As we all know deposit mobilization is a major way of collection of funds. The financial system has become more complex day-by-day comprising of government as well as private sectors financial institutions including bank, insurance companies, mutual fund, finance companies and investment banks. Financial institutions have great influence in the country’s economy as they assist in economic development of the country. The role of banks in a financial market is that of a financial intermediary, which makes use of loan and deposit services to effectively channel the idle funds of the public into valuable production and other investment projects helping people to reach their goals. It enables people to save for the future, invest in profitable business opportunities and to protect themselves against unpredictable shocks. Banking system is the backbone of financial inter-mediation through the mobilization and channeling of financial resources.
Individual and entities need money to pursue their daily business, so they place their money at money market to earn interest is termed as deposit.Deposits of commercial banks are the money deposited by the individuals and the corporation in different form of accounts with the expectation of earning certain stable return, safety, easy transaction and so on. Deposits are the basic raw materials for credit mobilization of the banks. Deposits are the source of any commercial banks as bank operates by collecting deposit from all over the country and mobilizing it into lending activities either directly by loaning or indirectly through capital market. Dispersed resource holds no meaning unless and until they are properly accumulated to utilized and mobilized efficiently and effectively in some productive and development sector.
Deposits mobilization is one of the important functions of banking business. It is an important source of working fund for the bank and other financial organization. Deposit mobilization is an indispensable factor to increase the sources of the banks to serve effectively. Mobilization of deposit plays an important role in providing satisfactory service to different sectors of the economy. The successful functioning of commercial banks depends on the extent of funds mobilized. Deposits are the lifeblood of banking companies. Deposits constitute a vital source of funds required for banking business. There are different types of deposits with different maturity pattern carrying different rates of interests. Deposit mobilization is depending on the cost of deposits, offering attractive deposits rates on bank deposits can gain high deposit mobilization (Philip, 1968). In banking, sector deposit mobilization is a scheme intended to encourage customers to deposit more cash with the bank and this money in turn will be used by the bank to disburse more loans and generate additional revenue for them. Deposits mobilized by banks play a key role not only as an important source of funds for banks but also as instrument for promoting saving and banking habit among the people. The size of the deposits largely decides the lending potential of a bank. Mobilization of deposits for a bank is as essential as oxygen for human being. Banks play intermediary role of mobilizing funds from savers (those who have excess funds) and subsequently lending them to investors (those who are deficient in funds). Banks contribute to the economic growth by facilitating investment and increasing capital accumulation and it is capable only if the banks have satisfied amount of deposits.
To mobilize enough deposits, banks should present various kind of deposit schemes to attract customers. Normally customers have various kinds of needs and wants with respect to their gender, age, profession, level of income, type of necessity, tenure, size of business and so many other factors lead to make a discrepancy among customers when they deposit their money in banks.Normally deposits are considered as the cost effective working funds that can increase the sustainability and profitability of the deposit taking institutions.
The stability of the banking system, financial system and the entire economy is linked like a chain and if one inter-node is damaged it would affect to the all other industries as well as. In order to, ensure the congenial atmosphere banks should be able to raise enough amounts of deposits. Therefore, appropriate, timely and well-planned policy instruments and programs should be implemented in order to increase the deposit mobilization.Acceptance of deposits and mobilization productive sector is the crucial function of commercial Banks. As such, deposit mobilization is one of the basic innovations in Nepalese Banking activity.
Nepal has stepped up in developing country from the list of under developed countries; hence, rapid economic growth is the expectation of each individual and entity. Financial development is crucial to economic growth and banks are the most important elements of the financial system. Banks as financial intermediaries are expected to provide a place for people to save incomes remaining after consumption. It is only possible from the deposit collected from public for extending credit facility to entrepreneurs and other industrialist. However, deposit mobilization has become major challenge in present competitive market in Nepal. In the process of deposit mobilization, i.e. accepting deposit and granting banks encounter many problems and challenges.
Few of the problems include; most of the time customers use assets with low values as collateral for borrowing money from banks. Hence, in case the borrowers fail to pay back the loan, they obviously forced to sell the pledged asset at the amount less than the borrowed money (at loss). Banks also face problems while they determine interest rate, i.e. since there are many competitors; they try to overcome so many challenges to determine the interest rates that are equivalent to their competitors. Unless it’s difficult, exist longer. The other problem is that, since most of the capital of the bank is composed of the deposit they accept from their customers, without promoting modern banking technology they may also get losing their customers. The lending activity is made possible only if the banks can mobilize enough funds from their customers. Since commercial banks depend on depositor‘s money as a source of funds, it means that there are some relationships between the ability of the banks to mobilize deposits and the amount of credit granted to the customers. Thus, the main function of financial institutions of mobilizing funds from the surplus economic agents to the deficit economic agents is put to test in order to generate economic growth. However, the efficiency of performing this function depends on the level of development of the financial system. Nepal has been struggling to maintain macroeconomic balance for a couple of years.
Low growth rate, high unemployment, balance of payments deficit, ballooning trade deficit, and high and sticky inflation are some of the existing macroeconomic challenges. Trade deficit has widened by 17.2 percent to Rs.1211.96 billion in the eleven months of 2018/19 although as per the first quarter review of 2019/20 it has declined by 12.0 percent. Similarly, current account registered a deficit of Rs. 21.79 billion in the review period. High current account deficit is due to the high volume of imports than exports. Now, add to that list banking and liquidity crises engendered largely by the Bank and Financial Institutions (BFIs) themselves and to some extent by Nepal Rastra Bank (NRB), the central Bank and its disastrous consequences in and beyond the banking system. The number of bank and financial institutions are increasing rapidly in Nepalese market. There already twenty-eight commercial bank in operation, consequences of which the liquidity position of banks is weak and nearly to breach the regulatory requirement (CCD ratio). This is an attempt made to analyze the efficiency of Nepalese commercial bank based on the deposit and its mobilization made by the sample bank.
