1.1 Introduction of study

Over the past ten years, banking system becomes accustomed to accepting the rapid pace

of changes in terms of product and services. Change such as computerized banking,

consumer credit, automated tellers etc, have been introduced. Banks and Financial

Intuitions play an important role in financial inter-mediation and thereby contribute to the

overall growth in the economy. A bank is a financial institution whose primary activity is

to act as payment agent for customers and to borrow and lend money. Banks have

influenced economics and politics for centuries. The primary purpose of a bank is to

provide loans to trading companies. Banks provided funds to allow business to purchase

inventory, and collected those funds back with interest when the goods were sold.

Banking services have expanded to include services directed at individuals and risk in

these much smaller transactions is pooled.

Banking Industry in Nepal is fully guided by the Central Bank, i.e. Nepal Rastra Bank.

However different Bank has different management systems, operational techniques and

different guidelines. The banking system of Nepal is composed of variety of banks

working as Commercial banks (both under government ownership and privately owned),

Development Banks, Finance Companies and Co-operatives. At present among other

banks, Agricultural Development Bank Limited (ADBL) have been operating their

banking operations effectively and efficiently in terms of rural credit institution and

providing banking services with a view to acceleration of socio-economic development

of the country. ADBL is one of the popular government held commercial banks in Nepal

in terms of largest rural financial institution and the extensive branch network throughout

the country. ADBL’s main product is development banking loans to farmers and rural

poor. Adoption of modern technology both in terms of equipment and terms of banking

practice ensures efficient service to clients. Day by day new private banks as competitors

covering both urban and rural sectors have been the ongoing challenge for ADBL.

In this regard, this report tries to analyses the major aspects wherein ADBL is lagging

and what it can do to tackle the modern day challenges to provide best banking service in

the context of Nepal.

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1.2 INTRODUCTION TO THE BANKING INDUSTRY

The term bank is said to be originated in 15th century, directly or via French ‘banque’, from

Italian ‘banca’ meaning “bank, bench or table”. The sense bank developed in the source language

from the table on which banking was transacted. With the change in time, the meaning and

function of bank gradually changed.

According to the shorter oxford English dictionary, "A bank is an establishment for the custody

of money received from or on behalf of its customer essential duty is to pay their draft on its

profit areas from its use of the money left unemployed by them".

A bank is a financial institution and a financial intermediary that accepts deposits and channels

those deposits into lending activities, either directly or through capital markets. A bank connects

customers that have capital deficits to customers with capital surpluses. Banks are also called

depository institutions because majority of their funds are collected from the saving of

individuals. Generally banks are opened to earn income. Major source income for banks is the

gap between the interest rate they provide to the deposits and the interest rates they charge on

loans.

Banking services serve two primary purposes. First, by supplying customers with the basic

mediums-of-exchange (cash, checking accounts, and credit cards), thus banks play a key role in

the way goods and services are purchased. Without these familiar methods of payment, goods

could only be exchanged by barter (trading one good for another), which is extremely inefficient.

Second, by accepting money deposits from savers and then lending the money to borrowers,

banks encourage the flow of money to productive sectors of economy. Without this flow, savings

would sit idle. Enabling the flow of money from savers to investors is called financial

intermediation, and it is extremely important to a free market economy.

“Bank is a financial institution, which provides financial services that may be in the form of

accepting deposits, advancing loan, providing necessary technical advices, dealing over foreign

currencies, remitting funds, etc.”

-Nepal Rastra Bank Act 2002

“Bank is an establishment for the custody of money from or on behalf of its customers its

essential duty to pay their draft on it, its profit arises from its uses of the money left unemployed

by them.”

-The Shorter English Dictionary

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“Banking means the accepting for the purpose of lending or investment of deposit of money from

the public, repayable on demand or otherwise and withdrawal by cheque draft order or

otherwise.”

-Indian Banking Company Act 1949

“A commercial bank refers to such type of bank which operates currency exchange transactions,

accepts deposits, advances loans, performs dealing relating to commerce except the banks which

been specified for the cooperative, agricultural, industry of the similar other specific objective. “

- Commercial Bank Act 2031 B.S

Commercial banks are the heart of every financial system in the country. Commercial banking

system of the nation is important for the functioning of the economy. They facilitate lending as

well as borrowing facility. The commercial banks of Nepal can be categorized into two types:

Public Sector and Private Sector. Public sector banks include only two banks: Nepal Bank Limited

and Rastriya Banijya Bank, whereas Private sector banks include other 30 banks.

The importance of commercial banks are:

Channelize the idle recourses towards the economic activities.

Helps build the financial sectors of the country.

Facilitates rapid economic growth.

Provides various financial services like accepting deposits and providing loan.

Exchanging foreign currency.

Remitting money from one place to the other.

Performing agency functions.

1.3 DEVELOPMENT OF BANKING INDUSTRY IN NEPAL

The history of development of banking system in Nepal is not been long. Nepalese banks are still

in its developing stage. Banking industries started here in Nepal when the first commercial bank,

the Nepal Bank Limited was established in 30 th Kartik 1994 BS (about 75 years back). Having

felt the need of systematic development of banking sector and to help the government in

formulating monetary policies, Nepal Rastra Bank (NRB) was established in 2013 BS (1957 AD)

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as the central bank as per the Nepal Rastra Bank Act, 2012 BS, and Agricultural Development

Bank (ADB) was established in 2024 BS (1968 AD). The government then allowed establishing

joint venture banks in 1980s, then the three joint venture banks namely Nepal Arab Bank Limited

(NABIL Bank Limited), Nepal Grindlays Limited (Standard Charted Bank Nepal Limited), and

Nepal Indoseuz Bank Limited (Nepal Investment Bank Limited) were established. With the

opening of NABIL Bank Ltd, the door of opening commercial banks was opened to the private

sector. Rural Development Banks were formed to uplift the living standard of the people by

providing them the necessary training and banking services and providing loan without security

collateral. Due to the enactment of Nepal Development Bank Act 2052 BS, development Banks

have been established.

