Interest Rate and Deposit Mobilization in Nepalease Commercial Bank

Abstract

The collection of deposit and its mobilization are the two sides of the same coin, in the absence of one, another cannot work i.e. without the collection of deposit, mobilization of deposits would be quite impossible and vice versa. They both get along with another under favorable condition. Interest is the main factor in fund activities of commercial banks. The level of interest rate is set by the interaction of supply and demand forces, with demand for funds coming largely from businesses, individuals, borrowers and when it is running deficit, the federal government. The main propose of this study is to analyze the interest rate and deposit mobilization Nepalese commercial banks. The secondary data are collected for 12 commercial banks covering the period of 2015-2019.From the analysis of relevant data of sample banks under the study using various statistical tools, financial tools, correlation analysis and regression analysis mentioned and from their findings conclusion has drawn. This study concludes that fluctuations in the interest rate of the commercial banks slightly affect the deposit mobilization. When there is a slight increase or decrease in interest rates of deposits and lending then changes its deposit and lending amount. So, the findings generated from the small sample may not be generalized to overall banking sector of Nepal. The study shows that correlation of deposit amount, investment amount and loan amount on interest rate of all the sample banks was found to be positive. It shows positive relationship between interest rate and deposit amount, interest rate and investment amount, interest rate and loan amount. The regression analysis reveals that deposit amount, investment amount and loan amount has positive impact on interest. This indicates that higher deposit amount, investment amount and loan amount, higher would be the interest rate.The results documented in this study support the finding and theories of the previous study. There is no difference on pattern of deposit mobilization and its effect of interest rate.