Role of commercial Banks in the economic growth of Nepal
Date
2015
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Abstract
This study investigates the role of commercial banks in the economic growth of Nepal
over the period 1975 to 2012. The main objective of this study was to examine the
trend and pattern of GDP and credit of the commercial banks, to explore the
relationship between Gross Domestic Product (GDP) and credit among increased
number of commercial banks and to study and analyzed total deposit collection and
deposit utilization of commercial banks in Nepal.
Banks play vital role in the economic growth of a country. They accumulate the idle
saving of the different of the people and make them available for investment. They also
create new demand deposits in the process of granting loans and purchasing
investment securities. Commercial banks play and important and active role in the
economic growth of a country; if banking system in a country effective, efficient and
disciplined, it brings a rapid growth in a various sector of economy.
This study employed the regression analysis. The independent variables includes credit
(C
r
) made by commercial banks and one period lagged GDP (GDP
t-1
). The dependent
variable includes nominal GDP in producer’s price, which measured of nation’s
economic performance as economic growth. The major findings of this study have
focused on contribution of commercial banks credit to the GDP and economic growth
of Nepal. The empirical result shows that the value of lagged GDP and value of credit
of commercial banks have positive effects on economic growth of Nepal represented by
the GDP. This result test on F test in both 5 percent and 1 percent level of significance,
which is statistically significant. Therefore, it recommended that the policy maker
should make policies to enhance and establish banking system in every part of
economy because banking sector is significantly contributing in the economic growth
of Nepal.
Description
Keywords
Commercial banks:, Economic growth: