Effect of bank specific and macro-economic factors on net interest margin of Nepalese commercial banks
Date
2024
Authors
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Journal ISSN
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Publisher
Shanker Dev Campus
Abstract
This study investigates the impact of bank-specific and macroeconomic factors on the net
interest margin (NIM) of six Nepalese commercial banks: Everest Bank Limited, NIC Asia
Bank Limited, Nabil Bank Limited, Sanima Bank Limited, Nepal Bank Limited, and
Citizens Bank International Limited. The research encompasses a period from fiscal year
2013/14 to 2022/23. The bank-specific variables examined include total deposits, asset
quality, liquidity, bank size, and management efficiency, while the macroeconomic
variables include GDP growth rate and inflation. The dependent variables in this study are
the net interest margin indicators, specifically the net interest income to average earning
assets (NIM1) and the net interest income to total assets (NIM2).
Through the application of various econometric models, including Fixed Effects Model
(FEM) and Random Effects Model (REM), the study analyzes how these factors influence
the profitability and efficiency of Nepalese commercial banks. Our findings reveal
significant relationships between the independent variables and the net interest margin
indicators, providing insights into the critical determinants of bank performance in the
Nepalese banking sector. This research contributes to a better understanding of the dynamic
interplay between internal bank management practices and external economic conditions,
offering valuable implications for bank managers, policymakers, and stakeholders aiming
to enhance the financial stability and efficiency of commercial banks in Nepal.