This document provides an introduction and background to a study on credit management at Nepal Bank Limited. It begins with an overview of banks and credit management. It then discusses Nepal Bank Limited, stating its mission, vision, products and services. The document identifies the problem statement as exploring credit efficiency and management in Nepalese commercial banks. It lists the objectives of assessing Nepal Bank's credit practices and exploring relationships between loans, non-performing loans and profits. The significance is stated as understanding how commercial banks manage credit positions. The document outlines the organization of the study and limitations. It will analyze Nepal Bank's credit management and efficiency over three years using financial analysis tools.

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A STUDY ON
CREDIT MANAGEMENT OF NEPAL BANK LIMITED
A Project Work Proposal
Submitted by:
Bisal Koirala
T.U. Reg. No. 7-2-0279-0187-2016
Roll No:
Submitted to:
The Research Management cell
Koteshwor Multiple Campus
Kathmandu
In partial Fulfillment of the Requirements for the Degree of
BACHELOR OF BUSINESS STUDIES (BBS)
Kathmandu Nepal
2020

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1. INTRODUCTION
1.1 Background of the study
A bank is a financial institution that accepts deposits from the public and creates credit. Lending
activities can be performed either directly or indirectly through capital markets. Due to their
importance in the financial stability of a country, banks are highly regulated in most countries.
Most nations have institutionalized a system known as fractional reserve banking under which
banks hoed liquid assets equal to only a portion of their current liabilities. In addition to other
regulation intended to ensure liquidity, banks are generally subject to minimum capital
requirement based on an international set of capital standards, known as the Basel Accords.
The word bank is derived from Italian word Banco which means to exchange money by sitting
on bench. Here, Banco donates bench. Thus, the same word Banco was letter pronounced as
bank. Previously Italian goldsmith used to performance the monetary transaction sitting on the
bench. So “Banco” word was used to donate to monetary transaction. Due to wider and changing
roles and function of bank as per time and situations, it is difficult to give the concrete definition
of bank. Some of the definitions are as follows.
A bank collects money from those who from have it to spare or who are saving it out of their
income and it lends this money to those who requires it.
Bank is the one who, in the ordinary course of his business, receive money which he plays by
honoring cheque of persons from whom or who’s account receive. In the preliminary stage, bank
were involved in limited activities but with the passage of time, the sectors to be contributed
increased. Due to this, bank also started serving in different sectors. According to their
involvement and the activities they carry, banks are classified into different types. The following
are the main types of bank operating in Nepal:
1) Central Bank
2) Commercial Bank
3) Development Bank
According to Commercial Bank Act 2031B.S “Commercial Banks are those banks which are
established under this act to perform commercial function except those which are established for
specific purpose like development banks, co-operative etc.” In the banking history of Nepal,
Nepal Bank is the first commercial bank which established in kartik 30 1994 B.S., under the
Nepal Bank Act 1994. Currently, there 28 commercial bank, 59 development bank, 40 finance
company and 45 micro finance development bank are operating in Nepal.
Credit Management is the system, which helps to complete the every job effectively. Credit
management is also system, which helps to manage credit effectively. In other words, credit
management refers management of credit exposure arising from loans, corporate bonds and
credit derivatives. Credit exposure is the main source of investment in commercial banks and
return on such investment is supported to be main source of income. Credit management is a

