CHAPTER: ONE

INTRODUCTION
1.1Back ground of the study:
From the very beginning money is the most important factor for the people. Money is that
instrument that enables people to have optimum satisfaction or utility. So because of this later
people felt for the security of their money and they found the bank as a right place. The word
bank is derived from the Italian word “banco” which means a bench for keeping lending and
exchanging of money or coins in the market place by money lenders and money chargers.
Regarding the origin of bank in the world, the first bank names as the bank of Venice, was
established in Venice of Italy i9n 1157 A.D. Following this, “The Bank of Barcelona, Spain,
established in 1401 A.D was the second Bank of the world. And the first central bank which
was established in1844 A.S was “The Bank of England”.

Bank can be simply defined as an institution that deals with the transaction of money and
credit. In modern concept, it is the financial intermediary between the depositors and the
credit seekers.

“According to the Cambridge International Dictionary of English has defined the bank as “An
organization where people and business can invest or borrow money, change it to foreign
money, etc. or a building where these services are offered”.

Now simply what we can say is bank is that institution which not only deals with the
monetary transactions but also with exchanging cheques, bills of exchanges, etc. Besides these
modern banking also provides banking services like remittance of money, issue of money,
bank guarantee and lots more. Therefore, we can say bank is that type of financial institution
which provides all modern banking facilities to the general people and also which accepts
savings from the general people by providing some rate of interest and loans it to the needy
ones by charging certain rate of interest.

1.2 Banking History of Nepal

In our country, the modern banking service provided by the banks is a recent development,
but from the historical evidence we can find out that the banking services are provided to the
people from the very beginning. The persons as the groups considered as the contributors for
the development of banks were named as King Guan Kam Dev, the business group
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“Tankadharies” of Kantipur and also a government financial institution, established by Rana
Prime Minister Ranodip Singh, named as “Tejarath”. The establishment of “Tejarath Adda”
was the first step towards the development of banking institution in Nepal.

Tejarath, which was established in Kathmandu by the government sector, is provided its
services only to the civil servants. Civil servants were able to general public the need of
commercial banks.

The first commercial bank named as Nepal bank was established in 1994 B.S. The central
bank of Nepal, “Nepal Rastra Bank” was established in 2013 BS in order to perform all the
functions of central bank. Following the Nepal Bank Ltd the second state owned commercial
bank was “Rastriya Banijya Bank” which was established in 2022 BS. Later agriculture bank,
NIDC was gradually established.

After some years, the government followed the liberal policy and in the year 2040 BS the
government of Nepal approved The Joint Venture Banks to operate in Nepal. As a result many
joint venture banks are already established and are providing their services to the people of
Nepal. “Nepal Arab Bank” is the first joint venture bank established in Nepal during 2040 BS.
After that the banks established are Nepal Indosuez Bank Ltd and Nepal Grindlays Bank,
which is now named as Standard Chartered Bank in 2042 BS and 2043 BS respectively. In the
year 2049 BS, Himalayan Bank was established and in the year 2051 BS, Nepal Bangladesh
Bank Ltd, Everest Bank Ltd, and The Bank of Kathmandu was established. Up to now many
joint venture banks are established.

1.3 Concept of Commercial Bank

The ordinary meaning of bank is commercial bank. Commercial are those banks that pool
together the saving of the community and arrange for their productive use. They supply the
financial needs of modern business by various means. It borrows from one set of people and
lends to hiring money and hiring out again. Some banks draw their capital mainly from their
shareholder, others mainly from depositors. Some lend mainly to industry, other mainly to
government, central and local. Some deal in short loans, borrowings and lending for shot
periods, other deal in long periods. But however the business of individual bank may differ,
their essential function is to gather saving together and lend out what they collect.

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“A bank is business organizations that receives and hold deposits of funds others and makes
loans or extends credits and transfer funds by written order of depositors.”

“A commercial banker is a dealer in money and substitutes for money, such as cheque or bill
of exchange. He also provides a variety of financial services.”

The primary economic function of the commercial bank is to hold demand deposits and to
honor cheque drawn upon them. In short, to provide us, the economies, with the most
important component of the money supply. Commercial bank plays an important role in
directing affairs of the economy in various ways. The operations of commercial banks record
the economic pulse of the economy. The size and composition of their transaction mirror the
economic happening in the country. For instance the mass failure of commercial banks during
1980’s reflected the phenomenon of several global depressions in the world.

