DIVIDEND POLICY OF EVEREST BANK LIMITED

A Proposal work

By

Nazani Khatun

T.U. Regd. No.:7-2-446-136-2015

Kathmandu Model Collage

Balkumari, Lalitpur

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of requirement for the Degree of

BATCHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal

February, 2019
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CHAPTER I

INTORDUCTION

Background

Dividend policy is the set of guidelines a company uses to decide how much of its earnings
it will pay out to shareholder. Dividend policy is concerned with financial policies regarding
paying cash dividend in the present or paying an increased dividend at a later stage. Weather
to issue dividends, and what amount is determined mainly on the basis of the company’s
inappropriate profit (excess cash) and influenced by the company’s long-term earnings
power. When cash surplus exists and is not needed by the firm, then management is expected
or to repurchase the company’s stock through a share buyback program. In other words,
dividend policy is the determination of the proportion of profits paid out to the shareholders
and reinvestment in the enterprise usually and periodically.

Dividend policy is the sets of guidelines a company uses to declare how much of it’s earning it
will pay out to share holders. It is a very basis part of corporate finance, which bring ahead the
shareholders and also that one of group of shareholders with those of another.

The dividend policy has remained a continuous issue ever since the early stage of corporate
development, making it one of the unresolved puzzles in corporate finance theory. The payment
of divined despite adverse personal taxation in a puzzle with a long-standing tradition in finance.
Thakor (1989).

Today’s world is the world of global economy. Economy is the backbone of any country and
financial institutions. Banks are the major institutions that affect the economy of a country.

Being a finance student, we should be aware with current scenario of the bank and their
performance and as a part of it, I would like to prepare a report on the financial position of
Everest Bank .A bank is an institution, which deals in money, receiving it on deposit from
customers, honoring customer's drawing against such deposit on demand, collecting check for
customers and lending or investing surplus deposits until they are required for repayment.
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in the present days, various types of banks are established, for instance, industrial bank,
commercial bank, agriculture bank, joint-stock bank,

 Co-operative  Bank  and Development  Bank. Modern banks are more advanced than the ancient

ones. The Nepal Rastra Bank (NRB), as the central bank of Nepal, has sole responsibility for the
regulation and supervision of the banking system. Nepal Rastra Bank Act, 2002 provides the
legal mandate to the NRB to deal with problem banks and to initiate corrective and resolution
actions on problem banks in a timely manner.

With these experiences, there is a need to promulgate a new framework with an aim to manage
weak banks and financial institution in an objective, transparent and cost-effective manner so as
to ensure stability in the banking and financial system. The Problem Bank Resolution
Framework (PBRF) spells out detailed policies and procedures for identification of problem bank
and financial institutions, intervention efficiency of resolution within the existing legal and
regulatory framework that ensures prompt and effective resolution.

Profile of Everest Bank Limited

Catering to more than 10 lakhs customers, Everest Bank Limited (EBL) is a name we can depend
on for professionalized & efficient banking services. Founded in 1994, the Bank has been one
of the leading banks of the country and has been catering its services to various segments of the
society. With clients from all walks of life, the Bank has helped develop the nation corporately,
agriculturally & industrially.

Joint Venture Partner

Punjab National Bank (PNB), our joint venture partner (holding 20% equity) is one of the largest
nationalized bank in India having presence virtually in all important centers. Owing to its
performance during the year 2012-13, the Bank earned many laurels & accolades in recognition
to its service & overall performance. Recently, PNB was awarded with “IDRBT Banking
Technology Excellence Award” under Customer Management & Intelligence Initiatives. The
Bank also bagged “Golden Peacock Business Excellence Award 2013” by Institute of Directors.
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Similarly, the Bank was recognized as “Best Public Sector Bank” by CNBC TV 18. The bank
has now more than 7,000 branches and 8,500 ATMs spread all across India. As a joint-venture
partner, PNB has been providing top management support to EBL under Technical Service
Agreement.

Network

Everest Bank Limited (EBL) provides customer-friendly services through its wide Network
connected through ABBS system, which enables customers for operational transactions from any
branches. The bank has 92 Branches, 116 ATM Counters & 28 Revenue Collection
Counters across the country making it a very efficient and accessible bank for its customers,
anytime, anywhere.

Awards

 The bank has been conferred with the “Second Best Managed Commercial Bank” by
ASIAN PAINT NEWBIZ Award 2018.
 The bank has been conferred with the “Best Managed Commercial Bank” by ASIAN
PAINTNEWBIZ Award 2013.
 The bank adjudged as “Number 1 Bank” under CAMELS (along with Customer Base &
Branch Network) rating conducted by KAROBAR national daily (a leading business
media house of Nepal).
 The bank has been conferred with “Bank of the Year 2006, Nepal” by the Banker, a
publication of financial times, London.
 The bank was bestowed with the “NICCI Excellence award” by Nepal India chamber of
commerce for its spectacular performance under the finance sector.

