Determinants of Liquidity in Commercial Banks of Nepal

International Journal of Economics and Management Studies

© 2019 by SSRG - IJEMS Journal

Volume 6 Issue 8

Year of Publication : 2019

Authors : Miss. Samiksha Khanal

10.14445/23939125/IJEMS-V6I8P103

How to Cite?

Miss. Samiksha Khanal, "Determinants of Liquidity in Commercial Banks of Nepal," SSRG International Journal of Economics and Management Studies, vol. 6,  no. 8, pp. 11-16, 2019. Crossref, https://doi.org/10.14445/23939125/IJEMS-V6I8P103

Abstract:

This paper aims to identify the determinants of liquidity in Nepalese commercial banks. The descriptive research designs have been adopted for the study. The study is conducted using panel data of 10 commercial banks of Nepal with 100 observations for the period 2007/8 to 2016/17. The dependent variable is LIQ (Loan to deposit ratio) which measures liquiditywhile the independent variables are bank size,CAR (Total capital adequacy ratio), NPL (Non-performing loan to total loan ratio),ROA(Return on Asset), GDP growth rate and inflation rate. For the purpose of this study, the secondary data have been used. Random Effect Model (REM) of panel data analysis is used as a major tool of analysis.The regression results revealed that ROA has positive significant impact on loan to deposit ratio whereas ROE, Size and inflation have negative significant impact on liquidity. Similarly, CAR and GDP has negative insignificant impact on loan to deposit ratio whereas, NPL has positive insignificant impact on loan to deposit ratio. This study concludes that ROA, ROE, size and inflation are major determinants of Bank liquidity.

Keywords:

Commercial banks, Capital Adequacy Ratio, Non-Performing Loan, Return on assets (ROA),Return on equity (ROE), GDP, Inflation

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