Market Trends Of Deposit In the Nepalese Private Banking Sector.

Submitted by:Devriti Rajya Laxmi Rana.

Section DA1802010152

Research methodology.Objective The primary objective of the research stands to

determine the Market trends Of Deposits In The Nepalese Private Banking Sector, to consider the customer relationship management and their marketing strategy and the Nepalese Banking Sector is represented by 7 banks studied in the project.

Hypothesis Hypothesis1: Sates that Nepalese banks have an upward trend of annual deposits.Hypotheis2: Tests the word of mouth and its relation with choosing of a bank.

Research Design Descriptive and Exploratory in nature.

Sampling technique Two-stage sampling technique

Sample target Is all the Private banks in Nepal. About 99 private banks exist.

Primary data Questionnairre1: one for testing CRM. For 350 customers.(50*7=350.)Questionnairre2:for interview purpose for the 7 individuals of the specified banks.

Secondary data 10 years of time series data of annual deposits of the 7 banks. Some may not have 10 years of deposit via annual reports.

Sample

7 banks (5 commercial and 2 development banks):• Ace Development Bank Ltd.• Himalayan Bank Ltd.• Nabil Bank Ltd.• Sanima Bikas Bank Ltd.• Nepal SBI Ltd • Laxmi Bank Ltd.• Nepal Investment Bank Ltd.

Objectives.• To determine the trend of deposits in the Nepalese private banking

sector. • To find out the market trend of deposits in the Nepalese private

banking sector.• To compare the market trend of deposits between commercial and

development banks.• To analyse some factors, i.e.; the degree of loyalty of customers

towards the bank, power of word of mouth to win customers, factors that make them choose a bank, their level of satisfaction with the bank that have a direct or indirect effect on the deposit trend.

• To analyze the marketing strategies of various private banks that affect in their deposit trend.

• To see if word of mouth effects the selection of a particular bank or banks.

• To provide recommendations accordingly.

Introduction.

• Banking in Nepal started in the 8th century in the reign of Gun Kama Dev.

• Nepal Bank Ltd. Was the first bank in Nepal estd in 1937.

• Nabil Bank was the first foreign joint venture in Nepal , with 50%shares owned by United Arab Emirates and 20% by financial institutions and rest by the general public.

• Liberalization of the financial sector begun in the 80’s but speeded up in the 90’s.

Facts • Banking sector in Nepal is one of the fastest growing industry.in the 1980’s there were

just 2 development and commercial banks only and in Mid-january 2010 there are altogether 99 commercial and development banks.And 254 banks and non-financial institute.

• Commercial bank are the strong backbone of the nepalese banking sector and alone holds more than 80% of the total assests and liabilities of the financial system.

• The deposits have had an upward trend from the year 2007.• A sector with the highest level of competition and high level of market saturation.• Banking sector today is facing bad liquidity-crisis, and their method of getting deposit is

through interest wars….. • Banks today follow the mantra “survival of the fittest” the strong gets to stay and the

weak needs to leave the game.• However government banks are preferred over private banks , due to its high credibility

Nepalese Private banks have been represented by 7 private commercial and development banks…….

SWOT Analysis Of Nepalese Private banking Sector.

Strength Weakness Opportunities Threats1.Increase in level of awareness in the general public

1.Negligence of the rural areas.

1. Expansion into the rural untouched areas.

1.Fear of liquidation due to stiff competition

2. One of the fastest growing industry in Nepal

2. Existing interest wars

2. To indulge into mergers and acquisition to increase its customer-base

2. Only the best can survive this competition. There is no space for the weak ones to grow and exist .

3. Good performance due to heavy competition.

3. Low fluidity of loans and advances.

3. To turn International via. Joint ventures, merger and acquisition.

3. Instability of the economic and political conditions .

4. Preference to Crm leading to satisfied customers.

4. Poor monitoring of Nepal Rastra Bank.

4. Instable NRB directives.

Findings and analysis.

Analysis: As the graph above clearly shows that there is undoubtedly been an upward trend of deposit in the Nepalese banking sector, be it the commercial banks or be it the development banks all of these entities are showing an upward trend in the deposit pattern but its pace does vary from bank to bank some banks have been slow and constant in gaining deposits, whereas some have banks have had a tremendous increase in their deposit pattern.

Fig.11 Analysis of Market Trend of the Annual Total Deposits.

Fig.13 Comparison of Annual Average Deposit and their Trend for Commercial and Development Banks

Analysis: As one can clearly see from fig.13 the annual average deposit trend between development bank and commercial has a vast difference though both have an upward trend. Development bank has a slow growth whereas; commercial banks have a rapid growth rate.

