Ankita's Summer Project Report

CHAPTER 1

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A project is a flexible, practical assignment, geared to providing a young person with

meaningful opportunity to develop knowledge. The study of project implies structural

learning experiences.

This report is prepared in order of partial fulfillment of our BBA-BI course. It is prepared as a

requirement of the BBA-BI program of Pokhara University. This is a field work report which

contains the information about Everest Bank. This report describes about the bank and work

done in the treasury department. This profile is to avail information about the overall working

activities and environment of the bank. This report provides a business learning experience in

a formal, monitored program to a real world organization setting, which enhances the

academic experience. It tells about how project helps the student to understand and identify

the importance of organizational functioning, process, working business environment and

problems in a real life situation.

1.2 OBJECTIVES

The main objective of preparing this report is to access the work situation in Nepalese

Banking organization. The objective of the study is simply to present and test the model that

identifies customer attitude and customer adaptation of banking within the context of Everest

Bank of Nepal.

To identify problems and their underlying cause and evaluate potential solutions that

optimizes organization’s strength, weakness, opportunities and barriers.

To give suggestions for improvement.

To identify how closely the theoretical aspect of treasury management are practiced in

commercial banks of Nepal.

1.3 LIMITATIONS

As everything has its limitations, this study too is not an exception. During the survey few

limitations and constraints faced. They are as follows:

Everest Bank Limited 1

Unavailability of enough secondary data.

Information regarding only a specific branch.

Time constraints.

Validity of report fully depends on the information provided by the concerned

authorities.

Knowledge about a specific department.

Reluctant of employees to involve the students in core and confidential activities.

1.4 SCOPE OF THE STUDY

This report has all the detailed information about the different departments of the bank which

includes the customer service department, remittance department, treasury department, credit

department and share department that could be very helpful to determine the major tasks

performed by them.

The report will also be helpful for the students and individuals who seek for the information

about the banking activities and the services provided by it. This study also helps to

understand the scope of banking sector in the Nepalese market.

1.5 METHODOLOGY

For the preparation of this report, mainly two sources have been used:

Primary source

Studying the work methodology and processes in the organization. Regular discussion with the employees of the bank. Discussion with customers about their relation with the bank. From the queries with the bank employees.

Secondary source

Brochures and prospectus of the bank. Annual report of the bank. Internal record of the bank. Other material provided by the bank Articles published in the newspaper Website of the bank


CHAPTER 2

LITERATURE

2.1 MEANING OF BANK

A bank is an institution, which deals with money and credit. It accepts deposits from the

public and mobilizes the fund to productive sectors. It also provides the remittance facility to

transfer money from one place to another. Bank is therefore, known as a dealer of money. In

addition to this, bank may be engaged in different types of functions such as exchange

currency, joint venture, underwriting, bank guarantee, discounting bills etc. bank is also the

principal source of credit for individuals, organization and government.

Finally, we can say that bank is the financial institution providing all kind of monetary

services that is necessary for the industrialization and development of a country.

2.2 DEVELOPMENT OF BANKING

Banking industries are indispensable for the overall financial development of the country.

Without investment of the banks, modern business can never be able to run smoothly. Bank

assists in the process from initial level of production to the final level of consumer service.

Bank also assists in the development of financial activities of the government owned

corporations. It provides important part of financial system i.e. monetary system of making

or receiving payment in the country.

In the era of financial concept bearing world of today, banking has proved to be a nerve of

the economic development. Therefore, that cannot be ignored. Commercial bank plays an

important role in the modern economy. They are regarded as the heart of financial system

because they accept deposits of individuals and institutions. And mobilize such savings and

make available funds for investments to borrowers’ i.e. needy persons and businesses. It

provides credit to the people with economic confidence.

The history of modern banking in Nepal begins with the establishment of Nepal Bank

Limited in 1937A.D as a semi-government Commercial Bank. Later Nepal Rastra Bank, the

central Bank of the country was established in 1956, with the objective of issuing paper

currency, circulation of Nepalese currency all over the kingdom, maintaining stability in


exchange rate, mobilizing capital to give boost to economic development and industry and

trade, developing banking sector in the country. The second commercial bank of Nepal is

Rastriya Banijya bank established in 2022 B.S as a fully government-owned Bank. With the

purpose of enhancing industry and Agriculture, Nepal industrial Development Corporation

(NIDC) as a specialized institution to finance industries was established in 1959. Likewise,

the cooperative bank established in 1963 was converted into Agriculture Development Bank

in 1968 with the financial liberalization after restoration of multiparty democracy many

financial institutions as well as joint venture banks have been established. At present there are

all together 28 Commercial Banks operating in the country.

COMMERCIAL BANKS IN NEPAL

Agriculture Development Bank Ltd. Nepal credit & commercial Bank

Bank of Asia Nepal Bank Ltd. (NBL)

Bank Of Kathmandu Kist Bank Limited

Citizens Bank International Ltd. Kumari Bank Limited

Development Credit Bank Ltd.(DCB) Lumbini Bank Limited

Everest Bank Limited Laxmi Bank Limited

Global Bank Machhachapuchhre Bank Limited

Himalayan Bank Prime Commercial Bank

Nepal Industrial & Commerce Bank Rastriya Banijya Bank (RBB)

Nepal Investment Bank Sunrise Bank Ltd

Nabil Bank Siddhartha Bank Limited

Nepal SBI Bank Limited Standard Chartered Bank

NMB Bank Annapurna Bank

Nepal Bangladesh Bank Limited

Table 1:Lists of Commercial Banks


2.3 EBL AT A GLANCE

2.3.1 Background of Ebl

Everest Bank Limited (EBL) started its operations in 1994 with a view and objective of

extending professionalized and efficient banking services to various segments of the society.

