MBA-IV, Uniglobe College, Kathmandu, Nepal

1. 1
CHAPTER I
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Commercial banks are organizations which normally perform certain financial transactions.
They perform the twin task of accepting deposits from members of public and make advances
to needy and worthy people from the society. However, the natures of banks have changed as
the time has changed.
Commercial Banks play very important role in the economic life of the nation. The health of
the economy is closely related to the soundness of its banking system. Although banks create
no new wealth but their borrowing, lending and related activities facilitate the process of
production, distribution, exchange and consumption of wealth. In this way they become very
effective partners in the process of economic development. Today modern banks are very
useful for the utilization of the resources of the country. The banks are mobilizing the savings
of the people for the investment purposes. If there would be no banks then a great portion of a
capital of the country would remain idle. Importance of commercial banks has emerged
through their primary role in the acceptance of demand deposits that can be withdrawn by
checks by distributors at any time after the time of deposit. Banks are now the major buyers
of debt and other securities. Commercial banks play a dominant role in the money and capital
markets. Thus the importance of commercial banks has emerged as a prime component of the
financial system and has a large impact on the economy. Banks in addition to the official
reserves and to the assets related to monetary policy operations hold other investments in
financial instruments and in real estate. Investment portfolios include government bonds and
equities. Investment portfolios may include other international bonds and equities and equity
funds as well. The objectives of the investment portfolios are income generation and capital
preservation, considering the risks stemming from other asset and liabilities and those
associated with institutional activities. (Rose, P., 2003). This study is to assess the proceeds,
the scientific principles, and rules in the composition of investment portfolios of Nepalese
Banks.
The investment portfolio should be carefully analyzed so that the investment should ensure
minimum risk and maximum profit. So, commercial banks should incorporate several
elements such as regulatory environment, the availability of funds, the selection of risk,
investment portfolio balance term structure of the liabilities etc. Good management of
investment portfolios of the banks will improve their financial position, which in turn will
make it better able to serve our customers optimally, leading to increased productivity and
effectiveness of banking services and more able to keep up with economic development and
global competition.

2. 2
Hence the banks should never invest its funds in those securities, which are subject to too
much depreciation and fluctuations because a little difference may cause great loss. The bank
should accept that type of securities, which are commercial, durable, marketable, stable,
transferable, and high market price.
1.2 STATEMENT OF PROBLEM
Investment is made in present, which is certain, but reward from investment will be in future
and it is uncertain. Therefore investment is risky activity. There are various factors that affect
the investment decision. A bank has to consider various factors while making decision about
the investment. The main problem is to find out best combination of investment portfolio in
order to minimize risk that provides higher rewards. Therefore, the study will seek to answer
the following questions:
What is the relationship of investment with total deposit, loan and advances and total
profit?
What is the proportion of investment of different commercial banks?
How much risk commercial banks are facing while investing in different assets?
Which bank has higher investment in five years?
1.3 OBJECTIVES OF THE STUDY
The main objectives of this study are to analyze and examine the investment portfolio of
commercial banks. The specific objectives of this study are listed below:
To evaluate and analyze the variation in investment structure.
To analyze risk and return on investment portfolio of different commercial banks.
To analyze the relationship of investment with other variables like deposit, loan and
advance, net profit and size of the firm.
To find out the proportion of investment of commercial banks.
1.4 SIGNIFICANCE OF THE STUDY
Commercial banks have pivotal role in collection of dispersed small savings and transforming
them into meaningful capital investment. The success and prosperity of the banks relies
heavily upon the successful investment of collected resource to the productive sectors of
economy. Hence, the main significance of this study is to help how to minimize risk on
investment and maximize return through portfolio analysis. Similarly, the study of
commercial banks on investment trend, risk and return pattern, portfolio management, credit
management, structure change in deposit and in investment, effect on investment decision by
earning, the internal weakness of the banks and furnish the ideas of improvement. A few
studies have been made on the investment portfolio analysis of commercial banks. Most of
the studies made up to present are related to financial performance evaluation, capital
structure analysis, dividend policy, risk and return etc. only few students have been able to
study on this topic. So the present study will be of substantial importance for investors,