(Source:www.everestbankltd.com/annual)
Objective

The objective of this field work, apart from requirement of BBS are covered the points
mentioned below:

 To estimate profit maximization of investor return.

  To analyze the dividend policy of EBL.

 To study the services provided in view of customer relation

 To study the view of management, employee and customer review

 To determine the most important factor of dividend payout policy in the banking sector.

 To investigate the relationship among dividend payout and its determinants which are:-

 Financial efficiency, safety, risk and profitability

Rationale

As we know that the main importance of commercial bank is maximization of profit and
minimization of costs as far as possible by the mobilization of reserve they have. Thus, the
importance from the requirement of BBS program, are covered under the point mentioned below.

 To explore the insight of a corporate event named “Dividend Policy” which drag a lot of
attention and results into drastic changes in the market valuation of the firm.

 To study the impact dividend on the price and volume before and after such divided is
announced.

 To check whether abnormality exists in the price and volume of the share as the dividend
is announced.

 To find out the room for leakage of any inside information about “dividend policy” of a
company.
Review

If we have to write an undergraduate dissertation, you may be required to begin by writing a

review. A review is a search and evaluation of the available review in our given subject or
chosen topic area. It documents the state of the art with respect to the subject or topic we are
writing about. After selecting the topic of the research, the research should study about
different journals, periodicals, newspapers published or unpublished bibliographies, books, etc.
to collect or gather the information about the selected topic of research. This process of studying
different educational materials is known as review of the literature.

Literature review plays a significant role in facilitating other steps of the research process. The
information collected about the earlier studies, if any ways are similar to the study in hand
should be provided by reviewing of literature.

A review has some main objectives which mentioned below:

 It surveys the literature in your chosen area of study.

 It synthesizes the information in that literature into a summary.
 It critically analyses the information gathered by identifying gaps in current knowledge;
by showing limitations of theories and points of view; and by formulating areas for
further research and reviewing areas of controversy.
 It presents the literature in an organized way.
 Demonstrates a familiarity with a body of knowledge and establishes the credibility of
your work.
 Demonstrates that you have learnt from others and that your research is a starting point
for new ideas.

A review shows our readers that we have an in-depth grasp of our subject; and that we
understand where our own research fits into and adds to an existing body of agreed knowledge.

Review from Previous Work

Dividend policy is the sets of guidelines a company uses to declare how much of it’s earning it
will pay out to share holders. It is a very basis part of corporate finance, which bring ahead the
shareholders and also that one of group of shareholders with those of another.

The dividend policy has remained a continuous issue ever since the early stage of corporate
development, making it one of the unresolved puzzles in corporate finance theory. The payment
of divined despite adverse personal taxation in a puzzle with a long-standing tradition in finance.
Thakor (1989).

Today’s world is the world of global economy. Economy is the backbone of any country and
financial institutions. Banks are the major institutions that affect the economy of a country.

Research

It is the heart of the project that provides the work plan and describes the activities undertaken
for the completion of project. This project uses both financial and staticals tool for detail
analyses on the project and it includes:-

a) Research design 

b) Data collection procedure

c) Data analysis tools

Research Design

Research design is a master plan specifying the methods

and procedures for collecting and analyzing the needed information. This serves as a framework
for the study, guiding the collection and analysis of data, the research instruments to be utilized,
and the sampling plan to be followed. Here, this study is concerned on deposit mix of Everest
Bank Limited. For the study, descriptive and analytical research methodology is used. Those
methodologies involve gathering data that describes events and then organizes, tabulates, depicts
and describes the data collection that reduce the data to manageable form.
Data collection Procedure

 No matter what the basic design of a research study, it is necessary to collect accurate data to
achieve useful results. For this reason, it is helpful to consider various sources of collecting data
and the quality of information they produce. So, two sources of data collection techniques have
been used them are:-
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Primary data:

Primary data is original data collected for the first time. I have used primary
sources i.e. interviews, questionnaires and observation to collect the primary data on EBL.

Secondary data:

Secondary data refers to the data that has been already gathered by others. I have used secondary
sources i.e.books,periodicals ,published reports, data services through which data were collected.
Besides them data were collected from Publication of NEPSE, financial statements of EBL and
annual reports which were collected from Everest Bank’s website, NEPSE and from SEBO.
However, the data mostly used while preparing the project report are secondary in nature and
they are collected through internet surfing. (www.ebl.np.com)

Limitation:

As every research has its own limitation, this study is not biased. The findings of this study are
subject to various limitation and may not be applicable in the area other than one study. Some of
the major short coming of this project work report are mentioned below:
 The project work report will carried out only for partial fulfillment of the requirement of
BBS 4th year under faculty of management.
 The study will be based on secondary data.
 There will be no comparative study with other commercial bank.
 The study will be only focuses on the dividend management system.
 The data will based on only five years fiscal year.