The Nepalese Financial Sector is composed of Banking sector and non-banking sector. Banking

sector comprises Nepal Rastra Bank (NRB) and other Commercial Banks. The non-banking

sector includes Development Banks, Finance Companies, Micro-credit Development Banks, Co-

operative Financial Institutions; Non-governmental Organizations (NGOs) performing limited

banking activities and other financial institutions such as Insurance Companies, Employee’s

Provident Fund, Citizen Investment Trust, Postal Saving Offices and Nepal Stock Exchange.

Nepal Rastra Bank has classified the financial institutions into four categories:

Class A: Commercial Banks (e.g. Agricultural Development Bank Ltd.)

Class B: Development Banks (e.g. International Development Bank)

Class C: Finance Companies (e.g. Goodwill Finance Company)

Class D: Rural Development Banks and Micro Credit Development Bank (e.g. Sana

Kisan Bikas Bank Ltd.)

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Fig. 1: Financial Institutions in Nepal

Source: Nepal Rastra Bank Report, Mid July 2011

Currently there are 32 commercial banks, 86 development banks, 79 financial institutes, 21 Micro

Credit cooperative banks, 16 saving and Credit Co-operative, 38 NGOs (Financial Intermediaries)

and a central bank.(see annex 1)

The lists of commercial banks are as follows:

Table 2: List of Licensed Commercial Banks of Nepal (As of Mid-July 2011)

S.No. NamesOperation Date

(A.D.)Head Office

Paid up

Capital

(Rs. '00

Thosands )

1 Nepal Bank Ltd. 1937/11/15 Kathmandu 3804

2 Rastriya Banijya Bank Ltd. 1966/01/23 Kathmandu 3853

3 Agriculture Development Bank Ltd. 1968/01/02 Kathmandu 94375

4 Nabil Bank Ltd. 1984/07/16 Kathmandu 20298

5 Nepal Investment Bank Ltd. 1986/02/27 Kathmandu 24091

6 Standard Chartered Bank Nepal Ltd.. 1987/01/30 Kathmandu 16102

7 Himalayan Bank Ltd. 1993/01/18 Kathmandu 20000

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8 Nepal SBI Bank Ltd. 1993/07/07 Kathmandu 18693

9 Nepal Bangladesh Bank Ltd. 1994/06/05 Kathmandu 20103

10 Everest Bank Ltd. 1994/10/18 Kathmandu 11196

11 Bank of Kathmandu Ltd. 1995/03/12 Kathmandu 13595

12 Nepal Credit and Commerce Bank Ltd. 1996/10/14 Siddharthanagar 13997

13 Lumbini Bank Ltd. 1998/07/17 Narayangadh 13000

14 Nepal Industrial & Commercial Bank Ltd. 1998/07/21Biaratnagar,Mor

ang13116

15 Machhapuchhre Bank Ltd. 2000/10/03 Pokhara, Kaski 16272

16 Kumari Bank Ltd. 2001/04/03 Kathmandu 14850

17 Laxmi Bank Ltd. 2002/04/03 Birgunj, Parsa 16140

18 Siddhartha Bank Ltd. 2002/12/24 Kathmandu 15610

19 Global Bank Ltd. 2007/01/02 Birgunj, Parsa 15000

20 Citizens Bank International Ltd. 2007/06/21 Kathmandu 19223

21 Prime Commercial Bank Ltd 2007/09/24 Kathmandu 22457

22 Sunrise Bank Ltd. 2007/10/12 Kathmandu 18554

23 Bank of Asia Nepal Ltd. 2007/10/12 Kathmandu 15175

24 DCBL Bank Ltd. 2008/05/25 Kathmandu 19209

25 NMB Bank Ltd. 2008/06/05 Kathmandu 16517

26 Kist Bank Ltd. 2009/05/07 Kathmandu 20000

27 Janata Bank Nepal Ltd. 2010/04/05 Kathmandu 14000

28 Mega Bank Nepal Ltd. 2010/07/23 Kathmandu 16310

29 Commerz & Trust Bank Nepal Ltd. 2010/09/20 Kathmandu 14000

30 Civil Bank Ltd. 2010/11/26 Kathmandu 12000

31 Century Commercial Bank Ltd. 2011/03/10 Kathmandu 10800

32 Sanima Bank Ltd. 2011 Kathmandu 20160

Source: www.nrb.org.np

1.4 NEED AND SCOPE OF THE STUDY

The report is submitted in partial fulfillment of the requirements for the MBA programme. The

study is focused on Agricultural Development Bank Limited. The internship was conducted in

head office. The study highlights the various aspects of commercial banks in the Nepalese

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Banking and Financial Sector. It focuses on the determine the importance of customer

satisfaction, the procedures of remitting the money, clearance of cheque, Human Resource and

financial feature of ADBL. It also deals with the various products developed by ADBL to cater

the customer, meet and exceed the customer expectations.

1.5 OBJECTIVES OF THE STUDY

The primary objective of an internship program is to provide knowledge to the students

about the practical world in banking sector. The specific objectives of the study are as

follows:

To analyze the functions of commercial bank

To know the general and operational activities of the bank

To have an overview of ADBL department.

To know about Agricultural Development Bank limited products and their details

To conduct SWOT analysis of Agricultural Bank Limited.

1.6 LIMITATIONS

The major limitations are:

1. The time period of only six week was allotted for the internship program so the

conclusion drawn includes the learning within this short restricted duration.

2. The bank’s policy on keeping some matters confidential prevented from analyzing

different activities.

3. The activities in the bank are sensitive due to which all the information was not

accessible and the information in the internet was also not accessible because of no

proper updating.

4. Only the departments where I was placed for long time period are given more focus in

comparison to other departments.

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2.1 INTRODUCTION OF THE ORGANIZATION

Agricultural Development Bank Limited (ADBL) is an autonomous organization largely owned

by Government of Nepal. The bank has been working as a premier rural credit institution since

the last three decades, contributing a more than 67% of institutional credit supply in the country.

Hence, rural finance is the principal operational area of ADBL. Besides, it has also been

executing Small Farmer Development Program (SFDP), the major poverty alleviation program

launched in the country. Furthermore, the bank has also been involved in commercial banking

operations since 1984.

With the main objective of providing institutional credit for enhancing the production and

productivity of the agricultural sector in the country, the Agricultural Development Bank, Nepal

was established in 1968 under the ADBN Act 1967, as successor to the cooperative Bank. The

enactment of Bank and Financial Institution Ordinance (BAFIO) in February 2004 abolished all

Acts related to financial institutions including the ADBN Act, 1967. In line with the BAFIO,

ADBL has been incorporated as a public limited company on July 14, 2005. Thus, ADBL

operates as "A" category financial Institution under the legal framework of BAFIA and the

Company Act, 2053.

The new legal framework provides the bank opportunity to operate complete banking business

throughout the country. At present, out of 243 branch offices the bank has been operating its

commercial business through 160 branch offices with limited product and services. It is necessary

for the bank to diversify and extend its product and services to increase its outreach, market

share, rate of return, clients' acquisition, satisfaction and retention of customers. ADBL is facing

challenges as it is in a transformation phase to a modernized commercial banking from traditional

development banking. ADBL is operated mainly under three major resources that are equity,

borrowing and deposit which are 21%, 5% and 74% respectively of total available resources.

Among many other sources of fund mobilization deposits are the main source of lending in

ADBL which mainly comprises three components viz fixed account (30.35%), Current account

(7.23%) and saving account (62.42%). In fixed and saving account there are also sub products

like Ba Ama Bachat Khata, Sambridhi Bachat Khata, Lakhapati Bachat Yojana etc that add some

augmentation to the deposit account. To sustain in the competitive financial market for the

financial institution like ADBL deposit collection is one of the major challenges. The bank needs

to diversify and extend its deposit products and services resulting in an increased market share

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and cost of fund. Similarly, the bank should focus on its clients’ satisfaction and retention as well.

ADBL has its 243 total no of offices which is shown in below table.

Table no 3: No of offices

No of offices

Head office 1

Regional offices 10

Regional training centres 5

Commercial main branch office 13

Commercial branch office 93

Commercial sub-branch office 41

Commercial offices total 147

Development branch office 28

Development sub-branch office 54

Development offices total 80

Total 243

2.1.1 Mission

To deliver comprehensive banking solution strengthening its extensive network.

2.1.2 Vision

To be a Mass-based Complete Bank serving from Urban to Rural.

2.1.3 Objective

(a) To provide quality banking services.

(b) To adopt market driven strategy.

(c) To obtain sustained and competitive return on investment.

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2.1.4 Corporate conduct

In achieving its corporate objective in pursuit of its corporate mission and vision, ADBL will:

comply with all relevant legislation, codes of conduct and standards of good corporate

citizenship in Nepal while maintaining full autonomy in the management of its

operations;

conduct its operations in an open and transparent manner;

put local resources to work for local development, serving the rural community and its

aspirations;

provide a full and balanced rage of financial products and services that satisfies the needs

of the rural population of Nepal, on a profitable and sustainable basis;

strive consistently to provide improved products and services to its clients at reasonable

cost, using modern banking, information and communication technology in the most

appropriate form to its clients needs;

be vigorous in building reputation for professionalism, competitive pricing, reliability

and quality of service and innovation;

operate in accordance with best banking practice, acting with financial prudence and

keeping in mind the need to balance profitability with asset preservation and liquidity and

to safeguard depositor's funds;

work together with its employees to develop their capabilities to contribute to

achievement of the bank's objectives, promoting excellence, rewarding achievement and

providing them the opportunity to share in the bank's success;

develop mutually acceptable relationship with government in the pursuit of improvement

in living standards in rural areas, while respecting best financial practices;

ensure that its activities contribute to the environmental stability and overall

improvement of living standards in Nepal; and

Judge the bank's success against the measures that include profitability, portfolio quality

in terms of minimal arrears and non-performing loans, portfolio worth, total deposits,

geographic outreach and public image.

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2.2 FUNCTIONS OF AGRICULTURAL DEVELOPMENT BANK LIMITED

a. Accepting Deposits

This is the oldest function conducted by commercial banks. It accepts deposits in three forms.

They are as current, saving and fixed deposit accounts. Deposited amount is repayable on demand

or on short notice. Interest is provided in saving and fixed deposit accounts whereas in current

account interest provision is not given.

b. Providing Loans

This is the second important function for ADBL. It provides loans and advances from the money

it receives from depositors. Different types of loan or credit facilities are provided to borrowers

against tangible and intangible securities. Various types of loan such as home loan, education

loan, vehicle loan, agricultural production loan or personal loan are given as per the loan need of

customer.

c. Foreign Trade Financing

The bank helps customers who deal with foreign trade. It facilitates export and import business

by issuing letter of credit (L/C). It discounts the bills of exchange drawn by Nepalese exporters

on the foreign importers and enabled the exporters to receive money in the home currency. On the

other hand, it also accepts the bills drawn by foreign exporters.

d. Agency Functions

ADBL acts as an agent and performs variety of services on behalf of its clients. The bank makes

payment of the cheques, draft and bills of exchange presented by the customers. It can also

transfer money from one place to another through use of draft, mail transfer on customer’s

request.

e. General Utility Functions

The bank does some services known as general utilities services. It carries out foreign currencies

transactions with central bank’s approval. Banks provides locker facilities for safe keeping of

valuable documents.

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2.3 SHARE CAPITAL STRUCTURE

Table 4. Share Capital Structure

1. Promoters 65%

2. General Public 35%

Fig 2: Share Capital Structure

2.4 ORGANIZATIONAL STRUCTURE

Organizational structure is the specified path which the formal command of authority and

responsibility flows. It differs from enterprise to enterprise because of the nature of activities

carried out in the enterprise. The head office of the bank is located at Ramshah path, Kathmandu.

ADBL follows a line structure where top level management consist of Board of Directors,

Executive Officer The middle level consists of Managers like, Deputy General Managers at

business operation, services and human resources in the different departments . The first line

managers consist of Supervisors in each department. Each manager has his own authority and

responsibility and is responsible for the activities. If a decision is beyond his or her responsibility

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then the manager needs to consult with the higher level management. EBL follows a proper chain

of command which makes the work more systematic and efficient.

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Legal Division

General Service Division

HRM Division

Finance and Account Division

Market and research Division

Information Technology Division

riiiiiiirrriskkkkkkrrrrRisk management Division

Deputy General Manager (Business Operation)

Deputy General Manager (Service)

Deputy General Manager (Human Resource)

Planning Division

Treasury Division

Internal Audit and Inspection Division

Credit division

Internal Audit and Inspection Division

Credit division

Deputy General Manager (Business Operation)

Legal Division

General Service Division

HRM Division

Deputy General Manager (Human Resource)

Finance and Account Division

Market and research Division

Information Technology Division

Risk management Division

Board of Director

Chief Executive Officer

Institutional Government Sub Committee

Audit Committee

Assets and liability Management Committee

Company Secretariat

Deputy General Manager (Service)

Planning Division

Treasury Division

Fig 3: organizational structure

2.5 BOARD OF DIRECTORS

The Board of Directors is the apex body of the bank. It formulates policies as well as strategies

and provides guidance to the management. The Board comprises a total of nine members; three

members representing Ministry of Finance, one member representing the Ministry of Land

Reform and four members representing individual shareholders. Besides, one member is

nominated by the Board as per the BAFIA. The Board is supported by Audit Committee and

Governance Sub- Committee in the area of internal control and good governance respectively.

Table 5: Board of Director

Name Designation

Prof. Gaja Nand Agrawal (PhD) Chairman

Mr. Krishna Prasad Devkota

(DDG Internal Revenue Department, Ministry of Finance)

Member

Mr. Krishna Bahadur Raut

(Joint scretary , Ministry of Land Reform and Management)

Member

Ms. Laxmi Devi Manandhar Member

Mrs. Mira Dhonju Member

Mr. Janak Raj Shah Member

Mr. Sitaram Thapaliya Member

Mr. Chhetra Bahadur Sejuwal Member

Mr. Tej Bahadur Budhathoki Member

Mr. Ram Bahadur Khadaka Company Secretary

2.6 TOP MANAGEMENT TEAM

The management team of ADBL consists of the entire manager or the department head. They are

the one who supervise their subordinate and guide them to accomplish their work efficiently.

Management of the organization plays a major role in achieving the organizational goal.

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Managers formulates action plan to achieve those objectives. The management team of ADBL

consists of the following people in different hierarchy. (See Annex 2)

2.7 BALANCE SHEET OF ADBL

The balance sheet is a snap shot of the company’s financial standing at an instance in time. It

shows the company’s financial position, what it owns assets) and what it owes (liabilities and net

worth). The bottom line of the balance sheet should always be balance (i.e. assets=liabilities + net

worth).the balance sheet of ADBL for the last three years is sown in annex. (See Annex 3)

2.8 PRODUCT AND SERVICES

2.8.1 Deposits

(i) Current Account

Mainly this account is intended for business/corporate houses, this account can be opened from

commercial banking branches throughout the country. This account is non-interest bearing. A

current account can be opened with a minimum amount decided by the specific branch.

(ii) Saving Account

 Designed with array of features, Savings account at ensures attractive returns to your idle money

but also makes your personal banking convenient and efficient.

Interest is calculated and credited to saving account on minimum monthly balance. Initial deposit

ranges are depending upon the branch and its level. Any balance below minimum amount will be

liable to incidental charges as fixed by the bank from time to time. Customer opening this account

gets a free cheque book. The bank offers Any Branch Banking facilities (ABBS) to its customer.

 

(iii) Fixed Deposit

Tenure of fixed deposit and its prevailing interest rate and the interest rate of other deposits, ( see

Annex 4)

  Features:

a. Fixed Deposit can be opened with a minimum balance of NRs. 10,000

b. Payable on maturity

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c. Penal interest is levied on withdrawal of fixed deposit prior to maturity

d. Interest is payable monthly

e. Tax is deducted at source from the interest on saving deposit as per the income Tax Act,

2058 (2001)

f. Nomination facility is available

g. Strict confidentiality is assured

2.8.2 Loans

(i) Housing Loan

ADBL understand that buying a home is a long-term financial commitment. So it provides the

loan to its customers where the customers are supposed to pay the interest on a quarterly basis

and the amount within the period of 5 – 15 years.

(ii) Auto Loan

It provides the auto loans for the light vehicles like: van, car, motorcycle. The loan scheme can be

structured over 5 -15 years at flexible EMI (Equated Monthly Installments).

(iii) Education Loan

Education is the most important investment one makes in life. Higher studies and specialization

in certain fields call for additional financial support from time to time. For this ADBl is financing

for the student those who want peruse their career in abroad, whether pursuing a bachelor

graduate or post-graduate degree.

(iv) Overdraft Loan

We offer financing to meet your company's working capital requirements, starting from the

purchase of raw material to the financing of receivables. This facility can be provided as an

overdraft with tenures up to 365 days. 

(v) Term Loan

We finance capital expenditures of businesses in the form of Term Loan for periods of two to

seven years. Term loans are generally secured by first charge on fixed assets. Generally, this is a

long term loan for acquiring or purchasing machinery, equipment, land and building.

(vi)Loan against gold silver

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During festivals, marriages, personal contingencies and other social commitments ADBL

provides loans against gold, silver.

(vii) Loan against fixed deposit

Concessional short term loans provided against security of fixed deposits with ADBL.

(viii) Foreign Employment Loan

For the people those who want to take up the dream job abroad it provide this loan facility from

any of its branch offices.

(ix) Agricultural loan

ADBL is mainly focused in serving the farmers and it provides the agricultural lone in different

form like, Agro production, agro business, agro tools, agro industry varying on different interest

rate depending upon the policy of the organization.

2.8.3 Other services

(i) Remittance

In order to exploit the benefits of money transfer services the Bank had launched its own new

product ADBL REMIT in last year. It also provides different types of remittance facilities under

agreement with Express, Western Union, Easy Remit, and Instant cash, Everest Bank, Bank of

Kathmandu, Nabil Bank and Siddhartha Bank Ltd. This facility is not offered through all bank

branches. Bank should provide remittance facilities in other branch offices also and ADBL

should explore the demand to expand the services further throughout the network.