3. 3
planners, researchers, students, and policy makers to meet their personal and organizational
objectives by identifying the various weaknesses prevailing in the investment and provide
package of suggestions of its improvement, finally it contributes to the national economy by
means of institutional development. It is expected that this work will be helpful to decision
makers to maximize the values of their organization.
1.5 RESEARCH HYPOTHESIS
A hypothesis is a proposed explanation for a phenomenon. For a hypothesis to be a scientific
hypothesis, the scientific method requires that one can test it. The objective of setting the
hypothesis is to test the significant difference regarding the parameters of the populations on
the basis of samples drawn from the population. This test has been conducted on the various
relations related with the banking business. The following steps have been followed for the
test of hypothesis:
o Formulating Hypothesis (Null hypothesis and Alternative hypothesis)
o Computing the test static
o Fixing the level of significance
o Making decision
The following test of significance can be shown in this study:
H1: Investment is positively related to Size of the firm, Profitability and Deposits
H2: Investment is negatively related with Loan and advances
Defination of variables which are used in the model are as follows:
Dependent variable= Investment
Independent variable = Size of the firm, Profitability, Loan and advances and Deposits
1.6 LIMITATION OF THE STUDY
This study is made only for the partial fulfillment of the Master of Business Administration.
This study is based on well known or already estimated analytical methods. So, this study is
conclusion oriented. This study has various limitations. It does not concern much with
fundamental basic decision oriented research. The other limitations of the study are as
follows:
Only five commercial banks are selected.
The study covers only five years period.

4. 4
The validity and confidence of the data depends on their faith and trustworthiness of
the published data.
There are time and resources constraints.
1.7 ORGANIZATION OF THE STUDY
The study has been organized into five chapters. They are as follows:
Chapter I: This contains the introduction which includes background of the study, statement
of problem, importance of the study, research gap and limitation of the study which is already
mentioned.
Chapter II: It is devoted to theoretical analysis and brief review of related and pertinent
literature available. It includes a discussion on the conceptual framework and review of major
studies.
Chapter III: It describes the research methodology employed in the study. This chapter deals
with the nature and sources of data, list of the selected companies, the model of analysis,
meaning and definition of statistical tools.
Chapter IV: It deals with the presentation and analysis of secondary data to indicate
quantitative facts on investment portfolio of commercial banks. It consist different ratios and
presentation of result in suitable diagram and also multivariate analysis.
Chapter V: It includes summary, conclusion and recommendation of the study. This chapter
presents the major findings and compares them with theory and other empirical evidence to
the extent possible.

5. 5
CHAPTER II
REVIEW OF LITERATURE
Portfolio is the composite set of ownership rights to financial assets in which the investor
wishes to invest. Portfolios are thus, composed of securities and their expected return and risk
of their component securities. This chapter is considered to the review of major related
literature about the investment portfolio in more details and descriptive manner. It provides
the foundation for developing a comprehensive theoretical framework to the field of research
in order to explore the true facts for the reporting purpose.
2.1 CONCEPTUAL REVIEW
2.1.1 INVESTMENT PORTFOLIO
Investment is putting money into something with the expectation of gain, usually over a
longer term. This may or may not be backed by research and analysis. Most or all forms of
investment involve some form of risk, such as investment in equities, property, and even
fixed interest securities which are subject inflation risk.
Gitman and Joehnk, “ Investment is any vehicle into which funds can be placed with the
expectation that will preserve or increases in value and generated positive returns.”
J.K. Fancies, “An investment is a commitment of money that is expected to generate
additional money. Every investment entails some degree of risk, it requires a present certain
sacrifice for a future uncertain benefits.”
According to Weston & Brigham, “A portfolio simply represents practice among investor of
having their funds in more than one asset. The combination of investment asset is called a
portfolio”.
2.2 REVIEW OF LITERATURE
Markowitz had developed the portfolio basic model, he derived the expected rate of return for
a portfolio of assets and their expected risk measure. Makowitz showed that the variance of
the rate of return was a meaningful measure of portfolio risk under a reasonable set of
assumptions, this theory indicated the importance of diversifying the investments to reduce
the total risk of the portfolio.
Capital Market Theory extends the portfolio theory and developed a model for pricing all
risky assets in a “Capita Asset Pricing Model”, or (CAPM) which was developed by Sharpe
and Litner, this model will allow investors to determine the required rate of return for any

