Todays universe economic system has been more competitory & A ; complicated due to the competition & A ; globalisation. The most of import fact of international concern operation is uninterrupted alteration in economic, political & A ; societal dimension. These opportunities are beyond the control of international concern concern. Nowadays international investors are attracted towards the fiscal markets of developing states. As a consequence, many joint ventures & A ; transnational companies are being established in the
state which plays critical function in economic development of the state.
Investing promotes economic growing and contributes to a state ‘s wealth when people deposit money in salvaging history in the Bankss. For illustration, the bank may put by imparting the financess of assorted concern companies. These houses in return may put the money in new mills and equipment to increase their production. In add-on to borrowing from the Bankss most companies issue stocks and bonds that they sell to investors to raise capital needed for concern enlargement. Government besides publish bonds to obtain financess to put in such undertakings as the building of dikes, roads, edifice and schools. All such investing by persons, concern and authorities involves a present forfeit of income to acquire an expected hereafter benefits. As a consequence, investing raises a state ‘s criterion of life.
“ Investing in its broadest sense means the forfeit of current dollars for future dollars. Two different properties are by and large involves clip hazard. The forfeit takes topographic point in present and is certain. The wages comes subsequently if at all, and the magnitude is by and large unsure ”
An investor gets countless chances or options for investing in the sound investing environment. Capital market is besides one of the topographic points where investors can do their investing. Capital market consists of securities and non-securities market. Securities market implies mobilisation of the fund through issue of the securities portions, bonds and unsecured bonds by the corporate sectors and bonds, measure and unsecured bonds by authorities. Non securities market refers to the mobilisation of the fiscal resource by the fiscal establishments in the signifier of sedimentations and loans. Economic growing of the state depends on the handiness, mobilisation and use of the fiscal resource. Financial establishments play the major function for economic development of any state. Financial sector chiefly indicates the banking sector. So, there is a really much dependance on the banking sector for the overall economic development of any state.
Development of Commercial Bank in Nepal
Bank is fiscal establishments whose operation is to accept sedimentation from public and to impart money to the enterpriser. Generally, a word of bank is indicates to the commercial bank. Commercial Bankss are one of the major fiscal intermediates whose primary map is the transportation of pecuniary resource from rescuer to the user. Writers have defined in assorted facets about bank. A modern bank performs figure of maps ; it has become really hard to give a precise definition of a bank. Some of the of import and normally used definitions of a bank are given below: –
“ A commercial bank is one which exchange money, sedimentation money, accepts sedimentation, grant loans and performs commercial banking maps and which is non bank meant for co-operative, agribusiness, industry or for specific intent. ”
“ A commercial banker is a trader in money and replacements for money, such as cheques or measure of exchange. It besides provides a assortment of fiscal service. ”
The development of banking system in our state is non really old. The construct of fiscal establishments in Nepal was introduced when the 1st commercial bank, Nepal Bank ltd, as a semi- authorities organisation was established in 1983 A.D. it was established under particular banking Act 1936 holding simple maps of a commercial bank. It becomes public limited company in 1953 A.D. Later in 1957 A.D. The first cardinal bank named as “ Nepal Rastra Bank ( NRB0 ” was established with an aims of supervision, protecting and directing the maps of commercial banking activities in Nepal. Another commercial bank to the full owned by the authorities named as ” Rastriya Banijay Bank ( RBB ) ” was established in 1966 A.D. And the class of clip different commercial bank Act and company Act have been formulated and implemented to further heighten the fiscal activities more efficaciously and expeditiously. After the reinstatement of multiparty democracy several in the state several joint venture Bankss were besides established. In manner, the no. of commercial bank is increasing during these yearss which are as follows: –
Table 1.1 the Commercial Bankss in Nepal: –
Name of Bank
operation day of the month ( A.D. )
Nepal bank Limited
Rastriya Banijay Bank
Agriculture Development Bank
NABIL Bank Limited
Nepal Investment Bank Limited
Standard Chartered Bank Nepal Limited
Himalayan Bank Limited
Nepal SBI Bank Limited
Nepal Bangladesh Bank Limited
Everest Bank Limited
Bank Of Kathmandu Limited
Nepal Commerce And Credit Bank Limited
Lumbini Bank Limited
cubic decimeter Nepal Industrial And Commercial Bank Limited 1998- 07-21
Machapuchare Bank Limited
Kumari Bank Limited
Laxmi Bank Limited
Siddhartha Bank Limited
Global Bank Limited
Citizens Bank International Limited
Prime Bank Limited
Sunrise Bank Limited
Bank of Asia Nepal Limited
Evaluation of Joint Venture Banks ( JVBs ) In Nepal
Joint venture is a partnership among states and besides between assorted groups of industries and bargainer to accomplish common exchange of goods and services for sharing comparatives advantage. We can specify a joint venture as a force between two or more endeavors for the intent of transporting out the specific operation.