(ii) Swift

SWIFT system which serves as a safe, secure communication carrier to improve efficiency and

speed in fund transfer is successfully implemented in the bank. The bank needs to increase

foreign currency transaction volume to make SWIFT a profitable business.

(iii) Safe Deposit Locker

Safe deposit locker is an important service which gives the customer a facility for safe keeping of

articles by hiring a locker from the Bank. Locker facility is primarily intended for the benefit of

account holders. ADBL has safe deposit locker facility at corporate office Kathmandu. This

facility is not offered through all bank branches. Bank should explore the possibilities of

extending these services in other branch offices where this can be done a profitable way.

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(iv) Information Service

ADBL expand the process and effective of information dissemination to market. This includes

traditional methods such as leaflet and advertisement as well as modern methods such as should

offer SMS service for enabling the customers/non customers to make queries/information.

(v) Automated teller machine (ATM)

In order to facilitate the customers ADBL has recently started installation of ATM machines. This

ATM facility is now available in the head office and is in the process of installing in the other

branches.

2.9 DEPARTMENTATION

2.9.1 Customer Service Department

Customer service is the front desk of any organization. It is the place where the customer makes

the first contact with the clients because they can get answer to almost all of its queries regarding

the function and services of the organization.

Functions carried out at CSD

Providing the answer regarding different services, which the bank is providing, along with

their features.

Opening of new account.

Answering the customer queries regarding:

New account

Existing account information

Telephone handling

Collecting the deposit and the account payee cheque

Producing the different documents at desk:

Bank statement

Check book as per the demand of the customers

2.9.2 Clearance Department

Clearing in the bank is required when there are cheques from different other commercial banks.

Generally, central bank is doing this function. Such function takes place under the observation

and presence of the Nepal Rastra Bank. This department makes an entry of the cheques of other

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banks in the clearing items. These cheques of other bank are deposited by the account holder of

ADBL. Instead of going to the other bank they deposit the cheque at ADBL. This is outward

cheque for ADBL .The staffs of ADBL visit the NRB”s clearing house twice a day and submit

the cheque to the respective bank and collect the cheque of ADBL as well. These collected

cheques are inward cheque for needed to be verified and if it is approved then the account holder

is debited and the Head Office is credited. The head office verifies it again and then debits itself

and credit the other bank for instance standard chartered bank. Finally, the person who deposited

in the standard chartered bank is credited. If cheques are returned then they should be informed at

the clearing house of NRB in the evening counter and the cheques are returned the following day.

Different activities carried out at clearing department:

Receiving inter-banks cheque.

Endorsing the cheques.

Keeping record of clearing cheques as well as returned cheques.

Receiving the cheques of IPO.

Forward inter-banks cheque to head office.

2.9.3 Remittance Department

Remittance is generally thought to contribute saving and investment thus leading to economic

growth. Nepalese economy is characterized by remittance economy. Customers who are going to

other country open this type of account.

The procedure of remitting the money:

1. Firstly, the sender visits the agent in the foreign country. He fill up the form in the

prescribed form and deposit the money (in FCY) to remit paying certain amount.

2. Secondly, he gets a secret code of certain digit (normally 10 to 13 digits)

3. Thirdly, the sender make confirms the code and conveys to the receiver in the receiving

location.

4. Fourthly, the receiver visits the local agents (probably the prescribed one by the sender)

with the valid identity.

5. Finally, the remitting agents pay the amount in the equivalent (LCY) to the receiver. The

entire procedure is done through web technology.

2.9.4 Marketing Department

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ADBL is providing its customer service transforming itself from traditional banking to

commercial banking based on market research and innovative product development backed by

modern technology. The key activities are:

Enable innovation and development of new products.

Provide and expand customer service.

Strengthen market section to conduct scientific market research and innovative product

development.

Use modern technology in urban areas to attract new customers and retain customers

through customer service.

Upgrade marketing resources to ensure that innovative new products and services are

marketed effectively.

Provide training to marketing staffs.

Develop and implement a comprehensive marketing plan.

2.9.5 Human Resources Department

Human Resource has been a major part of ADBL. The bank has a culture which has grown with

people who have been in the bank for a long time and there is resistance to change. It is getting

difficulty to ensure from the current working condition of the bank that the employees are highly

skilled, both technically and in terms of knowing ADBL business, and its corporate aims and

objectives, policies and strategies, to deliver a high level of service to the customers. ADBL is

involving itself in hiring competent staff from the job market as well as engage existing

workforce and make them capable of achieving the HR Strategic Priorities that are in alignment

with the vision, mission and values of the bank. The key activities are:

Creating and implementing an organization that aligns with the overall ADBL mission

and Strategic Plan and facilitates the most efficient way to accomplish the work.

Creating an organizational structure that provides as many opportunities as possible for

lateral and upward movement of staff to build upon expertise.

Cross-train employees to allow for deployment of staff to respond to workload

fluctuations and to improve job satisfaction.

Foster a climate that values inclusion to build and maintain a highly-qualified and diverse

workforce.

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Align employee performance expectations with strategic initiatives and organizational

goals and objectives.

2.9.6 Credit Management Department

This department of ADBL streamlines the credit and collection function to reduce credit risks,

improve customer retention and enhance cash flow. The key activities are:

Reviewing, updating and consolidate policies, procedures and manual.

Assigning loan officers responsibilities and educate on performance measurements.

Offer Insurance coverage along with loan/products.

Building linkages with external service providers in insurance (e.g. Deposit and Credit

Guarantee Corporation).

Strengthen Assets and Liability Management Committee (ALCO) and providing updates

on risk management.

Formulating and implementing action plan to deal with problem loans.

Designing and implementing monitoring and supervision system.

2.9.7 Management Information and IT Department

ADBL is ensuring its sustained operation and maintenance of IT services by completing the

implementation of CBS. The key activities are:

Completing its implementation of CBS.

Strengthen information security system by publishing bank’s formal IT policy and other

different policies with necessary operating manuals.