6. 6
risky assets. The importance of this theory is how it explains and helps investors and analysts
predict behaviour in the real world but not on the assumptions postulated.
The CAPM requires large number of assumptions, including those initially made by Harry
Markowitz. The Stephen A. Rose developed alternative theory which is called Arbitrage
Pricing Theory (APT). The name arbitrage pricing theory arises from the assumptions that
investor will arbitrage away any differences in the expected return on assets that have the
same risks. The basic assumptions of APT are not that investors are meant variance
maximizes but rather that returns are affected by systematic factors and the return on any
assets over time is called the return generating process.
The study of Edward J. Kane and Stephen A. Buser‟s in title” portfolio diversification at
commercial banks” deals how a firm perform a useful function by holding a portfolio of
efficiently price securities. According to them, it is rational for a firm to engage in prior
round of asset diversification on behalf of its shareholder‟s even when all assets are priced
efficiently and available for direct purchase by shareholders.
Portfolio Management Process: Process of managing an investment portfolio never stops.
Once funds are initially invested according to the plan, work in monitoring and updating the
status of the portfolio and investor needs begins. Following are the steps for portfolio
management process:
1. Policy statement construction: usually focuses on investor‟s short-term and long-term
needs, familiarity with capital market history, and expectations.
2. Investment Strategy: To examine current and projected financial, economic, political, and
social conditions; it focuses on short-term and intermediate-term expected conditions to use
in constructing a specific portfolio
3. Construct the portfolio according to the plan; it focuses on investors needs at minimum risk
levels.
4. Feedback and continual monitoring: to monitor and update investor‟s needs, environmental
conditions, and evaluate portfolio performance. (Reily, K. and Brown, K2003)
2.3 RESEARCH GAP
Makowitz showed that the variance of the rate of return was a meaningful measure of
portfolio risk under a reasonable set of assumptions; this theory indicated the importance of
diversifying the investments to reduce the total risk of the portfolio. CAPM which was
developed by Sharpe and Litner, this model will allow investors to determine the required
rate of return for any risky assets. Most of the researcher has done research on investment
portfolio but they are mainly concern with the rate of return but they don‟t measure the
relationship between investment and other variables. So this study will find out the real
relationship between the investment with deposit, profitability, loan and advance and size of
the bank.

