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CHAPTER: 1 INTRODUCTION

1.1Background of the Study

Investment is the employment of funds with the aims of achieving additional income or
growth in value. Itinvolves the commercial of resources that have been saved or put away
from current consumption in the hopes that some benefits will occur in future.

Investment is an activity that is engaged in by people who have saving s .If there been no
saving none of the investment can be made so that saving none of the investment can be
made so that saving is primary factor for investment and it is the backbone of
investment .If all the income and saving are consumed for basic needs, then there is no
saving neither existence of investment .Therefore investment and saving are interrelated.

Investment is primary factor for economic development of any country .It can be done
either by government or by individuals .investment generally involves real assets or
financial assets ,Real assets are tangible such as buildings, automobiles ,machinery
,furniture etc .Financial assets are pieces of paper representing an indirect claim to real
assets held by someone else .These pieces of paper represent debtor equity commitment
in the form of certificates .There are different attributes involved investment that are :

Return

Risk

Time

Return is known as reward from investment in securities so assets .Risk is the chance of
low return or loss from the investment in securities o assets .whereas ,time involves
holding period of investment in securities or assets .
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In conclusion we can say that investment is the sacrifice of certain present value for the
uncertain future rewards.

1.2 Profile of the Organization

Commercial banks creates credit and supports for the formation of the capital and hence,
itsRegarded as manufacture of the money. Commercial banks offers services to
individuals they are primarily concerned with receiving deposits and ending to business.
Commercial banks are also known as the financial department store because it satisfies
the broadest range of financial service needs in the economy.In the first chapter is
introduction. Its includes background, objective of the study, Rationale of the study,
literature review, methods of the study, limitation, Bibliography

1.3 Objective of the Study

Investment is the primary and necessary factors for economic development. The general
objective of this is to analysis. Investmentactivities of Nepal banks limited.Besides this,
other objectives of this study are as follows:

 To identify sector wise investment proportion with total investment made

by Nepal bank limited.
 To identify relationship between investment and deposits of the Nepal
banks limited.
 To Asses the impact of investment policy on banks performance.
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1.4 Rationale of the Study

Banking sector is one the major contributors funds providers for the individuals,
society and for the whole union. Hence, the performance of these sectors needs to be
above the parts to any others filed. The investment activities of commercials banking
sectors should be very much capable in enhancing the capital marked as well.

The accounting figures presented in the statement do not convey meaningful

understanding .It needs to be analyzed and interpreted to know the investment position
and activities of the banks .

Need of the study is to explore the existing situation as well as future prospects of
commercial banks investment .As it is well known fact that the commercial banks can
affect the economic condition of the whole country ,the effort is made to highlight the
investment analysis of commercial bank expecting that the study can bring the gap
between deposit and investment policies .Thus the present study makes a modest attempt
to analyze investment of Nepal bank ltd .Since this study is beneficial to different parties
,shareholders general public .further researchers and different parties concerned with
these Banks .

1.5 Literature Review

Many researchers have conducted studies about the bank mergers,

systemic risk, effect on the performance of banks, and in some case understand the
motive of the Central Banks. Hosono et al. (2006) investigated the reasons and aftermath
effect of the consolidation of co-operative banks in Japan from 1984-2002, having
concluded that Mergers and Acquisitions (M&As) has increased the cost efficiency of
acquiring banks,Carlettiet al. (2007) also suggest that large mergers generated an increase
in the expected aggregate liquidity needs, eventually fulfilling the minimum liquidity
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requirement required by the central banks. Another viewpoint relates to cost efficiency
(Beccalli & Frantz 2009) impact of M&A operations influence on the performance of
banks; taking a sample of 714 deals involving European Union (EU) acquirers and targets
throughout the world from 1991 to 2005, concluded that M&A operations accompany
minor decline in Return on Equity (ROE), cash flow return and profit efficiency, but with
a noted progress in cost efficiency, which might have arelevant impact in performance.
Somoye (2008) examined the performance of government induced banks consolidation in
Nigeria in a post-consolidation period, for the purpose of financial stability, risen due to a
credit crisis and transatlantic mortgage financial chaos, concluding that the mergers’
consolidation program has not been effective to improve significantly the performance of
banks. Somoye (2008) advocates that the process of bank consolidation should be market
driven in order to ensure an efficient process in the light of competitiveness in the
banking sector. A different view is advocated by Grandin & Saidane (2010) stating that
the global financial turmoil has induced the stateintervention to consolidate the banks and
underline their soundness. However, the authors argue that M&A normally occurs from
private market forces, compelled by the efficiency and profitability of the merged
entities, and question if managers might have been induced in their haste to enter into
M&A transactionsKhan (2011) concluded that Indian banks have been positively affected
by of M&As during the post liberalization regime. Financial parameters that include
Gross Profit Margin, Net Profit Margin, Operating Profit Margin, Return on Capital
Employed (ROCE), ROE and Debt-Equity Ratio were considered for measuring
performance of banks, having concluded that there have been efficiency gains through
M&As, and subsequently passed the benefits to the equity shareholders in the form of
dividend. However, Sohini Ghosh & Dutta (2015) observed about 10 M&A deals in
Indian financial institutions, between 2000 to 2010, having concluded that there is no
significant change in the performance of banks. In another market, Laiet al. (2015) made
a comparative analysis of financial ratios of Malaysian local banks to evaluate the impact
of bank mergers on profitability, cost reduction, liquidity, leverage and shareholder’s
equity, having concluded that in this market there was no important improvement in the
performance and efficiency of the merged banks.
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1.6 Research Methodology

Research methodology refers from the various sequential steps to be followed and
adopted by researcher in studying a problem with certain objectives. Research
methodology describes the method and process applied in the entire subject of the related
study. Every research should follow the systematic research methodology wider concept
so it consider the logic behind the methods used in context of research study and explains
why particular methods or technique is used.Depending upon the sources there are two
types of data i.e. primary and secondary data:

Primary Data: Primary Data are those data which are collected a fresh and for the first
time on the account of concerned investigation .The primay data is thus original in
character. The data is a primary for those person or institutions that collect them but the
same data become secondary for another.

Secondary Data: Secondary Data are the data which are borrowed from others who have
collected them for some other purpose .The Degree Accuracy of these types type of data
is comparatively less than that of the Primary Data.

Population and Sampling: The large group about which the generation made is called the
population under the study or the universe and small portion on which the study is made
is called the sample of the study .In this study the focuses analytical and descriptive study
of investment analysis of NBL.There are so many commercial bank is the market but it is
not possible to study all the data related with all banks of Nepal because of time and
other limitation so NBL bank has been selected for the study .

1.8 Limitation of the study

The report is for the partial fulfillment of Bachelor of Business Studies .The effort have
been made to prevent and analyze the fact clearly ,truly and within the boundary
.However ,reliability of tools ,lack of research experience ,and lack of data are the
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primary limitation of this report .Other limitation are :This study is focused on only the
few directive (of the total 20 directives issued 2066B.S) issued by the NRB to the
commercial banks of Nepal time to time .

a. This study is based on direct interview and secondary data only received from
NRB and the concerned commercial banks.
b. Data are taken from the Mid –July 2014 to Mid-Jan 2018 are only taken into
consideration for analysis.
c. Of the total 27 commercial banks operating in the country, only five CBs are
taken as a sample for research purpose.

d. Doing research in directives on some requirement, whichare also defined by

the Finance, and Banking Expertise.