Effects of Credit Risk on the Performance of Nepalese Commercial Banks

Abstract

he study has examined the effects of credit risk on the performance of Nepalese commercial banks. The main objective is to analyze and examine credit risk performance of commercial banks in Nepal with reference with EBL and NIBL. Mainly the study will be conducted on the designed basis of secondary data. This study will be based on the recent historical data of 5 year periods, from fiscal year 2012/13 to 2016/17 A.D. Required facts and figures have been obtained from the annual report collected from official website of EBL and NIBL. Data have also been obtained browsing the official website of NRB. Only descriptive and analytical methods is used to obtain the meaningful result of the collected data and to meet the research objective. Firstly, collected data are tabulated under various heading and then tabulated data are analyzed using various financial and statistical tools and compared these values with the help of different figure. The major findings of the study are two referenced commercial banks have meet the NRB standard of capital adequacy ratio. Non-performing loan both bank was satisfactory but NIBL need to improve in that ratio. Cost per loan assets average of EBL was higher than NIBL higher the ratio indicate the capacity in credit analysis ofthe bank. Cost per loan assets has positive effect on the banks performance. ROA of NIBL range from 1.9 percent to 2.6 percent with average 2.18 percent but it is 1.62 percent to 2.39 percent. It means NIBL was better productivity of assets than EBL. The liquidity position of both bank was satisfactory but EBL was lower the money supply in financial market. Lower level of CRR indicate liquidity crunch and very high level of CRR indicate idle money which do not generate any income. Leverage ratio of both bank was maintained it shows the degree of related and protection of total debt/total equity. Key Words:Bank, Credit Risk, Neplease, Performance