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term used to identify accounting functions usually conducted under the umbrella of Accounts
Receivables. Essentially, this collection of processes involves qualifying the extension of credit
to a customer, monitors the reception and logging of payments on outstanding invoices, the
initiation of collection procedures, and the resolution of disputes or queries regarding charges on
a customer invoice. When functioning efficiently, credit management serves as an excellent way
for the business to remain financially stable. A function performed within a company to improve
and control credit policies that will lead to increased revenues and lower risk including
increasing collections, reducing credit costs, extending more credit to creditworthy customers,
and developing competitive credit terms.
Credit management means the total process of lending starting from inquiring potential
borrowers up to recovering the amount granted. In the sense of banking sector, credit
management is concerned with activities such as accepting application, loan appraisal, loan
approval, monitoring, recovery of non-performing loans, etc. According to Hettihewa (1997),
Credit Management is extremely important as granting credit is considered to be the equivalent
of investing in a customer.
Introduction of Organization under study
Nepal Bank Limited (NBL)
Nepal Bank Limited, The first bank of Nepal was established in November 15, 1937 A.D
(Kartik, 30, 1994). It was formed under the principle of Joint venture (Joint venture between
govt. & general public). NBL's authorized capital was Rs. 10 million & issued capital Rs. 2.5
million of which paid-up capital was Rs. 842 thousand with 10 shareholders. The bank has been
providing banking through its branch offices in the different geographical locations of the
country.
Corporate Vision:
"Pioneer Bank with customer service excellence"
MissionStatement: BEST
 Building trusted and united customer relationship
 Ensuring superior quality customer service
 Service access to all
 Technology driven SMART banking service
Core Values:
 Honesty, transparency, integrity and ethics
 Respect to customers and respect to fellow associates
 Learning and knowledge sharing
 Teamwork, ownership and accountability
 Contribute to society and environment

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Objectives:
Nepal Bank Limited has the following objectives:
 the
 Focus on building the positive net worth and meeting minimum capital requirement over
the coming five years.
 Focus on increasing the customer base and market share.
 Maximize the potential/efficiency of bank's staff.
 Focus on minimizing the risk associated with the business.
 Focus on providing the world class business solutions.
 Focus on increasing the sustainable profit.
Shareholding Composition
S.N Ownership Percent
1 Government of Nepal 51
2 General Public 49
Total 100
NBL Network Overview
Province wise branches No of Branches
Province 1 30
Province 2 32
Province 3 48
Province 4 (Gandaki) 22
Province 5 28
Province 6 (Karnali) 8
Province 7 7
Total no of Branches* 175
No. of Staff: 2297 (As of Aug 17, 2019)
No. of computerized branches: 175
Branches under single computer network: 175(As of Nov 16, 2019)
Composition of Board Of Directors
The Board of Directors of Nepal Bank Limited is chaired by Mr. Basudev Adhikari,
representative from Ministry of Finance. 5 members are appointed by Ministry of Finance.
Headquarter: Dharmapath, Kathmandu, Nepal

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Area Served: Nepal
Products: Debit and Credit cards, consumer banking, corporate banking, Financial Service,
Investment banking, Mortgage loans, Private banking.
Website: www.nepalbank.com.np
Swift code: NEBLNPKA
1.2 Statement of the Problem
According to Shekhar (1985), credit plays an important role in the lives of many people and in
almost all industries that involve monetary investment in some form. Credit is mainly granted by
banks including to several other functions like mobilizing deposits, local and international
transfers, and currency exchange service.
Most major banking problems have been caused by weakness in credit management. Banks
should now have a keen awareness of the need to identify measure, monitor and control credit as
well as to determine that they hold adequate capital against it. These risk that they are adequately
compensated for risks incurred. So, to establish creditability position is major issue in
commercial banking sector during these days.
It is no debate that high profitable or successful organization can easily fulfill the ever need of
the organization, customer and serve the society. To improve the profitability situation of the
bank, it is necessary to establish the higher creditability position of the bank. Thus, the
creditability is major source and building better creditability position is the major strategy of
every commercial bank.
Credit is the most effective and sincere area of commercial bank. It is regarded as the heart of
every commercial bank. But the banking sector is far from this fact. Thus, Credit management is
considered as the heart issues in Nepalese commercial banking sector.
Credit management concept has appeared as major research gap in Nepalese commercial banking
sector. There is lack of such scientific and empirical research that could identify the issue of the
credit management in Nepalese commercial banks. In this regard, the performance of Nepalese
commercial banks is to be analyzed in terms of their credit. Some research questions regarding to
their to the credit practices credit efficiency, liquidity position, industrial environment,
management quality, organization climate, are considered as a clear evident in present situation.
Thus, the specific research question regarding credit management in Nepalese commercial
banking sector are identified as follows:
1. Is the credit practices adopted by selected commercial bank in good position?
2. What is the credit efficiency of the selected commercial banks?
3. Is the quality of management good in selected commercial banks?

