SECTOR WISE CREDIT CONCENTRATION OF NEPALESE COMMERCIAL BANKS AND ITS IMPACT ON PROFITABILITY

Abstract

The aim of this research was to identify the influential determinants of the bank’s liquidity risks in Nepal and to analyze the bank’s exposure to liquidity risk in the context of Nepal. The research design covers, population and sample, source of data, methods of data analysis. Out of the total financial system, five microfinance companies are chosen for sample purpose; mainly secondary data are used for the analysis. Research methodology is a path from which we can solve research dilemma systematically to accomplish the basic objective of the study. It consists of a brief explanation of research design, nature and sources of data, method of data collection and methods of tools used for analyzing data. This study is based on both descriptive and casual comparative research design and this study is based on secondary data. Secondary data are collected from their respective annual report, other publication and journals of the related banks published by Nepal Rastra Bank, Nepal stock exchange and other related magazines. Ten years data are taken to conduct the study from 2013/14 to 2022/23. For mathematical analysis, various financial and statistical tools like average (mean), standard deviation, regression, correlation and etc. has used. Similarly, SPSS, Spreadsheet, Excel and word has used to perform calculation. Findings shows analysis reveals that the Liquid Assets to Total Assets Ratio (LATA) has no significant relationship with Capital Adequacy Ratio (CAR) or GDP. However, there are moderate negative relationships between LATA and Non-performing Loan (NPL) as well as between LATA and Inflation (IN). Moreover, there is a weak positive relationship between LATA and Return on Equity (ROE), indicating a slight improvement in ROE with an increase in the Liquid Assets to Total Assets Ratio. The factors affecting the liquidity of Nepalese microfinance companies, several important conclusions emerge from the analysis. Firstly, the correlation analysis reveals that the management of nonperforming loans (NPL) is of utmost significance.