7. 7
CHAPTER III
METHODOLOGY
3.1 METHODOLOGY OF STUDY
Research methodology is the plan, structure and strategy of investigations conceived to
answer the research question or test the research hypothesis and to control variance. Research
methodology refers to the various sequential steps to adopt by a researcher in studying a
problem with certain objective in view. It describes the methods and process applied in the
entire subject of the study. It is the way to study systematically about the research problem.
In order to complete the report various methods will be applied. The data will be collected
from secondary sources. Most of the information will be gathered through the use of annual
report of selected commercial banks. In the same way other secondary information will be
collected from brochures, newspapers, published documents, bank‟s website and other
various websites. It includes research design, sample size and selection process, data
collection procedure and data processing techniques and tools.
3.2 RESEARCH DESIGN
The research design includes specification of the method of the purposed study and detailed
play for carrying out the study with various empirical data for the analysis of the problem. A
research design is the arrangement of condition for collection and analysis of data in a
manner that aims to combine reference to the research purpose with economy in procedure.
The research design is followed to analyze the loan and investment portfolio of commercial
banks. It is an integrated system that guides the researcher in formulating, implementing &
controlling the study conceived so as to obtain answers to research questions & to control
variance. Both analytical & descriptive methods have been used to attain the overall
objectives.
3.3 POPULATION AND SAMPLE
Population refers to all items that have been chosen for the study. Population may be definite
or infinite. A small portion chosen from the population for studying its properties is called
sample. A sample is the representative of the population. Under the study of investment
portfolio analysis of Nepalese commercial banks, the total no. of commercial banks including
domestic and joint venture banks operating in the Nepal is the population. At present there
are 32 commercial banks running in Nepal which is the population size. Out of them, the
selected sample banks for the analysis in this study are as follows:
Table:3.1 : Selected sample banks
S.N Name of Banks Observations
1 Global Bank Ltd. 5
2 Kumari Bank Ltd. 5

8. 8
3 Nepal Investment Bank Ltd. 5
4 Nepal SBI Bank Ltd. 5
5 Standard Charter Bank Nepal Ltd. 5
Total observations 25
This report considers only five commercial banks of Nepal as sample for study purpose out of
32 banks which is 15.62%. This study consist 3 joint venture banks and 2 private domestic
owned banks. It is shown as follows:
Population Size = 32
Sample Size = 5
Sample Percentage = 15.62%
3.4 NATURE AND SOURCES OF DATA COLLECTION
This study is mainly depends on the use of secondary data that consists of annual reports of
the concerned bank. However besides the annual reports various other sources of data have
also been used for the purpose of the study. The main source of secondary data comprises
annual reports of concerned banks, related journals, newspapers, Internet, official publication,
related studies and thesis etc.
3.5 DATA COLLECTION PROCEDURE
The relevant data will be collected visiting the concerned banks, Nepal Stock Exchange and
Security Board of Nepal. The review of related study was based on textbooks, official
publications, various journals etc.
3.6 METHODS OF ANALYSIS AND PRESENTATION
The collected data during the fieldwork is classified into different categories as per their
nature and the purpose of the study. Later, they are thoroughly analyzed. The category of data
was about to be descriptive cum analytical. The relevant data are presented in tabular form
and their relationship will be shown in diagram. The data will be analyzed comparing them.
3.7 MODEL SPECIFICATION:
Regression models involve the following variables:
The unknown parameters, denoted as β, which may represent a scalar or a vector.
The independent variables, X.
The dependent variable, Y.
In various fields of application, different terminologies are used in place of dependent and
independent variables.

9. 9
For the study of investment portfolio also researcher has formulate a regression model. The
model helps to know the relationship between the dependent variable and independent
variables. The model set for the study is as follows:
Model 1:
Inv= a + β1 X1 + β2 X2 + β3X3 + β4X4 + ei
Where,
a = Constant variable
Inv = Log of Investment amount
X1= Log of Deposit
X2 = Log of net profit)
X3= Log of Loan and Advances (loan)
X4 = Log of Size of bank (total assets)
This can be shown as follows:
3.8 DATA ANALYSIS TOOLS
In order to make the study more reliable and authentic, statistical tools and financial tool are
used which are believed to make the analysis more convenience.
Statistical Tools
There are various statistical tools have been used to carry out this study. In this study the
following statistical tools are used to analyzed proportion of investment of sample
commercial banks. This analysis comprises the following tools:
Investment
Amount
Deposit
Net profit
Loan and
Advance
Size of the firm
Dependent Variable Independent Variables