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4. Is there any relationship between credit position and profitability situation?
5. How does commercial bank manage better creditability position?
1.3 Objectives of the Study
Basic objective of the present study is to explore the credit efficiency or inefficiency and its
management in commercial banks. It is also aimed to find out the relationship between credit
practices and profitability situation. Moreover, the study has specified the following objectives.
1. To assess credit practice of Nepal Bank Limited.
2. To explore the credit efficiency of Nepal Bank Limited.
3. To explore the relationship with loan and advance, non-performing loan and net profit of
Nepal Bank Limited.
1.4 Significance of the study
Commercial banking sector is considered as successful area in financial sector of Nepal. In
today's context, commercial banks have to be more organic and sincere to establish better
creditability position due vast competition among them. The present concept deals with how
commercial banks managed credit position and how it affects to the organization effectiveness.
Present study is very important from the point of view of bank management. The main strategy
of every commercial bank is to establish the better creditable position, which has directly
impacted the financial performance of an organization. Besides, it helps to build positive attitude
and perception of costumer that helps to make the organizational success in terms of better
transaction, better turnover, and better profitability most of the earlier researches were focused
on financial performance of bank but few research were focused on creditability position of the
present study is very important in viewing an organizational performance or position in terms of
creditability.
1.5 limitation of study
Although this study try its allmost care to cover most of the important sector, it is still subject to
the following limitations, which are as follows:
1. The scope of the study is limitation only in commercial banks because of time and resource
constraints.
2. This study is very basis attempt to address the research issue; therefore, it might not be able to
show causal linkage or effect.
3. The study is confined to only three commercial Bank, Nepal Bank Limited.
4. The study covers the period of three years only i.e. from 20014 to 20016

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5. In this study only selected financial and statistical tools and technique are used.
1.6 Organization of the Study
Chapter-1 Introduction
This chapter describes the basic concept and background of the study. It has served orientation
for readers to know about the basis information of the research area, various problems of the
study, objective of the study and need or significance of the study. It is oriented for readers for
reporting giving them the perspective they need to understand.
Chapter- 2 Review of Literature
The second chapter of the study assures readers that they are familiar with important research
that has been carried out in similar areas. It also establishes that the study as a link in a chain of
research that is development and emerging knowledge about concerned field.
Chapter- 3 Research Methodology
Research Methodology refers to the various sequential steps to be adopted by a research in
studying a problem with certain objectives in view. It describe about the several of data related
with study and various tools and technique employed for presenting the data.
Chapter-4 Presentation and Analysis of Data
Fourth chapter is concerned with analysis of financial indicator, analysis of mean,
Standard deviation, coefficient of variation, correlation coefficient, regression and
Finance analysis.
Chapter-5 Summary; conclusion and Recommendation
On the basis of the result from data analysis, the researcher concluded about of the concerned
organization in term of credit management. It also gives important suggestion to the concerned
organization for better improvement.

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2. LITERATURE REVIEW
2.1 Introduction
This chapter will cover theoretical review, empirical review related to the topic based on this
study and thesis made in this field by the previous research and expert to the topic. It provides an
additional knowledge and scope of the study to the reader.
2.2 Historical presentation of credit management
Edwards (2004), Gathering, analyzing and making decisions based on that knowledge is credit
management. Credit management is needed to control the risks associated with credit sales. Its
purpose is to manage both the financial and the political risks. Edwards says in his book that
everybody from the Chief Executive downwards should understand that: “Credit means trust and
trust has to be based on knowledge for it to have any real meaning.” The main advantage of
extending credit is that it will attract additional customers and increase sales volume. Many
companies feel that it is necessary for them to offer credit to their customers because they
wouldn't survive if they operated on a cash only basis. For example, customers might not buy
from them if required to pay cash. On the other hand, if customers are offered 30-day credit
terms they might make the purchase instantly. Even though selling on credit can increase sales, it
can also increase the costs in terms of bad debts and payment periods.
G.N. and A.E.1981, Basically, banks are in place not only to accept deposits but also to grant
credit facilities, hence they are exposed to credit risk. Credit risk is by far the most important risk
faced by banks and the accomplishment of their business depends on accurate measurement and
efficient management of this risk to a greater extent than any other risks.
Parajuli, S. (2003) in his dissertation "Credit management of joint venture banks” states that
concept of financial reform emerged since 1980s with economic liberalization. Nepal
Government and NRB published the economic and monitory Policy to support such reform. As
the result of these policies various jointed venture bank established in the private sector.
Shrestha. S, (2005) in his dissertation “Credit management with special reference to Nepal SBI
Bank ltd” illustrates that lending is one of the most important parts of function of a commercial
bank and composition of loan and advances directly affects the performance and profitability of
the bank. There is intense competition in banking business with limited market and less
investment opportunities available. Every bank is facing the problem of default loan and there is
always possibility of a certain portion of the loan and advances, profitability deposits position of
Nepal SBI Bank Limited is analyzed and its contribution in total profitability has been measured.

