PART 1 INTRODUCTION 1.1 INTRODUCTION TO BANKING It has been seen that the origin of banking was from the ancient time. Although at that time the banking activities were not in systematic way but banking activities used to hold from that time. It has been said that the lending and borrowing are as old as money itself. The word bank has been derived from the Italian word "banco". The word banco means bench. As the different monetary transaction used to be held by sitting-up in the bench, it has been named as banco. Macleod has defined the word banco as the accumulation of money or stock. Bank in an organized form was first introduced in Italy in 1157 A.D. The Bank of Barcelona, Spain was the bank established in 1401 A.D. The first central bank was established in England, in 1844 A.D. But at present stage the bank has passed through different stage. It has been developing and modernizing its activities. Bank can be briefly defined as the financial intermediary between the depositor and credit seeker. The transaction can happen between the bank and depositor only when the depositors deposit certain amount in the bank and the bank has good relation with its customer. The Bank can make good relation with its customer only when it will be able to payback the amount deposited by the depositor at time. The intermediation takes place when bank accept deposit from general public, corporate bodies and private organization and invest those deposit for profitable purpose in form of loan and advances. The bank has started providing much more 1
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PART 1
INTRODUCTION
1.1 INTRODUCTION TO BANKING
It has been seen that the origin of banking was from the ancient time.
Although at that time the banking activities were not in systematic way but
banking activities used to hold from that time. It has been said that the lending
and borrowing are as old as money itself.
The word bank has been derived from the Italian word "banco". The word
banco means bench. As the different monetary transaction used to be held by
sitting-up in the bench, it has been named as banco. Macleod has defined the
word banco as the accumulation of money or stock. Bank in an organized form
was first introduced in Italy in 1157 A.D. The Bank of Barcelona, Spain was the
bank established in 1401 A.D. The first central bank was established in England,
in 1844 A.D. But at present stage the bank has passed through different stage. It
has been developing and modernizing its activities.
Bank can be briefly defined as the financial intermediary between the
depositor and credit seeker. The transaction can happen between the bank and
depositor only when the depositors deposit certain amount in the bank and the
bank has good relation with its customer. The Bank can make good relation with
its customer only when it will be able to payback the amount deposited by the
depositor at time. The intermediation takes place when bank accept deposit from
general public, corporate bodies and private organization and invest those
deposit for profitable purpose in form of loan and advances. The bank has
started providing much more facility to its customer such as remittance of
money, letter of credit, Bank guarantee, issue of money and many more.
According to Kinley, "Bank is an establishment which makes to individual
such advances of money or other means of payment as may be required &
safety made and to which individual entrust money or means of payment when
not required by them for use."
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According to Cambridge International Dictionary of English "An
organization where people and business can invest or borrower money changes
it to foreign money etc. or a building where these services are offered."
Thus, bank can be described as the custodian of savings of general people
and established as well. It could have been quite impossible for the
entrepreneurs to acquire the saving of general public for investment without the
establishment of the bank. So, bank can be best described as the financial
institution that accept deposit and provide the certain rate of interest and loan it
to the needy person, charging certain rate of interest and earn some profit in the
process of intermediation.
1.2 ORIGIN AND GROWTH OF BANK IN NEPAL
The lending or borrowing process of money used to be held even at
ancient time. The historical evidence shows the presence of some crude banking
practice in the earlier period of time. But in case of Nepal it has a very short
history. The development of bank in Nepal can be divided into two parts:
a) Traditional Banking
b) Modern Banking
a) Traditional Banking
Traditional Banking is related with the process of taking money with
private money lender and not with a registered institution. Previously the people
used to take money from the private money lender. Generally, people used to
take such loan for meeting daily expenses. The lender used to charge high
interest rate. In remote area till now there are different money lenders. There are
the sayings that in 780 B.S. King Guna kam Dev took loan from the money lender
and in B.S. 937 Shankadhar paid out the loan and started Nepal Sambat. In 14 th
century King Jaysthity Malla divided the people in 64 different casts. And
Tankdhari was also one of them. The main occupation of such cast people was to
deal with monetary transition. After this the Tejrath Adda was established in
government sector. They provide its services only to the civil servant to lower
rate of interest.
