LIQUIDITY MANAGEMENT AND PROFITABILITY ANALYSIS OF NEPALESE COMMERCIAL BANKS
Abstract
This study examines the liquidity management and profitability analysis of commercial
banks of Nepal over the period of 2017/18 to 2021/22. This study examines the
relationship between liquidity management and profitability in the context of Nepalese
commercial banks, with a focus on two leading institutions: Nabil Bank and Nepal SBI
Bank (NSBI). Liquidity management, a critical aspect of banking operations, involves
maintaining an optimal balance between liquid assets and liabilities to ensure the bank's
ability to meet short-term obligations without compromising profitability. The analysis
explores how these banks navigate the trade-off between liquidity and profitability,
considering factors such as liquidity ratios, return on assets (ROA), and return on equity
(ROE). By employing quantitative methods, the study assesses the impact of liquidity
management practices on the financial performance of Nabil and NSBI over a specified
period. The findings revealed that effective liquidity management is pivotal in enhancing
profitability, though it often requires careful balancing to avoid excessive liquidity that
could otherwise dampen returns. This research contributes to the broader understanding
of banking sector dynamics in Nepal and offers practical insights for policymakers and
bank management in optimizing liquidity for sustainable profitability.