PORTFOLIO MANAGEMENT OF COMMERCIAL BANKS IN NEPAL

Abstract

This study is portfolio management of commercial banks in Nepal. The main objectives of this study are to analyze the portfolio investment managed by the commercial banks in Nepal, to assess the existing situation of financial position of commercial banks in Nepal, and to examine the investment portfolio choices, affect the performance of commercial banks in Nepal. Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Total Assets (TA) and Cash Reserve Ratio (CRR) are the independent variables and Return on Assets (ROA) and Return on Equity (ROE) are the dependent variable in this study. Mean, standard deviation, descriptive statistics, correlation and multiple regression analysis are taken to present data. The major finding of this study is the correlations across variables, we can identify patterns and interdependencies. For instance, the strong positive correlation between ROA and CRR that banks with higher returns on assets tend to hold more cash reserves, potentially for liquidity management purposes. On the other hand, the relatively weaker correlations between ROA and Total Assets (TA) imply that asset size alone does not strongly influence return on assets, highlighting the significance of efficient asset deployment and risk mitigation strategies. Furthermore, the high correlations between ROE and CAR as well as ROE and CRR indicate that banks with stronger capital adequacy and higher cash reserves tend to generate better returns for their equity holders. In regression analysis, CAR and TA are positive significant relationship with ROA and NPL and CRR are insignificant relationship with ROA. In similarly, NPL and TA are significant relationship with ROE and CAR and CRR are insignificant relationship with ROE.