The bank is providing customer-friendly services through a network of 29 branches all over

the country. EBL joined hands with Punjab National Bank (PNB), India as its joint venture

partner in 1997.

PNB joined hands with EBL as a Joint Venture in 1997 and turned it around to a highly

profitable bank. There has been no looking back since then. PNB provides top management

support under the Technical Service Agreement. Punjab National Bank (PNB), our joint

venture partner one of the largest nationalized bank in India having 114 years of banking

history, holds 20% equity.

Drawing its strength from its joint venture partner, EBL has been steadily growing in its size

and operations and established itself as a leading Private Sector Bank. The Banker, a

publication of Financial Times, London, has conferred the bank with “Bank of the Year-

2006, Nepal”. Similarly, Nepal India Chamber of Commerce also bestowed the bank with the

“NICCI Excellence Award” twice for its spectacular performance under finance sector. The

bank's performance under all parameter has been outstanding during the financial year 2005-

06.

This sustained growth of the Bank is attributable to its strong systems and procedures,

professional approach, quality lending and highly motivated staff members. EBL is playing

pivotal role in facilitating remittance to and from across the globe being the first Nepalese

bank to open a representative office in Delhi India, the Nepalese in India can open account in

Nepal from designated branches of Punjab National Bank and remit their savings

economically through banking channels to Nepal. The Bank is also offering Cash

Management System through HDFC Bank, India for managing the funds of corporate

exporting to India by collecting their funds from about 183 locations in India the Bank’s own

Web based online remittance product “Everest Remit” facilitates remittance from UAE and

Qatar to more than 100 payout locations in Nepal. With India Remit, the Bank has same day


remittance facility with India in association with PNB’s 2200 Networked Branches at 550

locations, besides draft drawing arrangement with 218 PNB branches across India.

All the branches of the bank are connected through Anywhere Branch Banking System

(ABBS), which enables customers to do all their transactions from any branches other than

where they have their account. EBL in association with Smart Choice Technology (SCT) is

providing ATM services for its customers. EBL Debit Card can be accessed at more than 50

ATMs and over 800 Point of Sales across the country. ATM sharing arrangements with PNB

has facilitated usage of EBL Debit Cards at more than 870 PNB ATM outlets across India at

a normal rate. Similarly, Indian tourists and businessmen having PNB cards will be able to

use EBL ATM, in Nepal.

The Bank recognizes the value of offering a complete range of services and have pioneered

in extending various customer friendly products such as Home Loan, Education Loan, EBL

Flexi Loan, EBL Property Plus (Future Lease Rentals), Home quity Loan, Car Loan, Loan

Against Shares, Loan Against Life Insurance Policies and Loan for Professionals. With an

aim to encourage the saving habit among the individuals, the bank has introduced Sunaulo

Bhavisya Yojana- suitable for accumulations small savings into substantial amount. EBL has

been established with the objective of extending professionalized banking services to various

sections of society in the Kingdom of Nepal and thereby contributes in the economic

development of the country.

EBL was one of the first banks to introduce Any Branch Banking System (ABBS) in Nepal

EBL has introduced “Bank on Wheel” system, whereby the bank is installed in a vehicle and

moves around to various places to serve the segment deprived of proper banking facilities

through its Birtamod Branch. EBL is the only bank having representative office in a foreign

soil. The office facilitates remittance and Nepalese working in India can even open accounts

through the office.

2.3.2 Corporate Vision

Bank’s corporate vision is to “Evolve & position the bank as a progressive, cost effective &

customer friendly institution providing comprehensive financial and related services;

Integrating frontiers of technology & servicing various segments of society; Committed to

excellence in serving the public & also excelling in corporate values”


2.3.3 Corporate Mission

“Provide excellent professional services & improve its position as a leader in the field of

financial related services; Build & maintain a team motivated & committed workforce with

high work ethos; Use latest technology aided at customer satisfaction & act as an effective

catalyst for socio-economic developments.”

2.4 SHAREHOLDING PATTERN

Shareholding Percent

Nepalese Promoters 50

Punjab National Bank 20

General Public 30

Table 2: Shareholding Pattern of EBL

As shown in above table the Nepalese promoters, general public and Punjab National bank

hold ownership of EBL. Nepalese Promoters holds 50%, PNB holds 20% and the General

Public holds 30% ownership this is also shown in the pie chart below.