Strengthen bank’s IT capacity by reviewing IT organization structure and providing

specialized training to its core IT team with proper job description and authority.

Ensuring availability of accurate MIS reports from newly implemented CBS.

Ensuring proper IT operation management.

Up gradation of internet and email services.

Ensuring strong Information system (IS) audit mechanism

Applying outsourcing arrangement to ensure effective maintenance of IT infrastructure.

21

2.9.8 Treasury Department

ADBL has the strong treasury function overseeing the entire fund management activities and

foreign currency dealing thereby maximizing the return to its shareholders.The key activities

performed by this department are:

Appointing appropriate/adequate manpower at treasury division.

Preparing and implement treasury procedure manual including investment policy and

policy/ procedure related to foreign currency transactions.

Providing train to existing staff to deal with all kind of treasury related transaction.

2.9.9 Internal Audit Department

ADBL has competent in-house internal audit functions which is in additional regular audit is

capable of IT and Risk based audit and will provide valuable input to the bank for strengthen its

internal control and mitigating various risk. The key activities that are performed by this

department are:

Appointing internal audit expert who shall head the division.

Amending existing internal audit manual in line with the risk management policy and

requirement of IT audit.

Introducing frequent training program to audit staffs.

2.9.10 Risk Management Department

This department manages and control market, credit and operational risks in such a manner so as

to optimize earnings from carrying risks and at the same time ensuring that the risks are kept

within manageable levels on the basis of benchmarks laid down. A bank is exposed to many

risks, mostly among them is credit, operational and market risk. In order to mitigate these risks,

the bank has prepared number of policies, procedures and manuals. The bank is exposed to high

credit risk citing the reason of poor quality loans; collateral oriented lending and inadequate

credit related policies. Similarly traditional way of working, poor management exposure, high

operating expenses and lack of required manpower to operate commercial banking activities as

well as poor IT.

2.9.11 Finance and Account Department

(i) Finance and Financial Management Policy and Procedures

22

ADBL will separate its policies and procedures and prepare a consolidated procedure manual

covering its entire banking operations allowing its staff to work smoothly and in a uniform

manner. The Key Activities are:

Review existing manuals, procedures and regulations as well as circulars.

Separate policy document from the procedural document.

Prepare operation manual covering credit and banking operations.

Prepare adequate staff for implementation of the operation manual.

Implement operational manual effectively.

(ii) Accounting Strategy

ADBL prepare its accounting policy and accounting manual incorporating international best

practice (including Charts of Account) and implement the same allowing it to comply with the

statutory reporting as well as completion of financial statement within the statutory time frame.

The Key Activities are:

Preparation of comprehensive accounting manual incorporating accounting principal,

reporting forms and accounting procedures.

Effective implementation of accounting manual.

Clearing old and obsolete items from its financial statement.

Clear the items in the existing inter-branch accounts and introduce new inter-branch

system.

23

Table 6:Profit/loss account (2010/2011)

S.no Particulars 2010/11

1 Interest Income 6,101,817 ,522.03

2 Interest Expenses 2,1 16,489,366.61

Net Interest Income 3,984,698,515 .42

3 Commission & Discount 261,740,973.49

4 Other Operating Income 322,223,986.01

5 Exchange Fluctuation Gain -

Total Operating Income 4,568,663,114 .92

6 Personnel Expenses 2,209,114,434.73

7 Other Operating Expenses 376,622,882.89

8 Exchange Fluctuation Loss 1,268,597.98

Operating Profit Before Provision For Possible Loss 1,981,657,199.32

9 Provision For Possible Loss 2,504,030,906.77

Operating Profit -522,373,707.45

10 Non-Operating Income 105,562,274.41

11 Loan Loss Provision Written Back 2,182,828,111.44

Profit From Regular Activities 1,766,016,678.40

12 Income/Expenses From Extra Ordinary

Activities

367,166,143.98

Net Profit From All Activities 2,133,182,822.38

13 Employee Bonus Provision 158,013,542.40

14 Income Tax Provision 398,984,194.56

This Year 398,984,194.56

24

Up To Last Year -

Deferred Tax Provision 789,296,096.32

Net Profit/Loss 2,365,481,181.75

The major source of interest income from which the bank earns Rs 6101.18 million and it pays to

its deposit holders Rs 2116.19 million.

The total operating income after deducting commission and other operating income is Rs 4568.66

million.

Operating profit after reducing personal expenses, other operating expenses and exchange

fluctuation losses is Rs 1981.66 million.

The bank has separated Rs 2504.03 million and now its operating loss would be NPR 522.37

million.

Profit from regular activities after adding net operating income and loan loss provision written

back is Rs 1766.02 million.

Net Profit after adding income from extra ordinary activities is Rs 2133.18 million.

Net Profit for the Fiscal Year 2010/11 is Rs 2365.48 million after reducing employee bonus

provision and income tax provision and adding deferred tax provision.

Table 7: Share Value of Agricultural Development Bank Limited

Last Traded

Date

Last Trade

Price

Net

Chg.

%Chang

eHigh Low

Previous

CloseQuote

2012-07-26 Rs. 177 Rs.-7 -3.80Rs.

181

Rs.

175Rs. 184

ADB

L

http://www.nepalstock.com/companydetail.php?StockSymbol=ADBL

The share value as on 8/07/2012 is NPR 184 per share. The highest share value is NPR 177 per

share and the lowest share value NPR 175 per share. Net change in the price after the last

transaction was NPR -7. This indicates that the price of the share has decreased from NPR 184 to

NPR 177.

Table 8: Market Capitalization

25

Listed

Shares

Paid

Up

Value

Total Paid Up

Value

Closing

Market

Price

Market

Capitalization

Market

Capitalization

Date

30,375,000.00 Rs. 100Rs.

3,037,500,000.00Rs. 177 Rs. 5,376,375,000.00 2012-07-26

http://www.nepalstock.com/companydetail.php?StockSymbol=ADBL

The number of listed share is 30,375,000 and the Paid Up value of EBL is NPR 100 per

share. Therefore, the total paid up value is NPR 3,037,500,000. The closing price as on

8/07/2012 is NPR 177 and the Market Capitalization is NPR. 5,376,375,000.