Commercial banks have played a vital role in giving direction financing the requirements of
trade and industry in the country. In a planned economy, bank make the entire planned
productive process possible by providing funds for all types of production incorporated in the
plan, regardless of whether the production is in the public sector, joint sector or in the private
sector or whether the production in undertaken by one type of organization or another. They
endeavor to promote enterprise development by investing in shares and debentures. Therefore,
they support the country’s overall economic development process by financing in various
ways. In the Nepalese context, the Nepal Commercial Bank Act 2031 B.S defines a
commercial bank as one, which exchanges money, deposits money, accepts deposits, grants
loans and performs commercial banking functions.

1.4 Functions of Commercial Banks

Banks are financial service firms, producing and selling the professional and prudent
management of the public’s funds as well as performing many other roles in the economy.
The functions can be highlighted as follows:

a) Creating money:
One of the major functions of commercial banks that differentiate them from other institutions
is their ability to create money through the lending and investing activities. The power of the
commercial banking system to create money is of great economic significance as it helps to
create elastic credit system that is necessary for the economic progress.
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b) Payment mechanism:

Payment mechanism is a part and parcel of commercial banks, which makes uses of cheques
and credit cards facilitating safe and efficient transactions.

c) Savings:

Commercial banks provide an outlet of saving set aside by the public out of current income by
offering financial assets with attractive rates of return. Time and saving deposits of
commercial banks represent more than half of all thrift held out depository institution.

d) Extension of credit:
Another function of the commercial bank is the extension of credit to worthy borrowers.
Bank lending contributes a lot to the economy in terms of financing Agricultural, commercial
and industrial activities of the nation. It provides essential services for certain business
customers involved in international trade and finance.

e) Safe keeping of valuables:

Safe keeping of valuables is one of the oldest services being rendered by commercial banks.
They provide locker facilities to their clients to keep valuable documents, ornaments,
important papers etc. Since joint venture banks are commercial in nature, they are accepted as
a form of commercial banks.
At last, but not the least due to the changes in the global economy sometimes changes should
be made in the rules and regulations of the banks. So the study also helps the government to
change the rules according to the need and requirement of the economy.

1.5 Introduction of Lumbini Bank:

A commercial bank is financial institution which provides credit or loan facility to industrial
and commercial business. Commercial banking business consists of changing cash in to bank
deposit into cash, transferring bank deposit from one person or institution to other giving bank
deposit in exchanging for cheque, bills of exchange, and government securities.

There are so many types of commercial bank in our country, among them Lumbini Bank Ltd
is one which exchange money, deposit money ,accepts money grants loan and performs
commercial banking functions and which is not bank meant for co-operative, agriculture,
industry or for specific purpose. Lumbini bank Ltd established in 1998 A.D.
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1.5.1 Functions of Lumbini Bank Limited
Commercial banks are the financial institutions which collect the scattered savings of the
individuals and utilize them by investing them into productive areas. The basic functions of
the commercial banks as we know are accepting deposits as current, saving and fixed,
providing long term and short term loans, services in remittance of money, letter of credit, and
acting as an agent for valued customers, providing safety locker services.

Among the various commercial banks operating in the country, Lumbini bank is one of them
so as a commercial bank it also accepts deposits as Saving, Current and Fixed. Besides these
Lumbini Bank also accepts deposits as Call-deposits from it customers. The Lumbini Bank
provides short and long term loans by taking debentures, government development bonds,
shares, and valuables as collateral. Besides short and long term loans Lumbini Bank also
provides various other types of loans.

Lumbini Bank also provides its services to its valued customer by acting as their agent. As the
agent of the customer it makes payment of salary, dividend, bonus, rent etc. it also provides it
services in remittance of money and also in transfer of money through Credit Card, Traveler’s
Cheque, Draft, etc. Apart from the above functions Lumbini Bank also provides its services of
safety locket to its customers so that the customers can able to keep their valuables in that
locker. Lumbini Bank also renders its services in providing Letter Of Credit and in issue of
Guarantee Letter to its customers.

1.5.2 Deposits of Lumbini Bank Limited

Deposits are the source of income for the bank or we can say that the main source of raising
capital by the bank is through the deposits. The bank can create deposits by depositing their
savings in the bank whereas the bank creates deposits by providing loans and by crediting the
customer’s account. Generally the commercial bank accepts deposits are current, saving and
fixed.

The main function of the commercial bank is to receive deposits from the individual save who
cannot utilize their saving and loans it to the investors for the proper utilization of the
deposits. From the collected deposits bank makes profit by lending them to the investor. But
the volume of the fund that the management will use for creating income through loans
largely depends upon the bank’s lending policy.