A commercial bank must collect deposit from rural area too and mobilize its deposits and other funds in productive, innovative and development sector of the country for the welfare of nation. At currently the big merger of bank and financial institution has been arises in high lightly, which might be great revolt in adequate utilization and mobilization of deposit getting rid from cut throat and unhealthy competition among banks and financial institutionsDeposit Mobilization for the Economic Development.
NBL was in good condition than RBBL in the context of return on capital employed ratio. Both the banks operating efficiency ratios were alarming indication of poor performance and management. However, RBB was in good condition than NBL in the context of operating efficiency ratio. Future trend value (net profit) of NBL was in decreasing trend for the forecasted period but trend value of net profit of RBB was increasing and better than NBL.Their major target is to gather deposit from all over the country by attracting customer with their new and fascinated product however in status deposit mobilization is critical issue for banks. Since deposit mobilization is the key focus of many banks, finding deposit is becoming a challenging role for the banks in Nepal compatible with the growing need of loans.
Development of a country always depends upon the economic development of that country. Financial Institutions play vital role for economic development of the country and works as financial intermediary by taking deposit and lending that money to deficit group of society. Both private and public sector have been contributing to our nation. Integrated and speedily development of the country is possible only when competitive banking service reaches nook and corners of the country. Commercial banks occupy an important place in the framework of every economy because they provide capital for the development of industry, trade, business and other resources deficit sectors by investing the saving collected as deposits. All the economic activities of each and every country is greatly affected by the emerging trends of deposit mobilization financially. It should not be forgotten that a country could hardly achieve its growth of economic development without a strong capital base. Commercial banks play a vital role in performing such base for financial and economic development by way of deposit mobilization. It is quite true that a strong financial institution is of great need in the developing country like Nepal. Because all the economic conditions are based on the financial institution and the development of a country depend upon the active participation of the banks in the different activities in the economy.
Hence, banks should invest their fund in various portfolios to be safe from being bankruptcy. If banks concentrate the investment in few organizations there is a high chance of default risk. Banks are important for economic development of the country. Diversification is indeed need to all the business houses but it has seen immense important to commercial banks than other business house because banks use the money of other people for the benefit of its own. It helps in the capital formation to the country which is the most important element for the economic growth of the country. In overall, it can be concluded that commercial banks life is totally dependent upon the deposit collection policy and the optimum deposit mobilization procedure,business house because banks use the money of other people for the benefit of its own. It helps in the capital formation to the country which is the most important element for the economic growth of thecountry. In overall, it can be concluded that CBS life is totally dependent upon the deposit collection policy and the optimum deposit mobilization procedure.
The loan and advances composition ratio, RBB is special in collecting low cost deposit and lending to priority and deprived sector. NRB directives have compelled the commercial banks to invest 3% out of the total loan in deprived sector.NRB balance to total deposit of RBB is quit low. It should increase NRB balance so that it would have more liquid funds whenever needed.The basis of credit to total deposit ratio shows that the bank cannot mobilize their total deposit properly. The RBB should increase the ratio of credit to total deposit by increasing investment on loan and advances.
Thus the position of deposit collection of sample banks are satisfactory where as the deposit collection of all banks are in increasing but fluctuating trend which shows that thecommercial banks can utilize their deposit as per their wish because deposit is the major organ of commercial banks. Higher the deposit higher will be the chances of mobilization of fund. It is also observe that the problem of banking sector are unfair competition, not proper utilization of available resources, no uniformrules and regulation through which these problem create difficulties in performance of banks. They are lending in deprived sector as per NRB directives but the priority sector lending are not satisfactory. It seems in decreasing trend and not performing well as per NRB directives of priority sector lending.The banks should try to carry out different schemes which may help to increase the deposit collection of the bank to get success in the field of cut throat competition. The sample banks should decrease their minimum bank balance and the amount needed to open an account for promoting and mobilizing small investor’s fund. There was unfair competition between banks so banks should play fair game and strategic based on their effectiveness and efficiency.Commercial banks also mobilized their fund in rural area to show their identity. And they should not be centralized and city oriented . The sample bank should decrease their minimum bank balance and the amount needed to open an account for promoting and mobilizing small investor’s fund.The banks should make a continuous efforts to explore new, competitive and high yielding investment opportunities to optimize their investment portfolio. Lending rates should be changed according to the bearing capacity of the people. It should not be more than average rate of return. So low interest rate on credit is recommended. Banks should make plan to open their forthcoming branches in rural sector so that large number of people living in rural sector might be able to take advantages of banking facilities. As most of the joint ventures are operated only in the urban sector. They should explore the potentiality of the rural branches by taking local resources for effective deposit mobilization.
Savita Bhandari Asst. Branch Manager Rastriya Banijya Bank Ramnagar Bazar, Butwal
राष्ट्रिय दैनिक एक लोकप्रिय नेपाली समाचार पोर्टल हो। हामी सत्य तथ्य निश्पक्ष र सन्तुलित समाचार सम्प्रेषण गर्ने तर्फ उद्दत छौँ । हाम्रा टोल,समाज, शहर वा आम जनताका चुलो चौको देखि सदन सम्म अथवा समाजका उदाहरणीय ब्यक्ति, रास्ट्रका पहरेदार हरेक बिषय हाम्रा समाचारका श्रोत हुन् । आवाज बिहिनहरुको आवाजमा साथ अनि सरकारको बेथितिमा हाम्रो निगरानी हुनेछ । हामी राजनितीको रंग भर्दैनौं तर राजनितीको चेतना अवश्य भर्ने छौं ।