Figure 1:Shareholding Pattern

2.5 BOARD OF DIRECTORS

Mr. Bishnu Kumar Shrestha Chairman

Mr. Indra Dev Singh Executive Director

Mr. Ved Krishna Shrestha Director


Mr. Arun Man Sherchan Director

Dr. Bal Gopal Baidhya Director

Mr. Nabin Bhakta Shrestha Director (Shareholders)

Mr. Shiv sharan K. C. Director (Shareholders)

Mr. Ratna Sansar Shrestha Director

2.6 MANAGEMENT TEAM

Mr. Ravinder Kumar Ummat Chief Executive Director

Mr. Pradeep Kumar Pradhan Dy. General Manager

Mr. Indrajeet Arora Dy. General Manager

Mr. Hum Nath Gurung Asst. General Manager

Mr. Pramod Raj Sharma Company Secretary

2.7 SERVICES OFFERED BY EBL

EBL has persistently been mounting different techniques and ideas to serve its customers and

stakeholders the best it can offer. In context of this some of the services offered by EBL are

discussed below:

2.7.1 Accepting Deposit

EBL offers a wide range of products and services designed to make banking easier and to

match each and every customer's requirements. One of the services offered by the bank is

accepting deposit. Bank collects money from its customers in form of deposit and provides

them interest as per their rule some. Deposits vary in types some of the types of deposits

offered by EBL are:

a) Current Account

b) Saving Account

c) Saving Premium Accounts

d) Fixed Deposit

I. Cumulative Deposit Scheme

II. Sunaulo Bhawishya Yojana

III. Saral Samridhi BachatEverest Bank Limited 8

IV. Unfixed Fixed Deposit Scheme

V. USD Deposits

2.7.2 Loans and Advance

EBL is also involved in service like providing credit facilities to its customers. The various

credit facilities are:

a) Home Loan Scheme

b) Home Equity Loan

c) Flexi Loan

d) EBL Property Plus

e) Professional Loan

f) Vehicle Loan

g) Educational Loan

2.8 DEPARTMENTS IN EBL

EBL has different department for catering the services to be offered to its customer and are as

follows:

2.8.1 Remittance Department

This department is involved in transfer of fund inside or outside the country in addition to the

conventional facilities like demand draft, travelers cheques etc. The bank has also introduced

a facility for the Nepalese living in the Gulf for transfer of their savings to their homes in

Nepal by entering into drawing arrangements with Exchange Houses in U.A.E., Bahrain and

Kuwait. The services provided by this department is very effective in the sense that is give

attention to the beneficiary, the service is very fast, coordinate with the head office, motivate

to open account and identify the regular customer and provide privilege services.

2.8.2 Customer Service Department (CSD)

Every branch of the EBL has CSD. The Customer Service Department of the bank deals with

the customers of the bank and helps them in every possible way. The major task of the

department is handling queries of the customers, opening and closing accounts, providing

statement, OCD and many more.


2.8.3 Treasury Department

There is a single Treasury Department in EBL that is responsible for over all treasury

management of the bank. It does not exist in all branches, all the function of treasury is

performed in this single department whether it be of branches or the head office. Treasury

Department is involved in liquidity management of the company and ensuring the bank has

sufficient liquid funds and identifying the profitable investment sector. Therefore we can also

say that the Treasury management is all about management of the fund. Its function also

includes the currency management, dealing in foreign exchange markets and management of

foreign exchange risks.

2.8.4 Share Department

The share department of the company deals with all the share related activities of the

company may it be issue of share, transfer of share, dividend payment, issuing bonus shares

etc. Share department also provides and handles all the queries related to the share of the

company.

2.8.5 System Department

The System Department of the company handles all the IT related activities of the company.

Every branch has a system department. But the head office has a very significant system

department in it. EBL long term IT strategy is to be updated in the organization’s technology

to keep abreast of current trends in IT and also to be the leader in implementing new

technology for the benefit of the organization. The main business strategy is to increase the

deposit base so that more loans can be disbursed. IT is helping to achieve that goal through

various methods like ATM cards, POS machines, SWIFT, online remittances. The

technological infrastructure plan was made and being implemented all throughout Nepal at all

the 29 branches. The bank has risk monitoring system and mitigation strategies to avoid or

mitigate the risk.

2.8.6 Human Resource Department (HRD)


EBL has a single Human resource department, which is in head office of the bank. HRD is a

separate department in the bank that deals with and for the human beings present in an

organization and is concerned with recruitment, selection of the new employees. Besides that,

Human Resource department function also involves giving orientation class to the new

employees, providing training and development programs to the current and newly recruited

employees to make people more updated and well equipped so that they can cope with the

changes. This department manages the need of the people by its systematic recruitment

procedure.

2.8.7 Marketing Department

Marketing Department is the heart of the banking system. This department is basically

concerned with the maintenance of the quality of the information since the existing use of the

information is vital towards the daily transaction in a more systematic way. This department

is basically concerned with the public relation i.e. it is concerned about making good relations

with the customers as well as suppliers, providing information to the customers, giving adds

in an effective way so that the people become attracted toward the bank, organizing events,

designing the sites and try to make the site more informative so that people become more

clear about the services that the bank is providing and the opportunity that they might get

from the bank and many more. It is the responsibility of the marketing department to make

people aware of the facility provided by the bank.