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In the book, “An Outline of the Money” written by Crowther, the commercial bank is
defined as the institution which receives the savings from the people in different accounts by
paying certain rate of interest. Therefore, commercial banks draw surplus money from the
people who do not use it at the time and lend it to those who are in the position to use it for
productive purpose.

The general types of deposit accepted by all commercial banks including Lumbini Bank are
saving, current and fixed. Besides these deposits Lumbini Bank accepts other types of
deposits also thus, the deposits accepted by the Lumbini Bank are as follows:

1. Saving deposits
Saving deposits is the most popular one among the general people. The main aim of the
saving account is to encourage and mobilize small savings of the general people. In this
account, deposits can be withdrawal at any time. But the amount can be withdrawal with the
limitation. Though in some banks there are no such limitations. In Lumbini Bank, the prior
formal notice of 7 to 30 days is required in order to withdraw the amounts that exceeds Rs
50,000/- or if the whole deposit is to be withdrawal within a week. The interest provided by
the bank for saving deposit is low in comparison with fixed deposits. The Lumbini Bank
provides interest at a rate of 2.50% in saving accounts to its customers.

2. Current Deposits
This is the most popular deposit between the businessman and the business houses. Since the
deposits can be withdrawn up to any amount at any time on demand this deposit is also known
as Demand Deposit. There is no time restriction for withdrawal of deposits. So the bank does
not provide any interest on it. Rather the depositors have to pay some charges to the bank for
providing such services. Such type of deposit is generally mobilized for short-term loans.

3. Fixed Deposits
Fixed deposits are made for the fixed period of time. The amount is deposited in the account
for the fixed period of time and can’t be withdrawal before the maturity period. The rate of
interest provided by the bank is comparatively higher than the other type of account and the
rate of interest also differs relating to the duration of the amount deposited in the account. For
opening an account as fixed in Lumbini Bank minimum of Rs. 50,000/- is to be deposited.

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4. Call Deposits
Commercial bank maintains various types of accounts in order to collect deposits. Call deposit
account is one of them. This is an account, which is generally meant for the corporate bodies
who do not want to deposit their money in fixed account due to the withdrawal problem and
who cannot open the saving account. This type of account is similar to the current in which
any amount can be withdrawal and at the same time interest is also paid on decided amount
depending upon the duration of amount deposited in the account.

1.5.3 Meaning and Concept of Fixed Deposits:

Fixed deposit also known as Time deposit. Since, amount is deposited for the fixed period of
time the deposited amount cannot be withdrawn before the maturity period. Due to the nature
of fixed deposited amount the rate of interest provided by the bank is higher in compared to
saving and current account. But the rate of interest will vary according to the time. If the
deposited amount is required before the maturity period the bank will provide up to 90% of
amount as a loan charging some sort of interest.

In order to open the fixed deposit account, the customer has to fill the application. If the
application is accepted by the bank, the customer will get the fixed deposit receipt. In case of
Lumbini Bank also, the amount cannot be withdrawn before the maturity period. But in case
of necessity 90% of loan is provided from the bank charging some interest against the security
of fixed deposit receipts. The interest rate provided by the Nepal Lumbini Bank is 1.75.00%
for 14 days, 2.25% for 1 month, 2.5% for 3 months, 2.75% for 6 months, 3.25% for 1 year and
above and 4% for structured Deposit greater 1 year.

1.5.4 Role and importance of fixed deposits:

The fixed deposit account plays a very important role to every commercial bank. Through
fixed deposit account bank will be able to earn maximum profit by investing them into various
profitable areas. Since, in fixed deposit account, the amount is deposited by the customer for
the fixed period of time, the bank will be able to invest them without risk of the withdrawal of
that amount. Because of this the bank will be able to provide higher rate of interest to
customers in fixed deposit than in current and saving account. This allows bank to provide
loans to the industries and other financial institutions for long term through which the bank
will be able to maximize its profit, which helps to develop it.

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1.5.5 Procedures of Opening and Closing of Fixed Deposit Accounts in Lumbini Bank
a) Procedures of Opening of Fixed deposit account:
In order to open the fixed deposit account in Lumbini Bank, the depositor must have either
current or saving account. Without having this customers cannot open the fixed deposit
account. This is because that the interest gained on fixed deposit account will be transferred to
the saving or current account. Thus, there are some procedures, which the depositor must be
fulfilled in order to open fixed deposit account, which are as follows.

