Internship Report On Nepal Investment Bank Limited, Nepal (NIBL) Chapter One
Internship Report On Nepal Investment Bank Limited, Nepal (NIBL) Chapter One
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CHAPTER ONE
INTRODUCTION
1.1 Background
Tribhuvan University is the largest and oldest university in Nepal. It is the pioneer university in
providing management education and since its establishment it has been providing the excellent
education to the students. It provides a wide range of streams in the educational sector among
which management education holds a major position. It introduced the BBA program in the year
2001/02 with an objective of producing middle-level managerial professionals. Bachelor in
Business Administration (BBA) is the undergraduate level program of Tribhuvan University
(T.U.). It is a four-year course with 120 credit hours comprehensive bachelor degree program.
The program is committed to imparting the students with practical knowledge.
The BBA program has incorporated eight weeks internship program with a view to
developing students’ skill in object-oriented business management, capable of understanding and
solving real life business related problems. So, being the student of BBA in Shanker Dev
Campus the intern selected Nepal Investment Bank Limited and got involved in 2 months
internship program. During the period of internship, internee got the chance to learn many
practical kinds of stuff of the banking sector. As the topic is about the Credit Analysis of Nepal
Investment Bank Limited, this project report is basically focused on the services provided, the
structure of credit department and procedures of granting the loan in NIBL.
• To understand the corporate work culture and get adjusted in it.
• To present the understanding of banking organization and its working procedures.
• To observe the general banking procedure and workflow of Credit Department of NIBL.
• To understand and present the differences in classroom studies and real work life.
• To fulfill the partial requirement of the BBA eighth semester of Faculty of Management,
Tribhuvan University.
1.3 Methodology
Completion of the internship is a combination of the different types of activities. It starts from
the selection of the organization for the internship, performance of different kinds of activities
and placement in different parts of the organization and at last collection of various primary and
secondary data for the preparation of the report. In terms of data collection, both primary as well
as the secondary source had been used.
1.3.2 Placement
Intern was placed in NIBL, Durbarmarg, and Head Office. During the internship period, the
intern was placed in customer service department, credit department, clearing, and remittance.
Every staff of Head Office, NIBL was supportive and friendly. The supportive and friendly
environment in the organization helped the intern to complete the internship period through the
proper guidance of the staffs of various departments. Through their proper guidance, the intern
was able to learn more about the organization culture, work environment, and work procedures.
Clearing
Remittance
Credit
CHAPTER TWO
Bank can be defined as the financial intermediary between depositors and entrepreneurs. The
intermediation takes place when banks accept deposits from the general public, corporate bodies,
and private organizations and deploys those deposits for profitable purpose in the form of loans
and advances. Bank is financial service institution, therefore in between this intermediation, the
bank gets some earning.
By this definition, the bank can easily be defined as the custodian of deposits. The
transactions in the financial market heavily depend upon the banking system of the country.
Without the bank, it would be quite impossible for the industrialist and entrepreneurs to go
directly to the general public for getting their savings or investments. So the simplest definition
is that bank takes the saving of public by providing them with certain rates of interest and loan it
to needy customers charging them the certain rate of interest and earns some profit. This is the
broadest form of banking but in this age banking is such big term. It does a lot more than
deposits and credits, remitting of money, letter of credit etc.
As a public enterprise banking made its forced beginning around the middle of the 12th century
in Italy and the Bank of Venice founded in 1157 was the first public banking institution.
Following it were the bank of Barcelona and the Bank of Genoa in 1401 and 1407 respectively.
The latter two continued to operate until the 18th century. With the expansion of commercial
activities in northern Europe, there sprang up a number of private banking houses in Europe.
And slowly it spread throughout the world.
Our oldest bank is Nepal Bank Ltd. established in 1994 BS. 30th Kartik. After that, so
many banks were established. Nepal Rastra Bank was established in the year 2012 as a central
bank of the country. Rastriya Banijya Bank, another commercial bank was established in 2022.
Only after 2041 B.S, Nepal government allowed joint venture banks to operate in the country. At
present, the banking sector is more liberalized and there are various types of the bank working in
the modern banking system. This includes central, commercial, and development banks.