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3. RESEARCH METHODOLOGY
3.1 Introduction
This chapter discusses the methodological approach to which was used in the study. This
includes; study design, study population, sample size and sampling technique, data collection
and analysis.
3.2 Research Design
This study was carried out through a descriptive research design. A research design as the
scheme, outline or plan that is used to generate answers to research problems. The descriptive
method of research is to gather information about the present existing condition. The emphasis
was on describing rather than on judging or interpreting. The descriptive approach was quick and
practical in terms of the financial aspect.
3.3 Target Population
Target population is a universal set of study of all members of real or hypothetical set of people,
events or objects to which an investigator generalized the result. The target population will be 28
commercial banks of Nepal.
3.4 Sampling Design
Sample Frame
Sampling frame is an objective list of the population from which the researcher can make a
selection. Sampling frame should be a complete and correct list of populate. The sampling frame
for this study is a list so all head of credit related department of the concerned bank.
Sampling Technique
As a sampling technique random and purposive sampling will be used to select NBL from
among 28 commercial banks.
Sample Size
Sample size refers to the number of units or people that are chosen from which the researcher
wish to gather information or data. Since the population of this study was 28 banks of Nepal, The
sample size will constitute the head office of NBL and its branches as per requirement. Instead
the entire population was considered as the sample size because it was possible to collect data
from the whole population.
3.5 Data Collection
Data will be collected through the use of simple data collection forms which will administer to
the bank. Most of the data have been collected from secondary sources i.e. from the balance
sheets and P/L a/c of the company obtained from the head office. The questionnaires will be used

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to collect the needed information for the study. The researcher will also use personal interview
for primary data and important secondary data will be the major source of information which
will be taken from authorized site of concern bank.
3.6 Data Analysis
For the purpose of the study all collected primary as well as secondary data are arranged,
tabulated under various heads and them after disunities and statistical analysis have been carried
out to enlighten the study. Mainly financial methods are applied for the purpose of this study.
Appropriate statistical tools are also used. To make the study more specific and reliable, the
researcher uses two types of tool for analysis,
1. Financial method.
2. Statistical method
Analysis of data is the one of the major component for the accurate and true finding for research.
Researcher will take task as an important one and will be done very carefully. For the analysis of
the collected data some useful statistical tools like analysis of financial indicator, analysis of
mean, standard deviation, coefficient of variation, correlation coefficient, regression and finance
analysis.

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Bibliography
Christie, G.N., and Bracuti A.E, (1981); Credit Management, Credit Research Foundation Inc.,
New York.
Edwards (2004); Credit management: how to manage credit effectively and mana real, UK: Hope
Services (Abingdon) Ltd.
Hettihewa S. (1997); Introduction to Financial Management, Oxford University, Uk
Parajuli, S. (2003). Credit Management of Joint Venture Banks: An Unpublished Master Degree
Thesis, Central Department of Management, T.U.
Shekhar K.C. (1985); Banking Theory and Practices, New Delhi: Vikas Publishing house pvt.
Ltd.
Shrestha, S. (2005). Credit Management with Special Reference to Nepal SBI Bank
Limited. An Unpublished Master Degree Thesis, Central Department of Management,
T.U.