1. First of all the depositors have to fill the application firm providing the necessary
information.
2. The applicant should clearly mention the name, address, occupation and Citizenship
while filling the application firm.
3. Besides the general information the applicant should also mention the amount and the
duration up to which the amount should be deposited.
4. To open the fixed deposit account the minimum amount is fixed i.e. Rs. 50,500/- is
necessary.
5. To open the account in the minor’s name, the name of the guardian, A/C number of
the guardian, signature of the guardian should also be mentioned in the application
firm.
6. The applicant should also provide the necessary documents to the bank along with the
application firm. But the documents to be presented may vary depending upon the
type of customers.
7. The depositors must mention the name, address, and relation of the intended person
who is going to receive the entire amount along with the interest after his own
existence.
8. After the related authority gives the permission to open the account, the applicant will
get the deposit receipt.

b) Closing Procedure of Fixed Deposit Account:

The fixed deposit account will be closed automatically once the deposit period matures. The
bank credits interest at the timely basis and the principle at the expiry of the fixed deposit in
account holders saving or current account. Thus, the contract will be rescind as well as the
relationship between the bank and the customer will cease along with the completion of due

8
date. However, the account holder can renew his account for the next fixed period of time. If
he/she wants to continue his/her fixed deposit account. In case, if the depositor dies before the
due date, then the account in his/her name will be closed after providing all the sum of interest
and principle to the account holders’ nominee.

c) Fixed Deposit Receipts:

It is a type of certificate provided by the bank after the amount is deposited in the fixed
amount. Like in saving and current account, the bank does not provide the cheque book and
pass book to the account holder due to the nature of non- operative account. So, the bank
provides the deposit receipts to the fixed deposit account holders to certify that the person has
an account in the concern bank. This receipt includes the account no. amount, duration and
interest rate. This receipt is very important in order to claim the amount after the maturity
period.

This fixed deposit receipt helps in getting loan as being utilized as a pledge. Bank provides
90% of fixed deposit as a loan if the depositor wants to withdraw the amount before the
maturity period. After providing this facility, the bank charges some sort of interest from the
depositor. Bank does not take any interest or does not make any specific queries on which
project the loan is going to be used if fixed deposit receipts suppose to be secured pledge, is
mortgage for the loan.

1.5.6 Documents Required For Opening the Fixed Deposit Accounts:

1. In case of Individuals: Individuals need to submit application, specimen card,
identification like copy of citizenship, passport, driving license etc.
2. In case of sole proprietor: The sole proprietor should submit income tax certificate,
firm registration certificate, specimen cards along with the application card.
3. In case of partnerships: The documents that should be submitted by the partnership
firm are similarly to the sole proprietor. The additional documents that should be
submitted by the partnership firm are partnership deed.
4. In case of corporate houses: Along with the application form, the corporate houses
should submit memorandum of association, articles of association, income tax
certificate, board resolution, firm registration certificate etc.

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1.5.7 Characteristic of Fixed Deposit Account:

 Fixed deposit account is opened for the fixed period of time. The duration of deposit
period may be 14 days, 1 month, 3 months, 6 months, 1 year, and 1 to 2years and
above 2 years.
 The interest rate provided by the bank in fixed deposit account varies depending upon
the duration.
 The bank provides interest on fixed deposit in every 3 months.
 The interest rate on fixed deposit account remains the same until the deposit period
expires.
 The fixed deposit amount cannot be withdrawn before the maturity period.

1.5.8 Board of Directors of Lumbini Bank:

Chairman
Mr. Prakash Shrestha

Director Director Director

Mr. Kishor Malla Mr. Subarna Lal Malla Mr.Sushil Kumar Aryal

Director Director Direcor

Mr. Madanlal Joshi
Mr. Ramkaji Kone Mr. Uttamdas Shrestha Ahemed

Director Director Mr.

Shobhandev Panta
Mr. Dibyanidhi bista

1.6 Objective of the Study:

The main objective of study is to fulfill the partial requirement of T.U to complete B.B.S
program. Other objective is to provide services to the people and business in the country. The
major activities include deposit collection, lending loan to commercial as well as productive
sectors, Foreign exchange, business remittance, merchant banking, tale banking, bill of
exchange, letter of credit etc. It has twelve branches including corporate office it has also
started facilities of providing in Indian Embassy.

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For credit management it has established a separate NPA cell. All members of board of
directors and all the employees are under code of ethics director by Nepal Rastra Bank.