Private money lender following certain malpractice used to charge
unreasonable rate of interest that caused inconvenience and difficulty to the
people of country. The great need of a commercial bank was felt to eliminate
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prevailing hindrances caused by private money lender to the general public. As a
result, the "Tejarath Adda" was replaced by modern commercial bank.
b) Modern Banking
As the banking transaction started to be in broad condition there felt the
need of modern banking system. So in 30th Kartik 1994 B.S the Nepal Bank Ltd.
was established which was the first commercial bank in Nepal. Since then, the
banking operation began to foster. After the establishment of NBL Ltd., Rastriya
Banijya Bank was established in 2013 B.S. Different joint venture banks also
started its operation in year 2041 B.S. Nepal Indosuez Bank Ltd. & Nepal
Grindlays Bank Ltd. was established in 2042 B.S. and 2043 B.S. respectively.
Himalayan Bank Ltd. was established with the joint venture with Habib Bank of
Pakistan. Nepal SBI bank followed Himalayan Bank in 2051 B.S. The three new
banks were opened in 2051 B.S., Nepal Bangladesh Bank Ltd., Everest Bank Ltd.,
and Bank of Kathmandu Ltd. Meanwhile there are 16 commercial banks in Nepal.
1.3 MEANING OF NEPAL BANK LTD
Nepal Bank Ltd. was the first commercial bank. The banking history in
Nepal began from 30th Kartik 1994 B.S. with the established of Nepal Bank Ltd.
Under the privilege support from His Majesty King Tribhuvan. NBL commenced
its operation of modern banking system by accepting and monitoring the saving
of people and granting appropriate loan and monitoring the saving of people and
granting appropriate credit facilities to people, hence removing the hindrance in
the economic development of the people of the country. NBL was established
with the establishment with 51% of share of government of Nepal and 49% was
issued to general public. The authorized capital of this bank was 10 million. The
bank initially started its banking operation with paid up capital of Rs 842
thousand of the issued price of Rs 2.5 million. NBL Ltd. has authorized capital of
Rs. 1000 million, issued capital of 500 million and paid up capital of 38.04 crore.
The present share percentage of Nepal Bank Ltd. is 40.49% of government and
59.51% of the general public.
1.4 EXPANSION OF NBL
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As the main objective of commercial bank is to earn profit thus at the
beginning NBL was centralized in those areas where their business affairs took
place. NBL has opened its main branch in Kathmandu.
As different financial activities were held at this place, the first importance
was given to Kathmandu. NBL has its head office at New Road. Previously, as the
main export & import activities used to be held from Birjung it was quite
important to open branch office at Birjung so the first branch office was opened
there at B.S. 1998. And as different business activities of eastern side was used
to be done from Nepalgunj the most priority was given to it and at same year
another branch office of NBL was opened in Bhadrapur, Janakpur, Gaur and
Biratnagar. From the date of establishment of NBL within 5 years, 8 branch
offices were opened and had started its services. In fiscal year 1999 to 2011 the
more emphasis was given to the development of those banks. Till fiscal year
2046 the bank has got 234 branches at 67 district and the number of bank staff
reached to 8721. Later on a study report of CBPASS (Commercial Bank
Problem Analysis and Strategy Study) suggested that the non-performing
branches as well as excess staff should be removed. As a result NBL accepted
resignation of 800 staff and 15 branches were set collaborated. As a result NBL
has 212 branch office having 5500 staff employed. At present NBL has 7 branch
offices with fully computerized system and NBL is planning expand this number.
NBL is further planning to expand its sector and its services in different
sectors.
1.5 FUNCTIONS OF NBL
NBL is a commercial bank with an objective of earning maximum profit.
But it has also given priority to the economic development of the country. NBL
supply the financial need of the business by various means. Although the main
function of the bank is to earn maximum profit by providing different facilities to
needy people or organization to obtain the procedure benefit here are some
other main functions of NBL:
a) To deposit money in saving, current and fixed deposit.
b) To provide loan with or without considering legal procedure.
c) To invest money in education, business, and agriculture sector for
the economic development of country as it has certain responsibility
towards them.
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d) To invest in government bonds and securities.
e) To act as an agent.
f) To act as bank of government.
g) To provide safe custody of valuable goods.
h) To issue letter of credit & credit instrument.
i) To finance in foreign trade.
j) To deal with foreign currency.
k) To act as a referee and provide accurate information to the people.
Apart from the banking function, the act empowers NBL to do insurance
and transport business. Further the main function of NBL that differ from other
commercial banks is that it is especially empowered by act to grant loan to
companies undertaking profitable business associated with agriculture, mining,
road, railways, ropeway and so on.