• Development Bank
Development banks are established for the development of the economy. Nepal industrial
development corporation (NIDC) was established in 1956, with the objective of providing
medium-term loans for the establishment, development and modernization of private sector
industries. Small industry Development Corporation was established in 1960 to provide loans to
small-scale industries and it was merged to NIDC in 1971.
Commercial Bank Act 2031 states- “A commercial bank is the bank which exchanges money,
accepts deposits, grant loans, and perform banking function.”
According to S.2A, of Commercial Bank Act 1974 AD-“Commercial banks are the heart
of the economic system.They hold deposits of millions of people, government and business unit.
It exchange money, accepts the deposit, grant loan and operates commercial
transactions.”
2.7 Functions of Commercial Banks
The main function of the commercial bank simply is ‘to borrow to lend’. Besides, there are other
functions which have been developed according to need of the society as-
• Accepting deposits
• Advancing loans
• Discounting bills of exchange
• Transfer of money
• Miscellaneous functions
Banks are gradually shifting towards the IT-based solution to enhance service delivery in
order to address customer concerns. Most banks are embracing E-banking and provision of
ATMs to reduce long queue in the banking hall. In addition, some banks have launched mobile
phone banking services which facilities several account query tools, including account balances,
thereby minimizing the need for customers to visit banks. This drive towards the IT-based
solution will continue to gather momentum in the future as banks will find it very difficult to
survive in the ever growing competition without some form of competitive advantages.
Another trend observed nowadays is large corporate houses explore the shift towards
multiple banking relationships. In order to remain competitive, banks are seen to be increasingly
encouraging business houses to transact with them. This has led to the creation of the large
volume of unutilized limits with the bank and in order to get a large piece of the pie banks are
increasingly accepting risks, which they otherwise would not have taken. The unyielding
competition has also led the banks to accept collaterals that are more risky and unsecured. The
volume of loan against the hypothecation of stock, receivable and other assets are on the rise. In
the absence of hypothecation in the current assets, the risk of over financing is eminent and
banks are exposed to the higher degree of risk.
A total number of commercial banks and their date of the establishment are presented in
Annex I.
CHAPTER THREE
INTRODUCTION OF THE ORGANIZATION
The name of the bank subsequently changed to Nepal Investment Bank Ltd. upon
approval of bank’s annual general meeting. NIBL is managed by the team of experienced
bankers and professional having proven track record. So, it can offer customers what they are
looking for. The choice of the bank will be guided among others by its reliability and
professionalism. The fact of professionalism is reflected by the fact that the Banker of London-
based Financial Times Group has awarded NIBL with “THE BANK OF THE YEAR 2003”.
Besides, NIBL won the same award in the year 2005, 2008 and 2010 as well. NIBL was selected
for this honor amongst the Nepali banks for meeting the benchmark criteria set by The Banker.
The award is based on growth and performance of capital, assets, and return on equity and
management quality. The prestigious award is the first occasion that a 100% Nepali managed
bank has won. The reliability of the bank is reflected by its operation in the field. It is established
to provide the banking service in different parts of the country. Customer satisfaction is the
paramount driver at NIBL.NIBL provides 365 days banking services.
3.1.1 Vision
“To be the most preferred provider of Financial Services in Nepal”
NIBL is committed to doing this mission while ensuring the highest levels of ethical
standards, professional integrity, corporate governance and regulatory compliance.
• Quality
They believe that the quality service experience is paramount to their customer and are strongly
committed to fulfilling this ideal.
• Teamwork
NIBL is a firm believer in teamwork and feels that loyal and motivated teams can produce
extraordinary results. They are driven by a performance culture when recognition and rewards
are based on individual merit and demonstrated a track record.
The organization structure of NIBL consists of Chairman at the topmost position followed
by CED who is directly accountable to the Chairman. There are three Deputy General Managers
in NIBL holding the responsibility of Corporate Banking, Retail Banking and IT, Card,
Remittance and Product Development Department. They delegate responsibility to Assistant
General Managers who are also three in number at different branches of NIBL.AGM again
delegate authority to Department Heads and the hierarchy follows to branch manager to officers
to assistants.
The above pie chart shows the ownership structure of NIBL. The organized institution
holds the highest percentage of shares, i.e. 50%, Rastriya Banijya Bank and Rastriya Beema
Sansthan hold equal division of shares, i.e. 15% each and general public hold 20% of the total
share capital.