The main purpose of the study is to find out the financial position of Lumbini Bank Ltd in
resources collecting and mobilization. The objectives of the study are as follows:

 To examine the total deposit and the proportion of the fixed deposit
 To analyze the trend of fixed deposits.
 To examine the procedures and policies relating to fixed deposits of Lumbini Bank.

1.7 Research Methodology:

For providing us the basic ideas for preparing report writing we have an orientation class.
From that orientation class we came to know about the ideas and way to prepare the report.
Our college also provides us the recommendation letter in order to present to the concerned
officials of the bank of which we are going to prepare the report. After getting the permission
to commence the study in concerned institution, we are provided by the necessary information
and the relevant data from the staffs. Then , after making detailed analysis and study of the
data collected from the bank and with the help of other information’s this report is prepared
which is computer typed and printed to make it presentable.

1.7.1 Methods of Data Collection:

As we know that primary and se3condary data are used in order to make any types of reports.
Primary data are those data, which are collected fro the first time for some specific purpose. In
contrary with primary data re previously collected data and are not collected for the first time.
Primary data is the source of secondary data and are generally obtained from public or private
sources. Since the secondary data is not the first hand data, it may not fulfill the requirement
of the research. This report is based on both primary and secondary data.

In order to make the report I asked the various questions to the staffs and on the basis of the
answer I obtained from them I prepared this report. Likewise I collected the secondary data
from the Annual Report Of The Lumbini Bank, Concerned Department, Bulletins, Articles,
Newspapers and Journals.

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1.8 Limitations of the study:

This study was carried out in a very specific time frame. As expected it was not possible to get
that much of detail information from the organizations which were selected, even though
information was gathered as much as possible. As a result of that, the repost has been come
out in this shape. About a week was spent to analyze the information and writing the report.

Due to time constraints, the study was done only within an organization and also could not
compare with other financial institutions regarding their deposit pattern. Mainly separate
information on individual and party’s deposit in bank could not be achieved. As a
consequence of that separate analysis based on sex, level of deposit and currency has not been
possible as because of the strategy of confidentiality taken by the bank. All the information is
based on secondary data received from the bank. So each analysis and findings are based on
their information.

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 CHAPTER: TWO
DATA PRESENTATION AND ANALYSIS
The most important tool to evaluate the actual position of any organization is by analyzing its
past and present data. Proper analysis of data helps to find out the strength and weakness of an
organization. Since, the report is based on the study of Fixed deposit, this part of report
focuses on presentation and analysis of data related to the current fixed deposit as well as the
total deposits of Lumbini Bank.

2.1 Sources of Fund of Lumbini Bank Limited:

The Lumbini Bank generates its capital fund from various sources like share capital, reserves,
retained earnings, deposits etc. among various sources deposit collected from different types
of accounts i.e. total deposit covers the major portion in generating capital fund.

Table: 1
Sources of capital fund

Source of capital fund This year 2012 Previous Year 2013

1. Share Capital 491,654,400 491,654,400
2. Reserve Funds 990,027,903 822,533,056
3. Borrowings 229,660,000 961,153
4. Deposits 14,119,032,115 13,447,661,064
5. Bills Payable 173,499,287 108,943,551
6. Other Liabilities 741,612,933 730,371,768
Total 16,745,486,638 16,562,624,992

The table shows the source of fund of Lumbini Bank Limited during the final year 2012. As
said earlier from the table we can find out that the major sources of generating capital fund by
the LumbiniBank is through the deposits. The bank collects Rs 14,119,032,115 of total fund
through deposit. And since, the deposits are the main source of fund. It can refer as the
lifeblood of bank.

2.2 Total deposits of Lumbini Bank:

Before analyzing the fixed deposit trend of the bank, it is important to and better to know
about the trend of total deposit first. The following table shows the total deposit position of
Nepal Arab bank during the fiscal year from 2012 AD to 2013AD.

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 Table No: 2
Total Deposit of Lumbini Bank (Head Office)
Financial Total Deposit Changes in Total Deposit
Year
Amt. (in million) In percentage
2009 AD 12779.6 - -
2010 AD 15839.1 3059.5 19.32%
2011 AD 15506.2 -332.9 -2.15%
2012 AD 13447.6 -2.058.6 -15.31%
2013 AD 14119.0 671.40 4.5%

The above table shows that the total deposit of Lumbini Bank is increasing up to year 2010.
There is decrement in total deposit in the year 2011 . The increment in total deposits in the
years 2010 in Rs 3059.5 in million but the decrement in total deposit in the year 2011 and
2012 are Rs -332.9 and Rs -2058.6 in millions respectively. In the same way there is
decrement in the year 2012 is Rs 345.5 in millions.