2.8.8 Credit Department

Every branch of the bank has Credit Department. This department is concerned with granting

loans to its customers. EBL provides various credit facilities to its customers in order to cater

their needs, such as overdraft, term loan, working capital loan, trust receipt loan, home loan,

vehicle loan, education loan and so on. The whole work of providing credit to its customer is

done by the credit department. While extending credit to customers the credit 4C’s are taken

into consideration i.e. capacity, capital, collateral, and condition. Loan supervision is also one

of the responsible of the department. Loan supervision implies keeping in close contact with

the borrower and monitoring his financial activities. This may include frequent plan visits,

securing the borrower’s periodic financial statements and reviewing requests for renewable or

additional funds. The department also records graded accounts, Non-Performing Assets as

per Nepal Rastra Bank directives


2.8.9 Account Department

The Account Department of the bank maintains all the transaction of the bank that is related

to payment to the vendors or any party. It keeps the record of every transactions occurred in

the bank like administrative expenses.

2.8.10 Cash Department

The Cash counter is where all the transaction of deposits and withdrawal by the customers are

done in the bank. It is one of the most important sections of the bank in the operational area.

The cash department has to maintain records of deposits, withdrawals and transfers done by

customers and has to tally the records on a daily basis.

3.9 SWOT ANALYSIS

The SWOT analysis of the bank is analyzing the Strength, Weaknesses, Opportunities and

Threats of the banks.

Strength

Bank was awarded as “Bank of the Year 2006”.

High paid-up capital and strong financial condition

EBL has a good relationship with the existing clients and strong relationship with the

foreign competitors.

Bank has been adopting the credit monitoring policy, which improves credit situation

and helps in recovering possible losses without the arrangement of the additional funds.

Technologically well developed.

Absence of trade union, so the firm’s activities can be operated smoothly.

Experience and well skilled work force.

Proper information flow between the departments and good interpersonal relationship

between every individual of the organization.

Being a joint venture bank is one of the strength of the bank as it has helped an

improved a lot in operation of the bank.

Weakness

Lack of feedback from the clients.

No credit card facilities.


Lack of employee satisfaction regarding the financial factors.

Lack of spacious infrastructure.

Opportunities

With the improvements of economic and political situations in Nepal, EBL can collect

as much as savings and grant credit, loans and make various investments.

EBL has the advantages to make investment in various government bonds as well as in

various shares and debentures of other institutions.

The development of the technology has helped bank to widen up its area of services

provided to its customers.

Threats

Unstable political situation of the country is the major threat for the operation of the

bank.

Market of commercial bank is very competitive in context of Nepal, so EBL has lot of

competitors in the market.

By near future lot of foreign banks will be entering the market so EBL needs to be

strong to compete with those international bank.


CHAPTER 3

SPECIFIC AREA OF THE STUDY

3.1 MEANING AND FUNCTIONS OF TREASURY DEPARTMENT

To survive in today’s complex financial environment, businesses need to be able to actively

manage both their ability to undertake the opportunities, and their exposure to risks. They

need to be aware of the expanding range of hybrid capital instruments and financial

instruments and be able to select from these the ones which are appropriate to the businesses’

needs in the prevailing circumstances in order to gain competitive advantage. Therefore every

organization has to have a Treasury Department. Treasury function is the proper

management of the assets and liabilities as well as financial risks and is also concerned with

the raising finance, management of liquid resources, management of currency and interest

rate risks, and management of relationships with banks. A separate Treasury function is more

likely to develop the appropriate skills, and it should also be easier to achieve economies of

scale; for instance, in achieving lower borrowing rates, or netting off-balances. The Treasury

function varies in different organization depending on its size, complexity, geography and

organizations for e.g. in larger companies and groups, treasury will usually be centralized at

head office providing a service to all the various units of the entity and thereby achieving

economies of scale.

The functions or the activities of the Treasury Department can be grouped in three main area

i.e. firstly the Investment decision which determines how scarce resources in terms of funds

available are committed to different available projects ensuring to get the maximum return

from it. Secondly the Financing decision that is related in acquiring the optimum finance to

meet financial objectives and seeing that fixed and working capital are effectively managed.

It is also concerned with knowing the different sources of capital and its cost, ensuring that

the entity has a sound capital structure and maintaining proper balance between equity and

debt of the company. Thirdly the Dividend decision which is to decide what part of the

company’ profit should be retained in the company in form of retained earnings in order to

support the growth of the entity and what part should be distributed among the shareholders

as dividend which is a significant factor in determining the market value of the stock. Fourth


one is the Liquidity management which involves the working capital and money management

to ensure that the company has enough working capital to conduct its regular activities and

has sufficient liquidity and surplus fund is invested in some profitable. The Treasury function

also includes the Currency management that is involved in forecasting the exchange rate

which will help in adopting the procedure to manage such exchange rate risk. Dealing in the

foreign exchange markets and day-to-day management of foreign exchange risks becomes the

key functions of the Treasury department.

3.2 OBJECTIVES OF TREASURY DEPARTMENT

The treasury function exists in every business, though in small businesses it may form part of

a department covering other functions where as in a larger company, it is likely to be a

separate department reporting to the chief financial officer, but communications with the rest

of the organization need to be in good order if an effective service is to be provided.

Therefore in context to this the main objectives of the Treasury Departments can be listed in

following points”

Acquiring the optimum finance for the business to meet its financial objectives.

To manage the banks investment portfolio and ensure that the banks liquidity

requirements are met at all times i.e. maintain Cash Reserve Ratio(CRR) as per the central bank

guidelines

Maintain the Statutory Liquidity Ratio (SLR) as per the central bank guidelines

Management of liquid assets, interest and exchange rate and risks.