The total share capital structure of NIBL comprises of Rs. 3,011,372,125 with an
authorized capital of Rs. 4,000,000,000. The following table shows it in descriptive format:
Calls in Advance -
The above table shows the amount of different form of capital as at July 16, 2011, with the
total share capital of Npr. 3,011,372,125 and no calls in advance. Total paid up capital is Npr.
2,409,097,700 with proposed bonus shares of Npr. 602,274,425.
3.4 Review of Bank’s Financial Performance
The following table shows the financial performance of NIBL in three past years from FY
2008/09 to FY 2009/10.
Table 3.2: Review of Bank’s Financial Performance
Source: Annual Report of NIBL 2010/11
The above table shows the bank’s financial status in past three years. Despite various
adversities, the Bank achieved a marginal growth in total assets (+1.83 %), deposits (+0.08 %),
loans & advances (+2.29 %) and operating profit (+1.43 %). There has been some increase in
loan-loss provisions this year due to which net profit of NPR 1.17 billion recorded a negative
growth of NPR 89 million (-7.0 %) against last year’s net profit of NPR 1.26 billion. The
increase in loan-loss provisioning and decline in net profit has led to increasing in NPA ratio and
the decline in return on paid-up capital and return on shareholders’ fund ratios. Our market share
in deposit and lending has declined slightly due to the entrance of new players in the market.
NIBL, however, is still a dominant player and leader in the market.
Diagrammatical presentation of financial performance of NIBL in past three years is given
below
Fig 3.3: Review of Bank’s Financial Performance
The above bar diagram represents the major indicators of the bank’s financial performance in
terms of million rupees. Total assets and deposits seem to increase every year whereas loans and
advances, total investments and net profit has increased in the FY 2009/10 as compared to FY
2008/09, but again decreased in FY 2010/11 compared to previous year.
1. Deposits
Visa electron debit card @ NPR 250.00 per annum, valid in Nepal and India
Free e-Banking facility
Free ABBS within Kathmandu valley
No maintenance charge
• Keta Keti Bachat Khata
This is an a/c specially designed for the children. This a/c offers 3% interest p.a. on daily
balance. This a/c doesn’t require any minimum balance. The features of this a/c are as follows:
Visa electron debit card @ NPR 250.00 per annum, valid in Nepal and India
Discount Privilege card
Free e-Banking facility-pay school fees online
ABBS facility
No maintenance charge
Free birthday cake for the account holder (minor)
NPR 100 contribution from the bank as soon as the account is opened.
Fixed Deposit
Prime (%) Others (%)
Source: nibl.com.np
The above table shows the interest rate offered by NIBL in a fixed deposit account with
varying duration of deposit.
c. Current Account
Current A/C also termed as the Demand Deposit is maintained by the customers who requires the
money frequently. The balance in this A/C is nonproductive for the bank since, it cannot be
utilized. So, the bank does not provide interest in this A/C. Current a/c in NIBL is mostly
maintained by business enterprises. The minimum balance to be maintained in this a/c is Rs.5,
000.
2. Credits
A contractual agreement which a borrower receives something of value now and agrees to repay
the lenders at some later date. Any time when an individual finances something with a loan (such
as an automobile or a house), they are using credit in that situation. The various loan provided by
NIBL are as follows:
• Tenure:
Maximum of 5 years
The loan shall be terminated on /or before 60 years of age of the borrower.
• Repayment: Equal Monthly Installments (EMI)
• Fees and charges:
Management fee: 1% of loan amount
Documentation Fee: NPR 2,000.00 flat
Prepayment Fee: 1% of pre-paid amount
CIB Charge: NPR 750.00 per page
At present, the bank has 67 ATM locations provided to its customers in different parts of the
country. Moreover, to further extend its reach and for the convenience of its customer it is
planning to install new ATMs too. Thus, the bank enjoys an impeccable reputation of a lending
financial institution in the country.
3. S - Strengths
• Experienced and high performing executives.
• Use of advanced information technology system.
• Commitment from employees and loyal customers.
• Centrally located the head office and branches and ATMs all over Nepal.
• Good reputation in the market.
4. W - Weaknesses
5. O - Opportunities
• Current liquidity problem drive depositors to deposit money in older and established A class
bank like NIBL.
