Interest Rate Structure of Joint Venture Banks in Nepal and Its Impact on Deposit and Lending

Abstract

Commercial banks constitute a major chunk of total assets in the banking system inNepal. The collection of deposits and extension of credit is one of major functions ofbanking institutions. When the saving increases lending amount is also increase. Ifbanks are not efficient in their lending behavior, it may not contribute to economicgrowth. Deposit and lending mobilization is depending upon interest rate structure.The main objective of the study is made the relationship between interest rate anddeposit & lending amount of joint venture commercial banks in Nepal. In this study,researcher raised three questions and aimed to analyze the interest rate structure ofjoint venture commercial banks, which are in line with first research question.Similarly, researcher also aimed to examine the relationship of interest rate withdeposit and lending. Which are in line with last two research questions. Secondarydata are used for the study and have been sourced from Banking and FinancialStatistics NRB. Descriptive and correlational research design have been used in thestudy. The various statistical tools are used to interpret and analyze the data. themodels involves Nepalese joint venture commercial banks interest rate is independentvariable and other variables deposits and lending amount as dependent variable forthe period, 2012– 2017. From the regression techniques, the study revealed thatthere is a positive relationship between interest rates and deposits suggesting thatinterest rates has been responsible for customers deposits in joint venture banks inNepal. Similarly, there is significant negative relationship between interest rates andlending amount suggesting that interest rate has been responsible for lender. Thisstudy, therefore recommended thatthe interest rate is major factors for expansion andcontraction of deposits and lending amounts. The findingsand results will be helpfulto evaluate the strength and weakness of the sample joint venture banks. Therecommendation is made to take a corrective action and decisions.