Again the increment in total deposit in 2013 is Rs 671.40 in millions. The table also shows
that the percentage change in total deposit is both by inclining and declining trend. The table
shows that there is increment in total deposit by 19.32% in the year 2010. This shows the
inclining trend. But, in the year 2011 and 2012 there is decrement in the total deposit by -
2.15% and -15.31% respectively. This shows the declining trend. 2013 There is increment in
the total deposit by 4.75%.
Figure No.2
Bar diagram of total deposit
18000
16000
14000
12000
Total Deposit 12779.6
10000
Changes in Total Deposit Amt.
8000 (in million) -
6000 Changes in Total Deposit In
percentage -
4000
2000
0
-2000 2010 AD 2011 AD 2012 AD 2013 AD

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2.3 Composites and Position of Total Deposits:
As said earlier, total deposit is the main source of fund for any bank. After analyzing the trend
of total deposit in various years, it is important to know about the composition of total
deposits. Because total deposit is the total amount collected from the various types of accounts
such as saving, current, fixed and others. It is important to know about the composition of
total deposit because various types of deposits are invested into various types of credits

For example, fixed deposit is the source of liquidity of capital as that deposit is retained by the
bank for the fixed period of time and those deposits are the vital component of the working
capital for mobilizing in investments, loans and advances.

The following table shows the composition and position of total deposit in different financial
year.

Table no.3
Composite of total deposit
Year Current Saving Fixed Margin Others Total Change In Deposit
Deposit Deposit Deposit Deposit
Amount Percentage

2009 2880.6 4150.1 5278.2 416.2 54.1 12779.5

2010 2850.9 4917.1 7667.5 296.2 107.1 15839 3059.5 19.32%

2011 2703.8 4972.0 2446.8 364.2 74.4 15506.5 -332.5 -2.15%

2012 3034.4 5229.7 2252.5 381.3 9.3 13447.6 -2058.6 -15.31%

2013 2689.0 5994.1 2310.6 304.8 19.3 144119.0 671.4 4.75%

In the above table we can see that the total deposit is increasing up to year 2010. There is
decrement in total deposit in the year 2011 and 2012. Again there is increment in total
deposits in the years 2013. The increment in total deposit in 2010 is Rs 3059.5 in millions but

15
the decrement in 2011 and 2012 are Rs. 332.5 and 2058.6 in millions respectively. Again, the
increment in total deposit in 2013 is Rs. 671.4 in millions.

The composition of fixed deposit in the years 2009, 2010, 2011, 2012 and 2013 are Rs.
5278.2, 7667.5, 2446.8, 2252.2 and 2310.6 in millions respectively. These compositions are
highest in comparison to the other comparison to the other components of total deposit, i.e.
current deposit, saving deposit, margin and others. The composition of fixed deposit in the
years 2012 and 2013 are Rs. 2252 and Rs. 2310.8 in millions these compositions are lowest in
comparison to other components of total deposit, i.e. current deposit and saving deposit.

Figure No: 3
Types of deposit

8000

7000

6000

5000
Current Deposit
4000
Saving Deposit
Fixed Deposit
3000

2000

1000

0
1 2 3 4 5

2.4 Rate of Interest on Fixed Deposit:

The Lumbini Bank is able to collect large sum of capital through fixed deposit. The bank
provides the favorable rate of interest in the amount deposited by the customers in the fixed
account.

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 Table no. 4
Rate of Interest on Fixed Deposit

Time Period Interest Rates/ Annum

14 days 1.75%
1 month 2.25%
3 months 2.50%
6 months 2.75%
1 year to above 3,25%
Structure deposit > 1 year 4.00%

2.5 Trend of Fixed deposit of Lumbini Bank:

As we said earlier fixed deposit refers as a major source of working capital. Lumbini Bank
also uses its funds collected through deposit in investing loans and advances and also in
making long-term investment. During the various financial years Lumbini Bank is able to
collect more and more fund through fixed deposit account but if we analyze the data of fixed
deposit of various financial years, we can find out the both increasing and decreasing trend in
collecting fixed deposit. The following table shows the amount collected by LumbiniBank
during the last five years both by Foreign and Local currency.