• The increasing trend of Nepalese people moving abroad for employment which brings an
increase in remittance business.
• Developing trend of information technology business in Nepal which brings an increase in
trade finance business.
6. T - Threats
• Economic recession
• Growing competition
• Political instability
• Entry of some new banks with greater competencies in the market. eg Mega Bank, Janata
Bank, and Citizen Bank.
The Corporate bank lends a helping hand to its clients for new business or willing to
build / expand the existing ones and it focuses on building and maintaining diversified branch
portfolios. NIBL has a diversified sector wise lending like agriculture and forestry, mining,
manufacturing, beverage, construction, electricity, gas and water, metal products, machinery, and
electronics equipment, transport, warehouse and communication, wholesalers and retailers,
finance, insurance and real estate, hotel, and restaurant. However, Corporate Bank is more
focused on infrastructure development projects.
CHAPTER FOUR
Intern is thankful that NIBL gave an opportunity to do intern at different departments during
eight weeks period. Though the intern got to learn from various departments, this report basically
focuses on CREDIT DEPARTMENT of NIBL since her maximum hour of the internship was
spent in this department. Intern was highly concerned on the activities done in the department
rather than collecting data for the report. Intern has not gone over data analysis using standard
procedures such as time series, regression analysis, sensitivity analysis and other statistical tools.
However Intern has described and constructed activities categorizing them under several
headings with much detail as possible, and continuity between them is made as apparent as
Intern could. Primarily the overall analysis is based on nothing more than self-observation,
business related questions, cross questions and most importantly self-analysis with this
inexperienced mind.
Being the part in credit department, intern had done the following main activities:
• Prepared the documents required for the processing of the loan.
• Prepared checklist of original and other required documents while providing loans.
• Checked loan documents.
• Helped customers in the documentation.
• Visited credit customer for on- sight inspection.
• Reviewed documents of clients who had been enjoying credit facility of the bank and who
were going to enjoy it.
Under this function, the intern had assisted the employees by informing the walk in
customers about various schemes of the loan provided by NIBL and the procedure for granting
the loan.
Credit manager, after reviewing and approving the proposal prepares the interoffice memo to
forward it to the head of corporate in a summarized format.
In this stage, intern had done the activities like:
The memo forwarded by credit manager is reviewed by the head of corporate and if it meets all
the lending criteria, is approved by him. In NIBL, there is a credit limit for the approving
authority beyond which must be passed to CEO/ MC for credit approval.
The credit limit is presented in the table below:
*Combined funded + non- funded <= 500.00 million
* All the facilities above management committee (MC) are approved by BOD.
The facility is approved only after the detailed credit analysis. Credit analysis is actually a
risk analysis, i.e. it involves analyzing the business risks of the borrower. NIBL’s approach
reflects this thought and so, following questions are considered while doing risk assessment
before credit approval:
f. Disbursement of Loan
The Credit Administration Department handovers the executed loan documents along with the
original Loan Document Checklist to the Loan Administration Department (LAD). The latter
will examine the executed documents for appropriateness and authenticity of the borrower’s
execution. It will also check as to their conformity with the terms of approval. Once the LAD is
fully satisfied with the documents and ensures that other terms of the CFR are fully compiled
with, only then a facility will be processed for disbursement. LAD will remain jointly
responsible for the physical custody and maintenance of the loan documents with the CAD
during the life of the facility.
Under disbursement stage, intern had done the following activities:
Opened customer’s account;
Closed customer’s account;
Verified expiry date, interest rates and loan amount for further processing;
Disbursed the amount of loan in customer’s account.
NIBL regularly does monitoring under its post credit activity. The business of the client is
closely examined and the necessary financial information is tracked. The intention and character
of the client are also monitored on regular basis. Since, NIBL takes adequate precaution before
granting any loan to its client there is the minimum nonperforming loan or bad debt of NIBL and
thus, its stubborn customers are also least as compared to other commercial banks in Nepal.
However, necessary action is a must for the purpose of collection and recovery of its overdue
loan.
