Factor Affecting of Bank Lending in Commercial Banks of Nepal

Abstract

ABSTRACT This study examines the factor affecting of bank lending in commercial banks of Nepal. This study used secondary data covering ten year periods from 2012/13 to 2021/22. This study used descriptive analysis, correlation analysis and multiple regression analysis by using SPSS version 26. This study shows that Nepalese government own banks have good lending position. Bank lending always depends upon different factors such as cash reserve ratio, capital adequacy ratio, lending interest rate, bank size or total assets and inflation rate which are the major factors of commercial banks. The correlation analysis reveals that liquidity ratio and lending interest rate have significant negative relation with loan and advance (LLA) of government banks. At the same time, capital adequacy ratio and banks size have significant positive relation with lending or loan and advance (LLA). In addition, inflation rate has significant negative relationship with bank lending. At the meantime, the multiple regression reveals that liquidity ratio and inflation rate have insignificant negative impact on lending of government own commercial banks in Nepal. However, capital adequacy ratio and bank size have significant positive effect of bank lending. Moreover, lending interest rate has insignificant positive impact on banking lending. So, it can be concluded that capital adequacy ratio and bank size has significant and major factors of lending in Nepalese commercial banks. Keywords: Loan and advance, liquidity ratio, capital adequacy ratio, bank size and inflation rate.