After the proclamation of new policy in 1982-83 A.D. the first joint venture bank, Nepal Arab Bank was established in 1984 A.D. ( 2014 B.S. ) Nabil bank was established under the coaction with Dubai bank of United Arab Emirates. The 2nd Joint venture Bank was Nepal Indosuez Bank which was established in 1985 ( 2042 B.S. ) under the joint venture with Indosuez bank of France. Similarly, in 1986 A.D. ( 2043 B.S. ) Nepal Grindlays bank was established under the coaction between Nepal and Grindlays bank London and Himalayan Bank Limited as a joint venture with Habib bank limited, Pakistan. Then in upcoming old ages the figure of commercial bank dramatically.
A survey conducted by Dr. Manohar Krishna Shrestha, professor of Central Department Of direction ( Tribhuvan University ) in has article ” Commercial Bankss comparative rating ” clarifies that joint venture Bankss ( JVBs ) are new and comparative more efficient in operation and they have superior public presentation while comparing with local Bankss. They are executing better due to their man of the world engineering, modern banking and accomplishment in comparing to local Bankss. Their better public presentation is besides due to burthen the local Bankss are confronting due to authorities ramifying policy in rural countries and financing public endeavors. Local Bankss are efficient in rural sector. But holding figure of lacks, they have to confront turning restraints of socio-economic and political system on one manus spectrum and that of issue and challenges of JVBs commanding important banking in other spectrum.
Therefore, the joint venture between foreign bank and Nepali bank should be promoting in Nepal, specially, in merchandiser and investing banking. We hope foreign bank will convey healthy competition in the fiscal environment, which will better work efficiency and Quality of merchandise and services of Nepali bank excessively.
1.3 Growth of capital Market in Nepal
Capital market refers to the market for long term debt and equity portions. It can be farther dividend into primary market and secondary market. Primary market is the market where the portions are offered to general populace for the first clip and the in the secondary market is those market which have already been purchase securities by the populace in primary market are traded once more and once more. Lord Keynes was the first individual to show stock market as ‘ a game of professional investing ‘ . The chief intent is to win or to do tonss of money. Success comes to those ; who treat it as a game to be played non for net income but besides for enjoyment and athleticss. Stock market provides chances and threatens. Opportunities for the well informed people holding better cognition of market worlds and danger for the unknown people.
In the context of Nepal, capital market is really new construct with comparison to the other capital market in the universe. “ it is still in nascent phase though it began with the floatation of portions by NBL and Biratnagar Jute Mills Limited in 1973 under the Company Act 1936. At that clip, the engagement on the ownership construction of the corporate sector was restricted largely to the Rana Family. Consequently, the enlargement of the capital market to the desired degree had been restricted. No meaning efforts had been made in four ” Five aa‚¬ ” twelvemonth programs ” to reform the capital market ” . The capital market was development by the established of security Exchange Center in 1976 A.D. ( 2033 B.S. ) the no. of listed companies and their trading was really negligible until the authorities of Nepal had made economic refers along with wide fiscal policy in the procedure of economic liberalisation.
The denationalization of public entities have been started assorted finance and insurance companies in the private sector are being established with local and foreign investings. Those companies have to publish some of their portion of the general populace. In 1992, the finance company Act was amended. These enabled finance companies to be established to work in assorted countries such as leasing, lodging finance and hire purchase. These establishments were besides allowed to execute capital market maps such as portion issue, portfolio direction, market devising and tutelary services.
Stock market in Nepal has been turning bit by bit both in footings of turnover every bit good as the capital investing. No. of listed companies in NEPSE grew from 16 in 1986 to144 at the terminal of the FY 2007/08. The listed companies every bit good as their sector wise their market capitalisations are shows in table below: –
Listed Companies by the terminal of the FY 2007/08 & A ; besides including seven month informations of mid- February 2009: –
No. of listed Company
Banks & As ; Bank and Financial establishments and ( including insurance )
Production & A ; Processing industries
( Beginning: Nepal Rastra Bank 2008/09 & A ; Yess boss magazine )
Till the entire companies of listed NEPSE in 149 in mid-febuarary. 2009. The sum paid up capital of the listed companies at Rs.51.36 billion mid-February 2009. An increased by 110.9 per centum over the period of one old ages. The year- to- Year market capitalisation increased by 53.5 % to Rs.399.81 billion in mid feb.2009.