CRM and marketing strategy.The key essentials for marketing strategy as collectively stated by all 7 banks are:

• Maintenance of Customer Relationship Management.• Undertaking various CSR and PR activities to gain an edge over the rest.• Innovative products.• High interest rates for deposits at lowest possible cost.• Specification of how a banks product is distinct than the rest.• Creating an effective brand name and image.

All the strategy aims at increasing of deposits in the banks.

As for the CRM the analysis clearly state that there is a direct link between satisfied customers and increase in deposits and loyalty.

And the hypothesis that word of mouth is an important factor that leads the customers to choose the banks , its null hypothesis is accepted as its p-value is higher than the alpha value that is 0.05. The null hypothesis state that word-of –mouth is not influential on the customer’s to select a bank.

Recommendation Certain recommendation could be :-

1) Firstly , the government needs to put in the unused 5 billion NPRS money that it has in its account at NRB (as stated in the finance and statistic in www.nrb.org.np ) into the economy to inject liquidity into the economy.

 

2) The banks must understand the pros and cons of the unhealthy interest wars that they are fighting and adopt other healthy measures like introduce innovative products, create awareness ,involve in (CSR and PR ) etc .

 

3) The banks must concentrate more on improving their credibility and services by training their employees well .

 

4) The officials must be trained in the banks to effectively handle and manage customer relation ,as the study states that existence of a bank and its deposits depends on loyal and satisfied customer’s .

 

5) The NRB should not issue fluctuating policies like it is doing at present as based on them . the banks frame their policies ,and policy making is an expensive job .Thus NRB should understand the situation and make favourable and stable policies accordingly.

 

6) There are way too many unnecessary entries of banks in the country which leads to a scenario where supply is way greater than the demand ,the NRB should make strict policies to reduce the number of entries of banks into the country. The number to be decided should be as per the required demand in the market this reduces unnecessary competition and unnecessary liquidation is also abolished .

 

7) The banks must understand , the needs of their customers and where their customers stand . Customers today are street-smart and knowledgeable .They are not just interest driven , today ‘s customer demand credibility , good –services and good brand-recognition of the bank they want to be associated with . Banks should understand their customer need for the hour and work accordingly.

 

8) Coming to the marketing strategy, a marketing strategy determines the market success of a bank: strategy of a bank today should be customer-oriented wherein the differentiation of the products and their specification should be clearly stated in the market and instead of interest rates the customers should be driven by the products of the banks , then a healthy competition could prevail in the banking sector.

 

9) The banks are concentrated just in the urban areas, the rural areas of the country are still untouched whereas the fact is rural areas constitutes a large section of the country’s economy. The market trends of deposit will be highly favourable and affected if the banks undertook expansion strategy in the rural untouched areas this would certainly reduce competition and also encourage savings in the rural society both highly beneficial for the economy.

 

10) As the study states that word-of-mouth is not really effective in driving the customers to select a bank , gone are the days when people were blindly influenced by other’s vie, now people are smart and personal choices based on knowledge and experience, thus banks should aware themselves to this fact and concentrate more on customer satisfaction and innovative products.

Limitations• Every researcher has to face certain limitation and obstacles during their process of

completion of the research. The limitations faced during the completion of this research are as following:

• The time given (2 months) was too less for the completion of the research.• It was difficult to collect data as banks were not too open to allow retrieving their

intrinsic information.• The customers were not very experienced regarding the working of the banking sector.• The customers (few of them) were not very cooperative at the time of data collection.• According to stratified random sampling, samples of Commercial bank and

Development bank are not proportional as Development banks have strict policies and do not entertain outsiders. If secondary data was to be considered in development banks case, there was very little clarity regarding its financial highlight unlike the commercial bank?

• The research is limited to7 banks and 350 customers of these 7 banks in some of the areas of Kathmandu city.

• Therefore it is not accurate data because it is collected from only few people.• Nepalese Banking System is the vast explanation therefore it is difficult to collect the

accurate data, which is related to my topics.

Interest wars a curse to the Nepalese banking sector.(A case study on Ace.)

Effect of interest wars on Ace:• Declining profit growth rate• Increase in the cost of deposit• Increase in the operation cost• Decline in the growth of loan and advances• Slow growth of customer• Change in policy

Recommendation• Medical insurance• 365 banking/ Free ABBS• Discount card• Mobile/Home Banking• 3 in1 Saving deposit Scheme• Strategic Alliance

THANK-YOU