2.10 SWOT ANALYSIS OF ADBL `

SWOT analysis refers to the analysis of internal and external environment. Internal environment

consists of strength and weakness of the organization whereas external environment consists of

opportunity and threats.

Strength

One of the oldest banks operating in the country. Hence, it has a strong and reliable brand

image.

Support of government and donor agency like Asian Development Bank.

Execution of core banking system

Wide network branch.

Human resources of ADBL Bank are well trained and are dedicated toward its bank.

Strong corporate culture that values customer satisfaction and quality services.

Weakness

Lack of trained manpower to operate CBS.

The ADBL website is not updated.

ADBL has not yet introduced the e-banking service to its customers.

The bank has not been able to provide the ATM facility.

Opportunity

26

Increase in number of industries involved in trading of goods and services.

Development of advanced technology to increase efficiency of business.

The increasing need of banking in the growth of country's economy.

Abundant human resources are available in market due to which ADBL can recruit skill,

qualified and knowledgeable human resources.

Threats

High competition from other increasing numbers of commercial banks.

Political instability within the country.

Innovative products and services of the competitors.

2.11 COMPUTERIZATION IN AGRICULTURAL DEVELOPMENT BANK

LIMITED

The bank is fully computerized. Employees have access to computer from the assistant level

onwards. They use Local Area Network (LAN) to share data over the network. The organization

is in the implementation process of adopting TEMENOS T24 software which is the most

technically advanced banking system available today.

It pairs the most comprehensive and most powerfully flexible business functionality with the

most advanced and scalable architecture. T24 is built on open architecture, offers low cost of

ownership and uses established standards such as HTTP, XML and J2EE. T24 is available as a

model bank implementation, with best practice processes built in, or a more tailored

implementation for clients preferring differentiation.

Employees at different level have access to different part of the system. Similarly their authorities

are also determined depending on the department they are working in. Eg. Employees of

Customer Service Departments have access to account and account opening where as employees

of credit department has access to loan account and interest status of clients, etc. Each employee

has their own User Identification to enter the system and their authority to use the information

system. The Information Technology Department will then set the access level for their employee

as per their designation, department and as per the instruction of their supervisor.

The IT department is centralized in their Head Office. If any problem occurs they send the IT

staffs to the concerned branch to fix such issues. IT department maintains security over their

network. They monitor employees’ activities in the network. Social Networking websites and

27

personal e-mails are blocked. The USB ports are also blocked to ensure data confidentiality.

Employees also have to sign contract regarding the privacy issues of the bank before joining the

organization. They are using Kaspersky Anti-Virus 2012 to protect the network. Closed Circuit

Television (CCTV) cameras are fitted in different location of the bank’s premises to monitor the

activities of both staffs and customers.

2.12 COMPETITORS

2.12.1 Comparative Analysis with its major competitors regarding deposit collection

The unaudited Quarterly data of ADBL along with its major competitors RBB, NBL, NABIL and

NIBL are analyzed along with its major competitive factors. Table 9 shows the quarterly data of

two consecutive fiscal year that exhibits the growth rate and growth rate percentage of the deposit

over the two year period.

Table 9: Deposit Growth rate of ADBL and its major competitors (Rs in million)

Major

Competitor

s

II Qtr

FY

2065/6

6

III Qtr

FY

2065/6

6

IV Qtr

FY

2065/6

6

I Qtr

2066/6

7

II Qtr

FY

2066/6

7

III Qtr

FY

2066/6

7

IV Qtr

FY

2066/6

7

I Qtr

FY

2067/68

Quarterly

Growth

rate

Quarte

rly

Growt

h %

NBL 4311.0 4260.0 4463.0 4463.0 4320.0 4080.0 4241.0 4083.0 -35.51 -0.87

RBB 6226.0 6067.0 6809.0 6565.0 6310.0 6121.0 6862.0 6266.0 23.05 0.37

NABIL 3385.0 3578.0 3735.0 4117.0 4402.0 4252.0 4641.0 4635.0 189.30 4.08

NIBL 3891.0 4248.0 4670.0 4851.0 4734.0 4767.0 5009.0 4886.0 130.29 2.67

ADBL 3305.0 3309.0 3515.0 3367.0 3344.0 3090.0 3246.0 3096.0 -36.62 -1.18

National

Total

47846.

0

50256.

0

55514.

0

57677.

0

58656.

0

58600.

0

63128.

0 61950.0 2063.39 3.33

Source: nrb.org.np

The quarterly data for the last two years meticulously shows that deposit of ADBL decreases

from Rs. 3305.0 million in Second quarter of FY 2065/66 to Rs. 3096.0 million in First quarter of

28

FY 2067/68 registering the average annual growth rate of Rs. -36.62 million (Decreases by -

1.18%). The decreases in deposit collection almost by 1.18% revealing the fact that the

decreasing trend is highest in case of ADBL among its major competitors. The decreasing trend

has a negative impact on overall financial growth of ADBL. In that case, the only option to

compensate this decreasing trend is either explore new income generating sources by expanding

the business or by substantially develop new policy to lure deposits from general public.

2.12.2 Market Share of ADBL and its competitors in case of deposit collection

The market share of ADBL and its competitors in case of deposit collection has been shown

below with the help of the following along with its major competitors in case of deposit

collection.

Table 10: Market Share of ADBL and its competitors in case of deposit collection

Market Share (%)

Major

Competitors

II Qtr

FY

2065/66

III Qtr

FY

2065/66

IV Qtr

FY

2065/66

I Qtr

FY

2066/67

II Qtr

FY

2066/67

III Qtr

FY

2066/67

IV Qtr

FY

2066/67

I Qtr

FY

2067/68

NBL 9.01 8.48 8.04 7.74 7.36 6.96 6.72 6.59

RBB 13.01 12.07 12.27 11.38 10.76 10.45 10.87 10.11

NABIL 7.07 7.12 6.73 7.14 7.50 7.26 7.35 7.48

NIBL 8.13 8.45 8.41 8.41 8.07 8.13 7.93 7.89

ADBL 6.91 6.58 6.33 5.84 5.70 5.27 5.14 5.00

Source: nrb.org.np

29

Fig 4: Market share of ADBL and its major competitor in case of deposit collection

The above table and the pie chart shows that RBB has a major share of deposit among five

participating organization whereas ADBL has a lowest share of deposit. On the other hand,

NABIL and NIBL has relatively consistent market share over the period of time.