Table no. 5
Fixed deposit of Lumbini Bank
Year Fixed Deposit Total Fixed Change in Fixed Deposit
Deposit
Foreign Local Amount In Percentage
Currency Currency
(in million)

2009 1626.2 3651.9 5278.1

2010 2435.7 5231.8 7667.5 2389.4 31.16%
2011 887.4 1559.4 2446.8 -5220.7 -213.36%
2012 1036.6 1215.8 2252.4 -194.4 -8.6%
2013 1267.1 1043.5 2310.6 58.2 2.52%

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From the above table, we can find out that in the year 2010, the bank was able to collect Rs.
7667.5 million through total fixed deposit. In this year, there was an increase in fixed deposit
amount by Rs. 2389.4 million i.e. increase in fixed deposit of the bank in year 2010 by
31.16% Since, the bank accepts deposits both by foreign and local currency, the deposit
collected through foreign and local currency in the year 2011 was Rs 2435.7 million and Rs.
5231.8 million respectively.

But in the year 2003 and 2012, the bank was able to collect Rs.2446.8 and Rs.2252.4 million
through the total deposit. In the year 2011 and 2004 there were decrease in fixed deposit by
Rs. 5220.7 million and 194.4 million i.e. decrease in fixed deposit of the bank in 2011 and
2012 by 213.36% & 8.6% respectively. The deposit collected through foreign currency in the
year 2011 and 2012 was Rs. 887.4 & 1036.6 million respectively and through local currency
Rs. 1559.4 & Rs. 1215.8 million rupees respectively.

Again In the year 2013 the bank was able to collect Rs. 2310.6 million through total deposit
through foreign and local currency Rs. 1267.1 and Rs.1043.5 million that shows the increment
by 2.52.%.

From the above table, we can find out that the bank is able to collect more deposit in local
currency in the year 2009 to 2012. The proportion of local currency in total fixed deposit is
higher than the foreign currency. But in the year 2013 the bank is able to collect more deposit
in foreign currency. The proportion of local currency in total fixed deposit is lower than the
foreign currency.
Figure No: 4
Deposit in various currency
6000

5000

4000

3000 Fixed Deposit Foreign Currency

Fixed Deposit Local Currency
2000

1000

0
1 2 3 4 5

18
2.6 Composition of Fixed Deposit on Total Deposit
Like in other commercial banks, the fixed deposit of Lumbini Bank also covers the major
portion of total deposit collected from the depositors. Every bank will be in favorable
condition only when the fixed deposit covers the highest portion in total deposits. Because the
fixed deposit can be invested in different productive areas and the bank can able to generate
maximum profit.
Table no: 6

Composition of Fixed Deposit

Year Total Fixed deposit Total deposit % of FD on TD

2009 5278.1 12779.6 41.30%

2010 7667.5 15839.1 48.41%

2011 2446.8 15506.2 15.78%

2012 2252.4 13447.6 16.75%

2013 2310.6 14119.0 16.37%

The above table helps to know about the portion covered by the fixed deposit in total deposit
of Lumbini Bank during the various years. In the years, 2009, 2010, 2011, 2012, 2013 the
percentage covered by the fixed deposit were 41.30%, 48.41%, 15.785,16.75% and 16.37%
respectively.

Figure No: 5
contribution of fixed deposit in total deposit

19
 18000

16000

14000

12000

10000 Total Fixed deposit

8000 Total deposit
% of FD on TD
6000

4000

2000

0
1 2 3 4 5

Table No: 7 Interest on Deposits

2009 2010 2011 2012 2013

Fixed Deposit
Foreign Currency
664,456,660 106,577,373 29,799,179 12,967,426 13,672,291

Fixed Deposit Local

Currency
190,821,093 281,193,377 127,220,082 63,395,286 60,558,341

Saving Deposit 157,005,811 177,021,996 136,936,306 112,585,041 116,702,485

Total 414,283,564 564,792,746 293,955,567 188,947,753 190,963,122

The above table shows the interest provided by the bank during the various years. From the
above table, we are also able to know that the interest on fixed deposit is always higher than
the saving deposit. But due to the change in interest rate, the interest amount is not fixed in
both types of deposits. And the interest provided on fixed deposit collected in local currency
is higher than in amount collected in foreign currency. The table also shows us that the total
interest amount that should be paid by the bank is increasing every year.

