An Analysis on Investment Policy of Himalayan Bank LTD.

Abstract

The main focus of the study is to highlight the investment policy of HBL Bank Ltd. which will also give slight overview on general trend of investment portfolio analysis of commercial banks. The study will attempt to analysis the different aspect of investment of HBL like equity,treasury bills, government bonds and placements over the period of time. On the other hand,the study would provides information to management of the bank that would help get insight in to the investment portfolio over the series of time and their relationship with different hypothesis analyzed. In the context of Nepal, there is less availability of research works,journal and articles in investment analysis of commercial banks as well as other financial institutions. The success and prosperity of the bank heavily relies upon the successfulinvestment policy adopted that takes into account the resulting variables which has direct orindirect impact besides, the government fiscal policy/budget and NRB monetary policy reviewed each year will also be crucial factor in determining the investment portfolio of bank.Successful formulation and effective implementation of investment policy and investmen tanalysis is the prime requisite for the successful performance of commercial banks. Therearevarious problems in effective investment of commercial banks of Nepal, which affect theirperformance to the great extent. Hence, the main significance of this study is investmentportfolio analysis of Himalayan Bank Ltd. Similarly, the study will also further attempt tounderstand the relationship of investment of HBL with other covenants like reserves,borrowing, deposits and equity. Main aim of this study is to analyze the impact deposits, borrowing, capital and reserves oninvestment of HBL BankLtd. over the series of ten years. This study covers the period of 10years. The analysis is carried on using simple regression model, log transformation model,growth model in E-views software to confirm the quantitative relationship between the usedvariables in the system of equations. At last we can conclude that the investment decision of the HBL Bank Ltd. over the series oftime period of ten years shows that the deposits, borrowing, reserves and capital has positiveimpact on investment decision. The deposits has high positive impact andborrowinghas leastimpact on the investment of the HBL Bank Ltd. The investment of the bank is also determinedby the pricing factors like interest rate, inflation of the economy and government spending. v The higher the interest rate of deposits, borrowings the higher will be the cost of investment.The major investment tool for bank is treasury bills, government bonds and debenture. Thereturn on investment is also crucial in making investment decision for the bank. Theinvestment of the bank also relies on the rate of inflation in the economy which ultimately haveimpact on the interest rate and thus the investment decision of the bank. Likewise, thegovernment spending on timely led to liquidity in the market which then result in makinginvestment decision. Hence, in overall there are other macro economic variables besides themicro economic variable which has impact on the decision making regarding investment ofthe bank. The banks adopt its own investment policy while making investment. The investmentdecision is also based on the risk appetite of the bank with higher return on high risk and lowreturn on low risk. The return is high on long term investment and low short term investment.The findings of this article are consistent with the findings of this study. Here in this study thevariables deposits, borrowings, capital and reserves has positive impact on investmentdecision of the HBL Bank Ltd. The decision of investment need to be focused on banks own investment policy which focuseson the investment based on the time period of investment, rate of return on investment andpricing associated. Hence, HBL Bank Ltd. need to focus on the investment based on theavailable liquidity i.e. deposit and investment based on the return. The bank need to alsoconcentrate over the risk factor, monetary policy, rate of return over the period of time toassess the investment of the bank. Regularly reviewing the investment portfolio and policy of the bank as per macroeconomicvariables will led to better investment decision of the bank. The bank needs to continuously strive for new investment opportunity based on analyzing the variables having positive and negative impact. Besides, the policy need to be mould as per the micro and macro economic variables having impact towards investment of the bank.