the study. It refers to various sequential steps undertaken by a researcher
in studying a problem with certain objectives. In other words, it describes the method
and process applied in the entire aspect of the study. It is the process of arriving at a
solution of the problem through planned and systematic dealing with the collection,
analysis, and interpretation of facts and figures.

I.8.1 Research Gap

A research gap is characterized as a subject where the absence or inadequacy of
information hinders the ability to draw a conclusion for a given question. Conversely,
a research need is identified as a gap that restricts a decision maker's capacity to make
informed decisions

I.8.2 Research Design

Research design involves organizing conditions for collecting and analyzing data in a
way that balances relevance to the purpose with efficiency in the process. The study
to be conducted follows a descriptive and comparative research design.

I.8.3 Population and sample

The population comprises industries with similar nature, encompassing their general
services and products. Therefore, the entire set of Commercial Banks represents the
population for the data, while the bank under examination serves as the sample for the
study. So, from the population of 27 Commercial Banks operating in Nepal,
GLOBAL IME Bank Limited has been selected as the sample for the study.

I.8.4 Methods of Data Collection

Data are only from secondary sources. The data presented in this study are of
secondary type. The secondary sources of data are those that have been used from
published sources or used by someone previously. The annual reports of the
concerned Bank are the major sources of data for the study. However, besides that
data were taken from various websites and various formal and informal talks with the
concerned authorities of the bank were also helpful to obtain the additional
information of the related problem.

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I.8.5 Methods of Data Analysis
In the present study, following tools of data analysis will be used:

Financial Tools

Financial tools are those, which are used for evaluating the financial performance and
position of any firm ratio. In present study various ratio will be used to analyze the
dividend policy of GLOBAL IME Bank Limited. Thus, financial tools are those
significant metrics or instruments that are used to assess various aspects of company’s
financial growth by using different ratios.

Statistical Tools

The study aims to gauge the term structure at a specific moment and make predictions
for the future.

I.9 Organization of the Study

The research is structured into three chapters, each focusing on specific aspects of
Dividend Policy. The study report systematically presents the findings, employing a
straightforward research methodology approach. The brief contents of each chapter
are outlined below.
Chapter-I: Introduction
This chapter outlines the fundamental idea and context of the research. It serves as an
introduction, providing readers with essential information about the research area, the
study's challenges, objectives, and the importance or relevance of the investigation.

Chapter-II: Result and Analysis

The second chapter of the study ensures readers are acquainted with significant
research conducted in analogous fields. It discusses various data sources relevant to
the study, as well as the tools and techniques used to present and analyze the data.
Furthermore, it presents the study's findings.

Chapter-III: Summary and Conclusion

Chapter three consists of summary of the study, conclusion on the basis of the study.
This chapter presents the major findings of conclusion.

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 CHAPTER II : RESULT AND ANALYSIS

In this chapter, the data collected from various sources have been presented and
analyzed to measure the various dimensions of the problems of the study. Among
various ratios some of them are calculated such as:

Dividend Per Share (DPS)

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This ratio is the monetary distribution a company pays to each outstanding share of its
stock.

Total dividend paid

DPS =
Number of outstanding shares

Dividend Payout Ratio (DPR)

This ratio is the proportion of a company's earnings paid out as dividends to

shareholders. A higher DPR suggests that a larger proportion of earnings is being
returned to shareholders.

Total dividend paid

DPR Ratio = × 100 % Dividend Yield (DY)
Net income

This financial ratio represents the annual dividend income as a percentage of the
current market price per share of a stock. It provides investors with a measure of the
return on their investment in the form of dividends.

Annual dividend per share

Dividend yield = ×100 %
Current market price per share

Market Price Per Share (MPS)

It refers to the current valuation of a single share of a company's stock in the open
market. It is the price at which investors can buy or sell a share

Market price
MPS =
No of outstanding shares

PRICE EARNING RATIO (P/E ratio)

The P/E ratio, or price-to-earnings ratio, assesses a company's valuation by comparing

its current share price to its earnings per share (EPS).

Market price per share (MPS)

P/E Ratio =
Earning price per share (EPS)

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Along with all these various ratios and other statistical tools were used to derive a
conclusion.

II.1 References
Kinley, J. (1904). Money: A Study of the Theory of the Medium of Exchange.

MIller, M. a. (1961). Dividend Policy, Growth and Valuation of the Shares. The Journal of
Business.

Samuelson, P. (1948). Economics: An Introductory Analysis.

Walter, J. E. (1963). Dividend Policy: Its Influence on the Value of the Enterprise.