1.4 Brief Profile of Standard Chartered Bank Limited: –
Standard Chartered Bank Nepal Limited ( SCBNL ) has been in operation in Nepal since 1987 A.D. when it was ab initio registered as a joint venture operation. Today the Bank is an built-in portion of Standard Chartered Group who has 75 % ownership in the company with 25 % portion owned by the Nepali populace. The bank enjoys the position of the largest international bank presently runing in Nepal.
SCBL, subordinate of Standard Chartered Group presently runing hostel Nepal, enjoys an faultless repute of taking fiscal establishment in the state. With 16 points of representation and 17 ATMs across the land and employs over 350 local staff ; Standard Chartered Bank Nepal Ltd. Is in a place to serve its clients through a big domestic web. In add-on to which the planetary web of Standard Chartered Group gives the Bank the alone chance to supply genuinely international banking in Nepal.
SCBL, whose caput office is situated in new baneshwor, Kathmandu has Rs.1000 1000000s registered or authorised capital. It has issued portions of Rs.1000millions to run its operation swimmingly. And the bank has succeeded to roll up the paid up capital about Rs.620.7840 1000000s boulder clay at the terminal of Fiscal Year 2007/08. It was listed in NEPSE on 4th July 1988.
Brief Profile of Nepal Investment Bank Limited: –
Nepal Investment Bank Limited ( NIBL ) , antecedently Nepal Indosuez Bank Ltd. , was established in 1986 as a joint venture between Nepalese and Gallic spouses. The Gallic spouse ( keeping 50 % of the capital of NIBL was Credit Agricole Indosuez, a subordinate of one big banking group in the universe.
With the determination of Credit Agricole Indosuez to deprive, a group of companies consisting of bankers, professional, industrialists and man of affairs, has acquired on April 2002 at the 50 % shareholding of Credit Indosuez in Nepal Indosuez Bank Ltd.
The name of bank has been changed to Nepal Investment Bank Ltd. Upon blessing of Bankss Annual General meeting, Nepal Rastra Bank and Company Registered office with the following shareholding construction.
A group of companies keeping 50 % of the capital
Rastriya Banijya Bank keeping 15 % of the Capital
Rastriya Beema Sansthan keeping the same per centum.
The staying 20 % being held by the General Public ( which means that NIBL is a Company listed on the Nepal Stock Exchange. )
Brief Profile of Nepal Stocks Exchange Limited: –
The market where outstanding securities are traded is referred as secondary market, more popularly known as the stock market. There is merely one stock exchange in Nepal called Nepal Stock Exchange Limited ( NEPSE ) , where authorities and corporate sector securities are traded.
Securities Exchange Centre was established with an aim of easing and advancing the growing of capital market. Before transition into stock exchange it was merely the capital market establishment set abouting the occupation of brokering, under authorship, pull offing public issue, market doing for authorities bonds and other fiscal services.
His Majesty ‘s Government, under plan novice to reform capital market, converted Securities Exchange Centre into Nepal Stock Exchange in 1933. Nepal Stock Exchange, in short NEPSE is a non-profit devising organisation, runing under Securities Exchange act 1983.
The basic aims of NEPSE is to impact free marketability and liquidness to the authorities and corporate securities by easing in its trading floor through market mediators such as agent, market shaper etc. His Majesty ‘s Government of Nepal Rastra Bank, Nepal Industrial Development Corporation and Licensed members are the stockholders of the NEPSE. NEPSE opened its trading floor on January 13th 1994 through licensed members.
The authorised and issued capital of exchange is Rs.50 million. Of this Rs.30.41 million is subscribed by HMG/N, Nepal Rastra Bank, Nepal Industrial Development Corporation and licensed members.
1.7 Statement of Problems
Investor has the liberty over the choice of any investing options. They have the freedom of pick over the selecting of instruments. Different investor prefers different investing options. By and large, return, liquidness and safety of investing are basic concerned of the general investors. Therefore, investors sing these factors make investing determination and select either fixed rate giving securities or hazardous instrument like portion. Some want fixed income ( fixed regular income ) , some want growing of their money ( capital addition ) whereas some want safety ( guaranteed return of rule.