1.6 OBJECTIVES OF STUDY
The main objective of the study is to get entire knowledge of fixed deposit
and its chief feature in regards of NBL. The objective can be specified as follow: -
1. To analyze the share of fixed deposit out of total deposit of NBL.
2. To analyze the trend of fixed deposit in NBL.
3. To evaluate importance & utilization of fixed deposit account.
4. To know opening & closing procedure of fixed deposit.
5. To draw out different problems in fixed deposit management.
1.7 LIMITATIONS OF STUDY
The study is made in certain limitation they are as follows: -
a) This study concern only period of 6 years.
b) There are number of factors that affect the banking policy of NBL.
However only those factor, which are related with fixed deposit, is
considered in study.
c) Main focus is give only in the trend of fixed deposit of NBL.
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PART 2
MEANING OF FIXED DEPOSIT
2.1 MEANING
Fixed deposit constitutes a very important role for the bank. The amount
deposited for the fixed period of time is fixed deposit. It is generally opened by
such person who doesn't need money frequently. And as the money is kept in
bank for certain period of time it is also called time deposit. As the money is
withdrawn by the customers only after the maturity of date, pass book and
cheque book are not given by the bank. Since bank can be certain about the
withdrawl period of deposit, the bank gets the opportunity to utilize that money
in productive sector so his amount of interest is provided. In Nepal the fixed
deposit can be opened for 15 days, 1 month, 3 month, 6 months & 1 year and
above. The bank provides interest from 4.00% to 9.5%. After the maturity time
the customer can renew or withdraw the money. But before opening fixed
deposit it is necessary to have saving or current deposit.
2.2 PROCEDURE OF OPENING FIXED ACCOUNT
For opening fixed deposit account it is not necessary to have the identity
of the person opening it. The person should only have to specify the amount to
the deposited. The maturity date and other important documents as enquired by
the bank must be provided. Here are some procedures of opening fixed deposit
they are: -
a) The applicant have to fill up the application form in which an applicant
should mention his name, address, the amount to be deposited and the time of
maturity and the citizenship should be clearly mentioned.
b) The applicant signature is very important for the bank. So, the signature
should also be done clearly.
c) After filling up the form the depositor have to deposit the desired
money in the counter enough the voucher prepared by the bank’s employee for
the fixed deposit account.
d) After completion of all the process, the fixed deposit section open fixed
deposit account in the name of applicant the bank provide receipt which is called
fixed deposit receipt. The fixed deposit receipt is not negotiable, so only the
person whose name is in receipt can take money after maturity.
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e) To open the account in minor's name, the guardian name, cast and
account number along with his/her own signature should be mentioned in the
form.
2.3 PROCEDURE OF CLOSING FIXED DEPOSIT ACCOUNT
The depositor may close the fixed deposit account after the maturity date.
Because of different reasons the depositor may also close the account before its
expiry date. So, for closing the fixed deposit earlier it is necessary for the bank to
give pre-information.
Thus the contract will be rescinded as well as the relationship between
bank and customer will come to and with completion of due date. After the
maturity date, the depositor may also renew his account if he doesn't want to
take the money. For this he has to fill up the application form and submit to the
bank.
2.4. CHARACTERISTICS OF FIXED DEPOSIT ACCOUNT
The fixed deposit has its certain characteristics, which are mentioned as
follow:
1. Fixed deposit account is opened for the fixed period of time. The
duration of the deposit period may be 7 days, 15 days, 1 month, 6
months, 9 months, 1 to 5 years or above.
2. Interest rate is provided according to the deposit period. Though the
fixed deposit can be opened for more than 5 years, the maximum
interest rate remains the same as that of 1 year.
3. The interest is awarded every 3 months.
4. The Fixed Deposit Account holder could not withdraw his deposit
without completing the deposit period. However, the Fixed Deposit
Receipt can be pledged for loan from the bank.
5. The Fixed Deposit Account can be renewed after expiry of the fixed
time.
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PART 3
PRESENTATION AND ANALYSIS OF DATA
The most valuable and crucial tool to evaluate the true and actual position
of any organization is its past data. The strength and weakness of the
organization can be appraised from the proper analysis of data.
The part of the report focuses on presentation and analysis of data related
to the current deposit of NBL to obtain the objective of study.
3.1 TOTAL DEPOSIT
The deposit are said to be "life blood of the bank". The first and utmost
important thing to know is the total deposit trend in NBL. Total deposit refers to
the total deposit of the general public in various accounts during certain period
of time.
The following table shows the status of deposit of NBL during the financial
year from 2055-056 to 2059-060.
Table No. 1Total Deposit of Nepal Bank Limited
(Rs. in million)Fiscal Year Total Deposit Change in Total Deposit