Providing advice to management on capital structure and dividend policy issues.

Liaison with the organization’s banks.

3.3 ORGANIZATIONAL STRUCTURE Of EBL

The Treasury function varies in different organization depending on its size, complexity,

geography and organizations. Similarly EBL also has its Treasury Department in its Head

Office i.e. in Lazimpat that deals or handles with overall function of the treasury department.

The Department of EBL can be divided into two following sections.

Dealing Section or Front Office.

Back-up Section or Back Office.


3.3.1 Dealing Section or Front Office

This section of the department is responsible for the treasury related activities such as inter

bank borrowings and lending, buy and sale of foreign currencies, bidding and repurchases of

treasury bills or bonds, placements in financial institutions etc.

Dealing section of the EBL deals with following activities:

a) Inter-bank Lending

This is a short term placement with maturity of less than 7 days provided to other banks in

case of surplus fund in the bank for its optimum utilization and revenue generation from it.

b) Inter- bank Borrowing

Bank has to maintain sufficient liquidity to meet its financial obligation and when the bank

doesn’t have enough funds it has to borrow from the other commercial banks to meet its

obligation in case commercial bank is not in position to borrow the bank has to depend on

NRB and it receives funds from NRB by placing the treasury bonds as collateral, and this is

called inter-bank borrowing, and this function is also performed by the Dealing Section of the

office.

c) Placement

In case of surplus foreign currency and o maintain short and long position of the bank, bank

makes a placement of the foreign currency with other banks in order to avoid keeping it idle.

The placement is done for certain period of time.

d) Treasury Bill and Government Bond

Treasury bill or T- bills are the most marketable money market security. It is a debt

instrument issued by HMG/Nepal and NRB with the validity of less than one year. T-bills are

issued with 28 days, 91 days, 182 days and 364 days maturity period every Tuesday and the

dealing section deals with quoting such bills.

Government bonds are the long term bonds issued by the government when fund is required

in long term i.e. more than 5 years.


e) Repo

In case NRB has excess fund and commercial bank has less fund, in this case NRB provides

fund to the banks but before that the commercial banks are asked to bid for the interest rate,

and NRB provides fund to that bank which has offered the lower interest rate.

f) Reverse Repo

When the commercial bank is highly liquid or has excess fund with it, and NRB has low

liquidity in this case to overcome this problem commercial banks provides fund to the NRB

for short period and NRB asks to quote the rate to the commercial banks for providing the

fund to the NRB.

g) Funds transfer from one Nostro to another Nostro account

Transferring the fund from one Nostro to another Nostro account is also one of the functions

of the front office. Nostro account refers to the account that bank has maintained with other

banks. The fund is transferable from one nostro account to other nostro account in order to

make the payment easier.

h) Intervention

Intervention means buying or selling of US dollars by the central bank i.e. NRB at the request

of the foreign exchange and money dealers of Nepal (FEDAN) in case of surplus or deficit of

US dollars in the market.

i) Forward Contract

Forward contract is a contract whereby an enterprise can lock in an interest rate today for a

period of time starting in their future. On the future date the two counterparties in the contract

settle up and, depending in which way rated go, one will pay an amount of money to the other

representing the difference between the contract rate and the actual rate.

j) Inter-branch foreign currency buy and sell

Dealing section also deals with the buying and selling of foreign currencies from and to the

different branches of EBL as and when required.


k) Deal/ Request Slip

Deal/Request slip is the written request generated by the front office upon concluding the

department’s activities against which the Front office can carry on its activities and it is

maintained by the back office.

l) Maintaining CRR

Maintaining the CRR of the company is also one of the basic function of the Front or the

Dealing section of the Treasury Department. According to the ordinance passed by NRB

every bank has to maintain 5% CRR of its deposit and in order to fulfill this criterion the

Dealing section has to work on it.

3.3.2 Back-up Section or Back Office

Back-up section is responsible for the activities carried out by the Front office. It is

responsible for timely and efficient accomplishment of requests and deals made by the

Treasury Department and is equally responsible for submitting the reports of its activities to

the Treasury Department, Management and NRB as per the requirement.

The basic functions performed by the Back-up Section are:

Maintaining the data of every activities performed by the Front office as well as Back

office,

Treasury Bill Maintenance,

Maintaining account entries related to deal,

Sending and receiving deal confirmation,

Preparing Liquidity position and communication it with the concerned department,

Sending and settling instructions like SWIFT messages or Telex.

3.4 FUNCTIONAL RESPONSIBILITIES

Treasury department is the heart of any organization, therefore all its responsibilities is

fulfilled responsibly by the people in the department. The functional responsibilities of the

Treasury department of the bank can be grouped in following ways:

a) Determining the limits


Treasury department is responsible for determining the limit of holding the cash as well as

foreign currencies in branches.

All the branches of EBL hold cash in their vault as per the limits specified by the bank and

policies regulated by the bank and informs the Treasury Department of the bank every day

about the cash they have. In case of excess fund such surplus funds are deposited in NRB and

then it decides how that fund should be invested to maximize the return. This is done in order

to maintain the liquidity and meet the CRR as prescribed by NRB.

Treasury Department is also responsible for maintaining the foreign currency position limits.