2.13 HUMAN RESOURCE ANALYSIS

The staff strength of the bank is 3190 in the fiscal year 2011-2012. It is the considered that the

progress and success of any organization depends upon the knowledge, skills and motivation

level of the workforce. Human Resource has been a major part of ADBL’s problems in the past.

The bank has a culture which has grown with people who have been in the bank for a long time

and there is resistance to change. It is getting difficulty to ensure from the current working

condition of the bank that the employees are highly skilled, both technically and in terms of

knowing ADBL business, and its corporate aims and objectives, policies and strategies, to deliver

a high level of service to the customers.

The bank has been taking special interest in the development of its human resources by imparting

employee training in various aspects of banking and relevant subjects. The bank has been

conducting special program on Management Development to bring positive swing in the working

attitude of senior officers. ADBL considers training as an important investment as it helps to

develop competency among the employees. Also it has been sending the employee for the higher

education in foreign country so as to make them more competent, attending of EMBA classes.

2.13.1 Human Resource Structure

Based on the information furnished by ADBL Manpower Management Division there are total

3190 total no of staffs.

30

Table 11: Total No of Staffs

Special Class 5

First Class Officer 46

Second Class Officer 242

Third Class Officer 1022

Assistant First Class 930

Assistant Second Class 536

Assistant Third Class 47

Support Staff 362

Total 3190

Source: ADBL (F.Y.2011/2012)

Table 12: Staff by Qualifications

Qualifications Number of Staff Percent

PhD 3 0.03

Masters Degree 390 11.17

Graduate 850 24.22

Higher Secondary 1163 33.14

SLC 1103 31.43

Total 3509

Source: ADBL (F.Y.2010/2011)

Table 13: Staff by background

31

Source: ADBL (F.Y.2010/2011)

32

Educational Background Number of staff Percentage

Staff with Management background 1254 35.74

Staff with Agricultural background 1028 29.30

Staff with other background 1227 34.97

Total No of staff 3509 100

Table 14: Staff by number of years of service

Years of Experience Number of staff Percent

< 25 years 323 9.20

20-25 years 1427 40.67

15-20 years 351 10.00

10-15 years 426 12.14

< 10 years 982 27.99

Total 3509

Source: ADBL (F.Y.2010/2011)

2.13.2 Recruitment Method

Recruitment refers to the process of attracting, screening, and selecting a qualified person for a

job. Recruitment helps in selection which is necessary for filling up vacancies in the organization.

There are two major methods of recruitment.

Internal Source: An organization can recruit internally through promotion, job rotation,

employee referral and job posting

External Source: An organization can recruit externally through on campus interviews,

advertisement in media, employee agencies, etc

ADBL follows both internal and external recruitment method which is through promotion, job

rotation and advertisement in media to attract candidates. If candidates apply through the media

then the fresh candidates will have to give various tests like written test, interview, personality

test, etc. The recruitment process has to be fair and should give priority to the most competitive

candidate.

33

3.1FINDINGS

ADBL share capital structure is owned by both shareholder and public, i.e.65% by

shareholder and 35% by public.

ADBL has just started providing ATM facility, and is available in head office.

The share price is higher than the par value. The shareholder can benefit from selling

their shares at the market rate to earn capital gain. However, it was noted that the share

price of ADBL was lower than other commercial banks.

Nearly 65% staff have acquired academic qualification either Higher Secondary or below

where as 35% staff have completed under graduation and above. Similarly, only 36 % of

staff has educational background of management whereas other 65% are from other field.

The deposit collection has decreased in almost all banks. However, decreases in deposit

collection by 1.18% reveal the fact that the decreasing trend is highest in case of ADBL

among its major competitors. Likewise it was also found that among five participating

organization over the study period of two years ADBL has a lowest share of deposit.

Net Profit for the Fiscal Year 2010/11 is Rs 2365.48 million.

TEMENOS T24 is an information system has recently been implemented.

ADBL has segregated its activities into various departments like CSD, Remittance,

Clearance Department, etc for its smooth operation.

ADBL has developed various products to enhance its customer base and to satisfy the

customers.

The bank has plenty of strength and opportunity however the bank must be careful to

improve the weaknesses and be aware of the threats posed by the external environment.

34

3.2 SUGGESTION

ADBL may update itself with to the latest technology and implement it to provide prompt

and reliable service to its customers.

Since the bank has not started internet banking and customer are not aware of most of the

things such as posting a list of services that are rendered to the customers inside the bank

premises, demo of the services in the bank website; can be done to make the customers

aware, and use the services provided through internet and mobile banking of the bank.

The fact that the young employee are more energetic and creative and it is recommended

to release old or the employee having enough experience in the same field by introducing

VRS (Voluntary Retirement Scheme) program.

Capabilities of managers in terms of leadership should be developed by providing

leadership development training and espouser.

ADBL should offer a wider product range through a broader distribution channel.

It may update its website to provide needed information to the general public.

The information that is provided in the internet should be both in the English and Nepali

language so that all general public could easily understand.

3.3 CONCLUSION

ADBL with the main objective of providing institutional credit for enhancing the production and

productivity of the agricultural sector in the country has a wide network and a broad customer

35

base. The share price is higher than the par value. The shareholder can benefit from selling their

shares at the market rate to earn capital gain. They should try to increase the share price of ADBL

as it is very low to that of competitors.

This study is based on both the primary and secondary data that includes observation, informal

discussion, interaction with the staff of the bank moreover, the Annual Report of the bank of year

2008/2009,2009/2010 and 2010/2011, and the website and other different related brochures

related to the bank. The objective of analyzing the functions of the commercial bank, to know the

general and operational activities of the ADBL, having the overview of departments and

conducting the SWOT analysis of Agricultural Bank Limited all are covered.

36