The collection policies followed by NIBL for its loan recovery are as under:
a. Telephone Calls
NIBL conducts its follow-up task of the telephone call as the first step of collection policy after
the loan becomes overdue. The bank may also remind to some of its clients from a month before
the expiration date as per the nature of the client.
b. Letter
If the client does not adhere to the bank’s policy and does negligence in payment even after
reminding through phone calls, the bank sends an email and call back the letter which is of 35
days. Bank may extend the payment period if the intention of the customer regarding payment is
positive but failed to pay in time due to some unavoidable reasons.
If the payment is not made even after publishing 7 days notice, following actions are taken
as last measures for loan recovery:
• Auction of property
• Blacklisting
• Partial recovery from Deposit Insurance and Credit Guarantee Corporation (DICGC)
• Loan recovery by realizing Bonds/NSBs.
Under this function, intern had performed following activities and assisted the staffs:
Calculated interest overdue of clients;
Informed the customers about their payments of interest due to through telephone;
Sent e-mail to the clients requesting for payment of interest overdue.
• The clients brought only the copy of the required documents without original.
• Most of the times firm’s documents were presented without the stamp.
• They were not careful enough while giving the thumbprint and signing the documents.
• They tried to operate the account without fulfilling the complete requirement.
• Different inks were used in the same document.
• Delayed in the renewal of the loan and other documents like insurance, firm registration etc.
Intern had to deal with various kinds of problems. Almost all problems, which could be
solved by her, were solved with the support and proper guidance by the bank’s staffs and other
interns. Some of the problems that were solved by internee are:
• Reviewed the documents as per the nature of the loan.
• Found the missing documents and files.
• Filled the documents which were missed by the client.
CHAPTER FIVE
5.1 Conclusion
The banking system in Nepal is gearing up for another round of competition with the second
phase of financial sector reform and international standard oriented reforms underway. Nepalese
financial system, basically the banking business, has broadened in number and diversified in the
modern financial instrument. As the Nepalese financial market witnesses the domination of
banking sector, it is necessary to monitor the banking system properly and enhance
competitiveness with a strong, credible regulatory and supervisory bank.
NIBL is one of the leading commercial banks with a vision of being the most preferred
provider of financial services in Nepal. It has the highest customer base and is the topmost lender
amongst the private sector banks in Nepal. So as to accomplish its objective, credit department
plays a pivotal role in making a loan lending decision in the most productive sectors analyzing
all the risks associated and taking steps to monitor and recover the amount due.
Credit Department is thus one the most sensitive department as the quality of the loan,
borrower and securities determine the health of any bank as well as the banker. It checks and
evaluates different types of loan proposals like education loan, home loan, short term loan etc. It
is necessary for the bank because this department helps to analyze the various types of risks
occurred and mitigate the risks of the loan before and after granting the loan. Credit Department
makes the loan safe because this department analyzes the financial condition of both individual
borrower and institutional borrower by assessing the income and expenditure. Thus, credit
department of NIBL is the major department which performs the various activities of controlling
the credit and keeping the bank free from any future fallacy. It plays a major function in NIBL to
control each and every loan proposals before granting the loan to the consumers and also taking
necessary actions to recover the amount if the customer turns out to be the default.
Therefore, intern concludes that Credit Department plays a major function to control each
and every document before granting the loan to the customer as well as keeping an eye on
customer’s actions after credit approval in order to minimize the various types of risks. It
analyzes the financial condition of the borrower and tries to make it easy for granting the loan.
Credit department is thus the most crucial department that attempts to make the bank’s portfolio
highly profitable and thus responsible for its success in the competitive business environment.
• The day to day operation of Credit Department and the process involved with it.
• Coordination of workforce and the various activities for the smooth operation of the bank.
• Importance and role of the banking industry in the in the development of the economy.
• The friendly environment, good organizational culture, and efficient management being the
various reasons behind the success of NIBL despite the heavy workload.
• Use of theoretical knowledge into the practical working environment and also became aware
of the huge gap between theoretical knowledge and real life situation.
• The importance of time management and punctuality.
• The importance of interpersonal communication skills in professional life.
• Promotion of efficiency and effectiveness through sincerity and confidence.
• Use and operate various machinery, equipment, and systems.
• Work under pressure.
It was a great opportunity to be a part of Nepal Investment Bank Ltd and learn the during
the eight weeks internship programme. This has given the intern adequate feedback on how to
face challenges in practical terms and mix up with the organization culture giving her best for the
betterment of individual as well as organization’s career.