10. 10
a. Mean
The arithmetic mean is the "standard" average, often simply called the "mean". The
sum of the entire observations is divided by the number of observation is called mean.
Mean(X) =
Where,
X= Sum of all values of the variable „X‟
N= Number of observations
X= Variables involved
b. Standard Deviation (S.D)
Standard deviation measures the absolute dispersion. A small standard deviation
means a high degree of uniformity of the observation as well as homogeneity of a
series and large standard deviation means just the opposite.
c. Coefficient of variation (C.V)
The coefficient of variation is the relative measure of dispersion. The greater the value
of coefficient of variation, less will be the uniformity or consistency and vice versa.
C.V is defined as the ratio of the standard deviation to the mean expressed in percent.
C.V =
Financial Tool
The financial tool used in the study is as follows:
Proportion of investment =

11. 11
CHAPTER IV
DATA ANALYSIS AND FINDING
This is the most important section of the research study. In this chapter data and information
collected from different sources are classified, tabulated, analyzed and interpreted following
the research methodology described in the third chapter. To achieve the objective of the
research study collected data and information are presented and analyzed comparatively. The
primary purpose of this chapter is to analyze and evaluate the major financial and statistical
items which are directly related to the investment portfolio.
Under this chapter various statistical tools are used which are related to analyze the
investment portfolio of the selected commercial banks. The statistical tools used in this
chapter are mean, standard deviation and coefficient of variation.
4.1 ANALYSIS OF INVESTMENT
Table: 4.1 Proportion of Investment in percentage
FY Global Kumari Nepal SBI NIBL SCB
2006/07 11.01 14.08 19.13 23.58 47.39
2007/08 14.37 14.23 17.97 17.68 41.71
2008/09 12.83 8.15 42.97 13.96 49.86
2009/10 13.20 11.19 42.86 15.07 49.36
S 2010/11 16.67 17.24 41.03 12.72 39.39
Mean 13.61 12.98 32.79 16.60 45.54
S.D 2.09 3.45 13.03 4.31 4.72
C.V 15.3319 26.5475 39.7339 25.9513 10.3646
The above table shows the percentage of investment proportion of sample commercial banks.
It shows five years proportion of investment. In average, SCB has the highest proportion of
investment, which is 45.54%. Likewise, Kumari Bank has the lowest proportion of
investment among five commercial banks. Likewise average percent of proportion of
investment of Global bank, Nepal SBI bank and NIBL are 13.61%, 32.79% and 16.60%
respectively.
In case of coefficient of variation, Nepal SBI Bank has 39.73%, which indicates that there is
high variability or there is no consistency in investment. Likewise, the SCB has the lowest
CV, which is 10.36% among the five commercial banks. The lowest CV indicates that there
is low variability on investment. The CV of Global, Kumari and NIBL are 15.33%, 26.54%
and 25.95% respectively. The S.D of Nepal SBI is high which is 13.03 which shows that

12. 12
there is high risk of investment and the lowest is 2.09 of global bank. In the same way S.D of
Kumari, NIBL and SCB is 26.54%, 25.95% and 4.72% respectively.
Figure 4.1: Proportion of Investment (Mean)
The diagram shows that in average SCB has high proportion of investment and Kumari has
lowest average proportion of investment which is 12.98%. In the same way average percent
of proportion of investment of Global bank, Nepal SBI bank and NIBL are 13.61%, 32.79%
and 16.60% respectively.
Figure: 4.2: Proportion of Investment (Standard Deviation)
The S.D of Nepal SBI is high i.e. 13.03% which shows that there is high risk of investment
and the lowest is 2.09% of global bank. Likewise, S.D of Kumari, NIBL and SCB is 26.54%,
25.95% and 4.72% respectively.
13.61% 12.98%
32.79%
16.60%
45.54%
Global Kumari Nepal SBI NIBL SCB
Proportion of Investment
0
2
4
6
8
10
12
14
Global Kumari Nepal SBI NIBL SCB
Proportion of Investment (Standard Deviation)
Proportion of Investment
(Standard Deviation)