2.7 Correlation showing the relationship between fixed Deposit and Total
Deposit Table no. 8 Co-relation analysis

20
Years Fixed Total
Deposit
Deposit X=(X-X) X2 Y=(Y-Y) Y2 XY
(Y)
(X)

2009 5278.2 12779.6 1107.12 1225714.7 -1558.74 2469670.39 -1725712.229

2010 7667.5 15839 3496.42 12224952.82 1500.66 2251980.44 5246937.637

2011 2446.8 15506.5 -1724.28 2973141.52 1168.16 1364597.79 -2014234.925

2012 2252.4 13447.6 -1918.68 3681332.94 -890.74 793417.75 1709045.023

2013 2310.5 14119 -1860.58 3461757.94 -219.34 48110.04 408099.6172

We know that

X = ∑X/N Y = ∑Y/N

Here, Here,

∑X = 20855.4 ∑Y=71691.7
N=5 N=5

Now, Y = 71691.7/5 Now, X = 20855.4/5

= 4171.08 = 14338.34

Using Pearson’s formula of coefficient

r = ∑xy / √ x * √ y

21
= 3624135.14 / √23566899.92 * √ 6887776.41

= 3624135.14 / 4854.58 * 2624.46

= 3624135.14 / 12740651.03

= 0.28

22
 CHAPTER: THREE
SUMMMARY, CONCLUSION & RECOMMENDATION

3.1 Summary
Lumbini Bank, the first joint venture commercial bank, has started its operation from 12 th July
1984 it was the subsidiary of Emirates Bank International Limited, Dubai consisting 50% of
the equity. Later on EBIL sold its shares to Bangladesh National Bank Ltd., Dhaka. It has a
matrix system of organizational management. Boards of directors are the main controlling
body, followed by executive director’s chief executive officer and so on.

The deposits collected from the customers’ savings are the main source of the bank. Lumbini
Bank has been successful in collecting equate deposits providing effective and reasonable
interest rate on them. The bank collects deposits in 3 main accounts i.e. Current A/c, Saving
A/c and Fixed A/c. Because of the higher interest rate, fixed deposit can be generalized as the
most popular A/c among the general peoples. During the course of study, it is found out that
the total deposit covers the major proportion of the bank’s capital fund. The proportion of
total deposit in the fiscal year 2012/2013 is 84.31%. The total deposit of the Lumbini Bank
shows both the increasing and decreasing trend during 2012 to 2013. Similarly, the fixed
deposit contribution of fixed deposit is higher in compare with other deposits.

Like in total deposits, the fixed deposit of Lumbini Bank have both increasing and decreasing
trend. The financial years 2010 shows the increasing trend in fixed deposit where as the
financial year 2011 and 2012 show the decreasing trend in fixed deposit again the financial
years 2013 show the increasing trend. The rate of interest provided in fixed deposit is based
on the duration of deposit period. Similarly, we get the deposit receipt as a proof of having the
fixed deposit A/c in the bank. This deposit receipt is a very important document as it should
be present to the bank in order to get the amount after the maturity period. Once the period
matures the bank credited the total amount i.e. principal and interests either to the saving or
current A/c of the depositor. So, in order to have a fixed deposit A/c the person must have
either saving or current A/c in the bank prior to this.

3.2 Conclusion
23
From the analysis of Lumbini fixed deposit data, we came to know that maximum percent of
total deposits is occupied by the fixed deposit, which is the interest bearing deposits and has
more interest rate than other deposits. This has me cost more and can adversely affect the
profitability of Lumbini Bank. This is a serious threat of Lumbini and the management should
look out for the solution.

There is a cut throat competition in the banking sector due to emergence of number of banks
and too many finance companies has been adversely effecting the acceptance of deposits. The
rival of commercial banks and upcoming finance company provides many facilities to deposit
holders and prompt service to the depositors. The management of Lumbini should not ignore
this. There is an increasing trend in fixed deposit of Lumbini Bank and decreasing trend as
well. The reason behind this is due to the recession period in the economy causing change in
rate of into.

3.3 Recommendation:

Lumbini Bank is doing pretty good business and it has improved in better way. I have drawn
some suggestions for Lumbini Bank in order to develop the performance in a better way.
Some of them are as follows:

 To compete with other banks, this bank has to cover wide market. For this the bank
should put its more effort to establish new branches at every convenient place.
 The bank should formulate policies keeping customers in mind as they are the valuable
assets of the bank.
 Deposit collected in foreign currency has not increased so significantly so the bank has
to do more effort to increase deposit in local currency.
 In this competitive banking industry, the bank should attract more depositors by
providing more and more improve new services and facilities.
 Lumbini Bank needs high amount to open the account. If the bank is able to minimize
this amount then there will be increase in the depositors.

24