So, the investor can be classified into three classs based on hazard and return. First type of investor is risk lover investors who become ready to confront high hazard in the hope of high return. The 2nd type of investors are risk avoider who try to avoid confronting high hazard and became ready to be satisfied in low return. Third types of investors come along in between these two investors. They are ready to bear medium hazard and have medium return. The survey has examined whether these investors are cognizant about the hazard and return analysis of the establishments they are puting or non.
Investor must be able to analyse hazard and return of single stocks and portfolio every bit good. This will increases their assurance and finally increases the efficiency of the market which surely will assist the development of the capital market of the state. It is the duty of the investors to do the rational determination. However, in Nepali context, most of the investors appear to be least familiar with the fiscal activities. Very few people analyzed the hazard & A ; return. Awareness sing the fiscal activities, investing policy, doing portfolio etc. is really small.
After the established of Nepal Stock Exchange, the capital has quickly grown but most of people have non cognizant in doing investing in the securities market. Investors are non good informed and cognizant of characteristics of different fiscal instruments. Most of them have ne’er gone exhaustively while using for the portions.
The investors are more attracted towards the stocks of banking sector instead rest other. Investors who take hazard in puting do non hold adequate information. In such an immature phase of capital market and surrounding, the research worker aims to analyze on the stocks of commercial Bankss from hazard and return positions. Therefore, this survey peculiarly trades on following research inquiries: –
What are risk and return of the selected commercial Bankss?
How hazard and return are correlated?
How gaining per portion and market per portion are correlated with the dividend payout ratio/
How is the systematic hazard and unsystematic hazard of these Bankss?
What is the co-variance between the returns of the selected Bankss?
What is hazard and return of the market NEPSE?
1.8 Aims of the Survey: –
The overall aims of the survey is to analyse the hazard, return and other relevant variables that help in doing determination about investing on securities of the listed commercial Bankss. The specific aims are as follows: –
To mensurate systematic and unsystematic hazard of the selected Bankss.
To analyze the hazard return of the selected Bankss.
To happen out the relationship between gaining per portion and market per portion of the commercial Bankss.
To happen out the correlativity co-efficient between selected Bankss.
To happen out hazard and return of market NEPSE.
To happen out the co-variance between selected Bankss.
1.9 Significance of the survey
In the context of Nepal, the capital market is turning really easy. The market is non so efficient. Most of the investors are puting on the capital market without any proper cognition or information about the market. Investing of capital market is merely similar hiting in the dark. Therefore, this survey will give the information of capital market by analysing hazard and return of commercial Bankss.
It will supply the basic construct and the state of affairs of hazard and return of Nepali investing. It will be helpful to possible investor who wants to put in security. The survey will make consciousness about use of investor ‘s panic resource and aid to place the hazard return merchandise off their investing. This research will be aid to clear up about hazard and return to the investors every bit good as concern companies which will be good to the investors and companies for taking right investing determination and bettering scheme and direction.
1.10 Restrictions of the survey
The restrictions of survey are as follows: –
Merely two listed commercial Bankss are taken as sample.
This survey was complete within the limited clip so it covers merely 7 old ages.
Secondary informations are used for the analysis and the reading which are taken from the SEBO, NRB one-year study of concern Bankss and web sites so the consequence may non be truth
The survey is fundamentally focus on hazard and return on common stock of the commercial Bankss and analyzed the annual informations.
Analysis is base on the limited fiscal and statistical tools which are reference as methodological analysis.
Average return of the single bank is taken as expected return.
1.11 RESEARCH METHODOLOGY
Research methodological analysis is systematic manner to work out the research job. Research methodological analysis describes the methods and procedure applied in the full facet of the survey. It includes all the processs from theoretical foundation to the aggregation and analysis of informations.
“ Research Methodology refers to the assorted consecutive stairss ( along with a rational of each measure ) to be adopted by a research in analyzing a job with certain object/objects in position ”
“ Research is indispensable a systematic enquiry seeking facts through aims verifiable methods in order to detect the relationship among them and to infer organize them wide rules or Torahs. It is truly a method of critical thought by specifying and redefining jobs, explicating hypothesis or suggested solution, roll uping, forming and measuring informations, doing tax write-offs and doing decisions to find whether they fit the formulated hypothesis. Therefore, the term ” Research ” refers to a critical, careful and thorough probe or enquiry or scrutiny or experimentation holding as its purpose the reversion of recognized decisions, in the visible radiation of freshly discovered facts. There are as many definitions of research as there are research workers.