13. 13
4.2 MULTIVARIATE ANALYSIS
Multivariate analysis (MVA) is based on the statistical principle of multivariate statistics,
which involves observation and analysis of more than one statistical outcome variable at a
time. In design and analysis, the technique is used to perform trade studies across multiple
dimensions while taking into account the effects of all variables on the responses of interest.
In statistics, the coefficient of determination, denoted R2
, is used in the context of statistical
models whose main purpose is the prediction of future outcomes on the basis of other related
information. R2
is most often seen as a number between 0 and 1, used to describe how well a
regression line fits a set of data. An R2
near 1 indicates that a regression line fits the data well,
while an R2
close to 0 indicates a regression line does not fit the data very well.
Adjusted R2
is used to compensate for the addition of variables to the model. As more
independent variables are added to the regression model, unadjusted R2
will generally
increase but there will never be a decrease. This will occur even when the additional
variables do little to help explain the dependent variable. To compensate for this, adjusted
R2
is corrected for the number of independent variables in the model. The result is an
adjusted R2
than can go up or down depending on whether the addition of another variable
adds or does not add to the explanatory power of the model. Adjusted R2
will always be
lower than unadjusted.
The results of the ANOVA are presented in an ANOVA table. This table contains columns
labeled "Source", "SS or Sum of Squares", "df - for degrees of freedom", "MS - for mean
square", "F or F-ratio", and "p, prob, probability, sig., or sig. of F". The t-test tells us if the
variation between two groups is "significant". In general, the purpose of analysis of variance
(ANOVA) is to test for significant differences between means. Generally the level of
significant is taken “1%”, “5%” and, “10%”.
TABLE 4.2: SUMMARY OF MODEL 1 WITH INVESTMENT DEPENDENT VARIABLE
Model Summary
Model R R Square Adjusted R
Square
Std. Error of
the Estimate
1 .985a
.970 .964 .08896
a. Predictors: (Constant), Deposits, Profit, loan, Size
In the above table dependent variable is investment amount and independent variables used in
the model are deposits, profitability, loan and advance and size of the firm. The table shows
that the adjusted R square is 96.4%. The regression result from adjusted R square indicates
that 96.4% of the variation in Investment is determined by this independent variable. This
shows that dependent variable (Investment) is 96.4% explained by the independent variables

14. 14
used in the model and rests are explained by other variables. Standard error of 0.08 shows
that the coefficient estimate is reliable or that it has a small variability, which means that the
trend is strong.
ANOVAa
Model Sum of
Squares
df Mean Square F Sig.
1
Regression 5.083 4 1.271 160.583 .000b
Residual .158 20 .008
Total 5.242 24
a. Dependent Variable: Investment
b. Predictors: (Constant), Deposits, Profit, loan, Size
In the above ANOVA table it is clear that 25 observations are used in the model and
dependent variable is investment amount and independent variables are deposits, profitability,
loan and advance and size of the firm. Also the f-static is significant at the level of 1 percent
which means that the independent variable is able to explain the dependent variable.
Therefore, from the overall model which is determined by the F-statistic probability zero
leading to the rejection of the null and indicates that the overall model is significant at the
level of 1%.
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) -1.298 .782 -1.660 .113
Size 2.420 1.639 1.511 1.477 .155
Profit .016 .026 .041 .612 .547
loan -1.924 .190 -1.072 -10.143 .000
Deposits .521 1.529 .332 .341 .737
a. Dependent Variable: Investment
The above table shows that Size has positive relation with the dependent variable and
indicates statistically insignificant. This indicates that when the size of the firm is large then
the investment of that firm will be more than that of small size firm. In the same way
Profitability has the positive relation with the investment but it is also statistically
insignificant. The loan and advances has the negative relation with the investment which
states that when there is high loan and advances then the firm will low investment as there is
inverse relationship. It is statistically significant at the level of 1%. Deposit has the positive
relationship with the investment which indicates that as deposits increases the investment
amount get increases and is statistically insignificant.