In case of EBL foreign currency is collected by Baneshwor Lazimpat branch and new road

branch and all that sent to new road and then sent to NRB.

b) Recording and implementation of policies

All the transactions carried out in the bank should be recorded properly for the future

reference and this is one of the major and unavoidable responsibilities of the treasury

department and it should be recorded as per the accounting policies and procedures.

c) Foreign Exchange Management

Bank is equally responsible for managing the foreign exchange some of is sub functions are:

i) Exchange rates

One of the major functions related to FOREX management is related to exchange rate

determined. The Treasury department finds out the rate of foreign currency from the Reuters

which is the software that gives information about the cross currency rate of every currency,

LIBOR, SIBOR, TIBOR, gold rate, international market. The rate keeps fluctuating from

time to time so stable rate is implemented. In Nepal the USD rate is determined on the basis

of rate of INR. In order to maintain uniformity in the rate, all the commercial banks sends

their exchange rate to FEDAN and then the standard rate is determined. Every morning this

function is carried out by the department. The final rate that is determined should be

communicated to every branches of EBL and this is the function of Treasury Department.

ii) Positioning currency


Positioning the currency means maintaining the short position or long position of the

currency. Bank maintains long position when there is expectation of increase in rate of dollar

rate. Because by maintaining the long position they buy the dollars and can sell them to other

in higher rate. Likewise bank maintains short position when the dollar rate is expected to

decrease in this case bank sells the currency so that they do not have to incur exchange loss in

future. Thus depending upon the scenario bank maintains the positioning of the currency.

iii) Purchase and sale of INR

Treasury Department of the bank is also involved in buying and selling of INR. Bank has to

make payment for DD’s and TT’s in India therefore it has to maintain its INR account in

PNB, HDFC and SCB, Calcutta. In order to maintain the account bank sends INR to those

banks by purchasing it from PNB and the rate is fixed by NRB itself and should be followed

by all commercial banks. The buy and sale of INR in the inter-market is prohibited by NRB,

there by, limiting the buy and sale of INR from and to the customers of NRB only. Treasury

department purchases NRB based on the position of INR maintained in the bank only. The

purchases are made every 4 times a month and the minimum amount is 5 Crores.

iv) Purchase and sale of USD

USD rate in Nepal is based on the dollar rate in Indian Market. The commercial banks quote

their rate and send it to the FEDAN and the standard rate is determined. Usually the rate

quoted by all the commercial banks is same because of demand and supply of USD dollar in

Indian market.

The buying and selling of USD is done through intervention and IBL. In the process of

buying USD bank practices the system to charge the mid rate to other parties where as in case

of intervention when the bank has to sell the dollars to NRB it has to charge 4 paisa less than

the mid rate and during the purchase from NRB the rated is charged according to the quoted

rate.

v) Purchase and sale of Foreign currency

The exchange rate of other foreign currencies is dependant upon the cross rate of other

foreign currencies against USD and the base rate between USD and NPR. Because of the


above underlying factors it is easier to convert other foreign currencies are volatile so

treasury department should always remain vigilant and hedge the volatility risk at all times.

The department is usually involved in selling the currency; it buys the foreign currency only

when it has to make payment of LC. Usually bank is involved in purchasing Japanese Yen for

the purpose of LC.

d) Liquidity Management

Liquidity management involves working capital management and cash management. It is the

responsibility of the treasurer to ensure that the company has sufficient liquid funds and

invest surplus fund to avoid the risk of liquidity crisis in. Liquidity should be managed in

both local as well as foreign currency. In case of foreign currency liquidity should be

managed to meet the business need as well as optimize the treasury incomes. Liquidity

management is considered as the main responsibility of the treasury department of the EBL.

i) Liquidity Management in Local Currency

Treasury Department is responsible for maintaining liquidity in local currency .It maintains

liquidity in form of balance at NRB and vaults of every branch. As per the NRB directives,

every commercial bank should maintain 5% CRR of its total deposit therefore Treasury

Department should focus on maintaining it in order to maintain the liquidity of the company.

The portfolio of loans and deposit is the determinant factor for maintaining the liquidity in a

company. Therefore the treasury department should review the trends of portfolio of both

loans and deposits in order to maintain the adequate liquidity. For this purpose treasury

department refers to Account department, Customer Service department and Credit

department of all the branches to get updated about the every transaction occurred in the

bank. Moreover, the report or information regarding the monitoring of fixed deposits serve as

a useful tool for the purpose of efficient, liquidity management and optimizing revenue

through inter bank lending/ placement and investments in treasury bills.

In some cases if bank fails to maintain liquidity as per NRB directives and meet short term

obligations it is covered through inter bank borrowings to the maximum possible extent and


thereafter through Repo on outright sale of T-bills, development bonds, whichever is cost

efficient. If even in the above cases too, the bank fails to overcome liquidity crisis, the

treasury department must inform the EBL management to acquire more deposits or reduce

the amount of loans. But referring to the history of EBL it has still not faced such problem

and this is the strong aspect of the bank.

ii) Liquidity Management in Foreign Currency

Like wise maintaining liquidity in local currency, maintaining liquidity in foreign currency is

also one of the responsibilities of the bank. It is maintained by positioning the currency for

short and long period.

e) Risk Management

There is a saying “No risk no gain”, every business has risk and similarly banking sector also

has a lot of risk such as Business Risk, Interest rate risk, currency risk, Exchange risk, market

risk, financial risk, default risk and many other risk that are faced by the bank during its

operation. Risk can also be defined as the variability of possible returns around the expected

return of an investment. Therefore to overcome such risk the Treasury department of the bank

is involved in managing such risks. These risks have broadly been classified into three

categories:

Liquidity Risk Management

Assets/ Liabilities Risk Management

Foreign Exchange Risk Management

Market Risk Management

i) Liquidity Risk Management

Bank must be able to generate sufficient cash to be able to meet its immediate obligations and

therefore continue service. Unprofitable businesses can survive for quite some time if they

have access to sufficient liquid resources, but even the most profitable business will quickly

go under if it does not have adequate liquid resources. Therefore the efficient management of

liquidity is important from every aspect of the company.


