DETERMINANTS OF NON-INTEREST INCOME OF NEPALESE BANKS A

Abstract

The main objective of the study has been to find out the factors affecting the noninterest income of commercial banks in Nepal. The study provides guidelines to design new product and services that generate non-interest income sources and interest income. In this study, the descriptive as well as causal comparative research design has been used. Decision regarding, what were; when how much by means concerning an enquiry or a research study constitutes a research design. In this research, secondary data has been used. The ten fiscal year data has been incorporated, form 2013/14 to 2022/23, in this study. The study on determinants of non-interest income (NII) in Nepalese banks reveals significant insights into the factors influencing revenue diversification within the banking sector. Analysis of income sources such as ATM management fees, loan administration fees, letters of credit, remittance fees, and financial guarantees shows varying degrees of impact on NII. Remittance fees and letters of credit exhibit stronger correlations with NII, suggesting that these sources contribute more significantly to non-interest income compared to ATM management fees, loan administration fees, and financial guarantees, which show weaker correlations. Regression analysis indicates that a combination of these income sources collectively explains a substantial portion of the variability in NII. The model's high explanatory power, as indicated by a notable R Square value, underscores the relevance of these fee-based income streams in influencing overall non-interest income levels in Nepalese banks. In conclusion, this study contributes valuable insights into the determinants of NII in Nepalese banks, offering a foundation for further research and strategic decision-making aimed at fostering sustainable revenue growth and financial stability in the banking sector. Future studies could delve deeper into sector-specific dynamics and regulatory frameworks to refine these strategies and maximize the potential of fee-based income streams in Nepal's banking industry.