15. 15
CHAPTER V
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY
Bank is an institution whose main function is to accept deposit and invest it. Bank collects
money from public by providing attractive sound interest and can earn profit by lending it on
mainly in business organization, industrial, agricultural sectors etc. So, we can say the main
task of commercial bank is to mobilize idle resources in productive areas by collecting it
from scattered sources and generating profit. Banking plays significant role in the economic
development of country. Banks role as intermediaries channeling between saving and
investment and fulfill the credit needs of customer as well as investment requirement of
savers. It is clear that efficient and stable banking systems are crucial for an orderly economic
growth. The pace development of country largely depends on the level of financial
development.
In the context of Nepal commercial banks are the only financial institutions, which can play
very important role in the resource mobilization for the economic development in the
country. Commercial bank occupies greater role in the economic development by generating
the saving towards the desired sectors from one place to another, communicating with its
branches and agencies in different parts of the country.
A portfolio simply represents practice among investor of having their funds in more than one
asset. The combination of investment asset is called a portfolio. The investment portfolio
should be carefully analyzed so that the investment should ensure minimum risk and
maximum profit. So, commercial banks should incorporate several elements such as
regulatory environment, the availability of funds, the selection of risk, investment portfolio
balance term structure of the liabilities etc.
Some major findings of the study are as follows:
Standard Charter Bank has the high proportion of investment than other commercial
banks and Kumari Bank Ltd has the lower investment proportion.
Nepal SBI Bank has high variation in investment and Standard Charter Bank has
lower variation.
The ANOVA table shows that overall model is significant.
There is positive relationship of Investment with Size of the firm, Net profit and
Deposit but statistically insignificant.
There is negative relation of investment with Loan and advance and is statistically
significant.

16. 16
5.2CONCLUSION
Commercial Banks play very important role in the economic life of the nation. Commercial
Bank has played important role in developing the economy of the nation. The performance of
the bank leads to the improvement of the national economy. The health of the economy is
closely related to the soundness of its banking system. Although banks create no new wealth
but their borrowing, lending and related activities facilitate the process of production,
distribution, exchange and consumption of wealth. Good management of investment
portfolios of the banks will improve their financial position, which in turn will make it better
able to serve our customers optimally, leading to increased productivity and effectiveness of
banking services and more able to keep up with economic development and global
competition. Proper portfolio management helps to improve the financial position of the
bank.
Standard Charter Bank has high proportion of investment than other banks. In the same way
SCB has less variation in investment than other banks. Nepal SBI bank has high variation in
terms of investment. There is positive relationship of Investment with Size of the firm, Net
profit and Deposit but statistically insignificant. Size of the firm has positive relation with the
dependent variable and indicates statistically insignificant. This indicates that when the size
of the firm is large then the investment of that firm will be more. In the same way
Profitability has the positive relation with the investment but it is also statistically
insignificant. There is negative relation of investment with Loan and advance and is
statistically significant. It states that when the loan and advances increase then the investment
will be decreases. Deposit has the positive relationship with the investment which indicates
that as deposits increases the investment amount get increases and is statistically
insignificant.
5.3 RECOMMENDATION
The investment portfolio should be carefully analyzed so that the investment should ensure
minimum risk and maximum profit. Commercial banks play a dominant role in the money
and capital markets. Thus the importance of commercial banks has emerged as a prime
component of the financial system and has a large impact on the economy. Banks in addition
to the official reserves and to the assets related to monetary policy operations hold other
investments in financial instruments and in real estate.
The commercial banks must have clear investment policy on different securities. SCB must
maintain variation in investment which is less than other banks. It is recommended that Nepal
SBI bank must control its variation which is very high than other banks. Commercial banks
must increase its net profit and deposit in order to increase its investment. Investment is
directly related to the deposit, size of the firm and net profit, thus commercial bank must
focus to increase these items in order to increase the investment of the bank.