EBL need to be sufficiently liquid to overcome all possible risks arising out of liquidity crisis

and to meet business needs and such EBL must maintain adequate level of local currency,

INR, USD and other foreign currencies at its disposal at all times. The treasury department

and back office, as and when applicable, adhere to the following procedure for managing

liquidity risk:

Local Currency

Reviews the total credit and deposit portfolio on a daily basis. For review the account

department supplies the uses and sources of funds on a daily basis to the treasury department.

Coordinates with the customer service department and branches to tentatively

ascertain/estimate the liquidity position by being information on bulky inflow/outflow of

deposits in seven days to one-month period.

Coordinates with the credit department and if needed with the branches to tentatively

estimate the liquidity position by being informative on bulky repayment/ disbursement of

credits.

Reviews and monitors the maturities of fixed deposits as well as savings in the

operative call and current accounts. Large amount of fixed deposit maturities and unusual

swings in the operative call and current accounts informs to EBL management credit

department, customer service department and the concerned branches for timely checking and

necessary actions.

Reviews the Nostro account balance on a daily basis. Excessive balance is transferred to

NRB. Likewise, the deficit balances are funded through NRB of other appropriate measures.

The mirror account balances relating to Nostro accounts is provided by treasury bank office to

the treasury department on a daily basis.

INR, USD and other foreign currencies

Reviews the Nostro account balances on a daily basis. Excessive or deficit balances are

transferred from on Nostro to another depending upon the requirements as well as to optimize

revenue generation. The mirror account is provided by treasury back office also provides the

Nostro balances as available to the treasury department on a daily basis.

The branches and the departments involved in dealing with the above currencies report

to the treasury department as stated in different parts of this treasury manual.


The treasury department and all other concerned departments adhere to the limits prescribed

to the domestic and international banks as regard to the placements/ deposits of funds.

ii) Assets/ Liabilities Risk Management

It is a risk that the bank will encounter difficult in meeting its maturing liabilities with the

maturing financial assets.

Assets/ Liabilities risk management is analyzed and managed by assets and liabilities

management committee in accordance to assets and liabilities management guideline

implemented by EBL.

iii) Currency Risk Management

Currency risk is the risk of loss from movements in exchange rates. Bank has an obligation to

sell foreign currency at an agreed rate and on an agreed future date at the same time it also

has exposure risk. But in case of a bank, a payable in foreign exchange may be cancelled out

by a receivable in the same foreign exchange. Therefore in many cases banks have natural

hedging transactions. Foreign exchange risk of a bank in relation to a particular currency is

basically determined by is net position in that currency. This term refers to uncovered

currency position after taking into account all assets an liabilities and the immature spot and

forward contracts in the currency.

Devaluation and revaluation of foreign currencies against each other and local currency are

the major risks associated with foreign exchange management. The treasury department

always endeavors to maintain the foreign currencies positions within their prescribed

limits .the treasury department timely and adequately covers the longer short positions of

foreign currencies to bring them within their prescribed limits. In order to maintain the

foreign currencies positions within the limits, the branches and the concerned departments

report to the treasury department on buy or sell of foreign currency. Treasury back office

provided the foreign currencies positions of the previous business day to the treasury

department.

iv) Market Risk Management


Market risk is the risk of loss from movements in market prices of investments. Banks need

to arrange for hedging in case there are excess liabilities and sales over assets and purchases

in case of particular currency.

3.5 RESTRICTIONS

As we know that the Treasury department should perform its functions and responsibilities

properly but it is important to note that the department has some restrictions in performing it.

Some of the restrictions are as follows:

Depending upon the bank’s capital structure and income EBL has limited the amount of

IBL.

In case of exceeding the limit the department has to take the approval from the higher

authority.

The Treasury dealers are restricted from

Accounting entries

Sending and receiving deal confirmations

Sending settlement instructions i.e. SWIFT messages/ telexes.

