LBEF RESEARCH JOURNAL OF SCIENCE, TECHNOLOGY AND MANAGEMENT

Author(s):Shreeti Shrestha, Uday Kant Jha

Abstract:This study explores the Impact of Liquidity on Profitability in Foreign Joint Venture Commercial Bank in Nepal: with reference to HBL, EBL & NBB. 3 foreign joint venture commercial banks in Nepal; HBL, EBL and NBB are selected among 27 commercial banks of Nepal as a sample and analyzed for the current study over the period 2014/15 to 2018/19 AD. Analysis was based on data extracted from annual reports and accounts of the banks for the relevant period. Correlation and regression analysis respectively were employed to examine the nature and extent of the relationship between the variables and determine whether any cause and effect relationship between them. Since liquidity management can increase the bank’s profitability. the study has examined their liquidity management as well as profitability positions using various statistical and financial tools. The article indicates largely zigzag trend of average profitability of commercial banks, although the trend of liquidity ratios of the bank is unstable. The research concluded that bank’s liquidity ratios have below the prescribed standard. The study concluded that the LADR has significant impact in ROA as well as ROE of HBL, EBL and NBB. NRBTDR/CRR has weak significant impact on ROA of all sample banks whereas, it has negative impact ROE of NBB and have the positive impact on other two . CACL has significant effect on ROA of HBL and EBL whereas there is no significant impact on ROA due to CACL in NBB. Further, CACL has significant impact on ROE on all three banks. CHTDR has significant effect on ROA and ROE of HBL and EBL whereas NBB has weak significant impact on both the profitability index. CATA has significant effect on ROA in HBL, EBL and NBB. Similarly, CATA has significant effect on ROE whereas there is weak positive impact for EBL and NBB. The LADR has significant impact in ROA as well as ROE of HBL, EBL and NBB. However, the findings of this paper are based on a study conducted on the selected banks. Hence, the results are not generalizable to non-quoted banks. Secondly, the sample only comprises foreign joint venture commercial banks in Nepal. Therefore, the results are valid for this sector.

Keywords:Liquidity, Profitability, ROA, ROE, CATA, LADR, CHTDR, NRBTDR and CACL.