Similarly the treasury back office is restricted from:

Dealing activities

Quoting the prices and deciding the exchange rates

Raising deal slips

Striking deals with counter parties

Approving counter party credit limits

Approving market risk limits

Deciding on Nostro funding

Updating position blotters

3.6 DEALING PROCESS

In a proper treasury setup, front office or the dealer deals with the other banks and informs

back office about the deal, and then the front office fills up the deal slip and gives it to the

back office. The back office then arranges for the deal confirmation with the counter party


and the other party too sends the deal confirmation to the department in other words we cans

say they exchange the deal confirmation, then the further activities carried out by the Front

office is checked to ensure that there is no any problem or mistake in the deal made by the

front office, and the dealing process ends when the money is back to the department after the

maturity period. Therefore the dealing process is very short in EBL. The dealing process can

be shown by the following flow chart:

3.7 TREND OF INVESTMENT IN EBL

Particulars 2004 2005 2006 2007 2008

1. Nepal Government Treasury Bills 2392103694 1873709702 3322443166 3614541127 3237977740

2. Nepal Government Saving Bonds

3. Nepal Government Other

Securities 74325000 226580000 226173802 1090091299 1583627004

4. Nepal Rastriya Bank Bonds

5. Foreign Securities

6. Local Licensed Institutions

7. Foreign Banks 52115000 9255150 632816092 260600000 138400800

8. Corporate Shares 17114000 19387000 19887000 19887000 16225000

9. Corporate Bonds and Debentures

10. Other Investments

Total Investments 2535657694 2128931852 4201320060 4985119426 5061157544

Provisions -804840 -804840 -1600000

Net Investments 2535657694 2128931852 4200515220 4984314586 5059557544

Particulars 2002/03 2003/04 2004/05 2005/06 2006/07

1. Investment in Shares:

1.1 31,200 Shares of Rs.100/-each in

Rural Micro Finance Co. Ltd. 2500000 2500000 3120000 3120000 3120000


1.2 33,000 shares ( including 3000 bonus shares)

of Rs. 100/- each in Nirdhan Utthan Bank Ltd. 1200000 1200000 2500000 3000000 7752000

1.3 1,34,140 ordinary shares of Rs. 100/-

each in Himalaya Distillery Ltd.

1341400

0

1341400

0

1341400

0

1341400

0 -

1.4 3,530 Shares of Rs.100/- each

in Credit Information Center Ltd. 353000 353000 353000

2. Investments in Debentures - - - - 84927000

Total Investments

1341400

0

1711400

0

1938700

0

1988700

0

10115200

0

3.Provisioning

3.1 Up to last year - - - - -

3.2 This Year 804840 1600000

Total Provision 804840 1600000

Net Investments

1341400

0

1711400

0

1938700

0

1908216

0 99552000

Table 3: Trend of Investment in Ebl

The above table clearly indicates the trends of investment in EBL which is continuously

increasing every year. These table shows that the bank has constantly been investing its

money in different sectors thereby maintaining liquidity also it has not kept its fund idol.

CHAPTER 4

FINDINGS & CONCLUSIONS


4.1 FINDINGS AND CONCLUSIONS

The Treasury Department of EBL has widely applied the theoretical aspects of Treasury

management as well as foreign exchange management. EBL has widely been applying the

concepts of Forward Contract, Intervention, Positioning, Inter Bank Borrowing and lending

in the Treasury Department as one of the major activities of it.

Treasury Department has two sections Front Office and Back Office. Both the sections of the

department require highly skilled and specialized staffs. The dealer of the bank is involved in

risk management as well as the fund management and making dealings with the parties which

is considered as the important responsibility of the Front officer and they are expected to

make best possible decisions in complex situation.

The work of the treasurer is complex, risky, and stressful and requires high devotion because

a small mistake in a job would lead an individual in a big trouble, therefore the senior

management should be cautious during recruiting the employees for the departments. They

should be able to cope and adopt the changes as today’s business is globalized and for this

purpose the staff of EBL has been constantly been providing training to the employees and

has highly skilled employees in the bank. There is a proper management of funds in EBL;

they invest the funds that are in surplus in all the branches in government bonds, securities

and T-bills receiving certain interest rate. Reviewing the history of EBL, the bank has still not

been suffered from any liquidity crisis this clarifies that the bank has effectively managed its

liquidity therefore we can conclude that the department has been effectively managing or

performing its responsibility.

4.2 RECOMMENDATIONS

With reference to the above findings and analysis, following recommendation are suggested

to overcome the weaknesses and drawbacks to help the bank improve its performance and

efficiency.

Bank has constantly been providing quality services to its customers and has to continue

it.


Employees are the real asset of the organization, therefore they should be provided

various training on the job as well as off the job from time to time in order to increase the level

of their performance.

The main activities of the bank is accepting deposits and providing loans. Therefore in

order to increase the deposit bank should revise the system of maintaining minimum balance

during opening an account because it may not be applicable in case of low income people and

rural areas at the same time interest rate also definitely has lot of impact in increasing the

number of accounts in the bank.

Though the treasury department of the bank has been applying most of the theoretical

aspect of Finance, lots of derivatives and hedging tools are not implied in the banking sectors

of the country. International Market are making huge profits using different kinds of

derivatives. Now, the Central Bank has given the opportunity to increase the treasury market so

we strongly recommend bank to use this concept in their activities. This would definitely add

up value in their activities and can be used for the benefit of the organization.

Two way quote system in the exchange rate has to be implied in the banking sector, this

would provide inflows and outflows of foreign currencies and can maintain the exchange rate

risk and flexibility in exchange rates.

Trading in international shares and bonds should also be done, which as per my

information the central bank is taking necessary steps to extend the market.

Concept of Mutual Fund can be implemented for better prospects of the Organization.


Ankita's Summer Project Report

Documents

bank everest bank limited

bank employees

bank assists

bank guarantee

bank articles

meaning of bank

banking activities

credit department