Examination of Specific Factors of the Form Affecting Profitability of Commercial Banks: A Case from Nepal

  • Anjay Kumar Mishra Srinivas University, India and Kathmandu College of Management, NEPAL https://orcid.org/0000-0003-2803-4918
  • Deepak Raj Kandel Sanker Dev Campus, TU, NEPAL
Keywords: Competitiveness, Economic Contribution, Manpower Investment, Capital Ratios, Liquidity, competitiveness, economic contribution, Manpower, investment, capital ratios, liquidity


This study investigates the determinants of operational performance in Nepalese commercial banks, with a particular focus on the roles of capital adequacy, cost-to-income ratio, and various performance indicators. The study underscores the pivotal role of maintaining an optimal level of capital adequacy and cost-to-income ratio in shaping the profitability of commercial banks.Bank size, nonperforming loans ratio, liquidity position, cost-to-income ratio, capital adequacy, and assets quality all exhibit a positive impact on overall bank performance. Prudent management of capital adequacy and cost-to-income ratio emerges as key factors influencing profitability. Analysis with one-year lagged variables reaffirms the significance of liquidity ratio, capital adequacy, and increased capital ratio in enhancing bank performance, particularly in terms of return on assets. An improved assets quality also contributes to overall bank performance. Effective liquidity management is crucial, emphasizing considerations of liquidity ratio, capital-to-assets ratio, investment-to-asset ratio, and quick ratio. Commercial banks are advised to operate within a threshold level of capital ratio, avoiding excessively high levels that may negatively impact profitability. The study recommends investing in well-trained manpower to enhance operational efficiency and customer service. In the broader economic context, the study highlights the vital role of banks in contributing to the country's development. It calls for strong supervision, monitoring, and the implementation of a one-window service in lending and investment activities. Commercial banks are encouraged to demonstrate their potential contribution to the national economy by ensuring a satisfactory rate of return on investment, efficient mobilization of savings, and strategic competitiveness


Download data is not yet available.


Abate, T. W., & Mesfin, E. A. (2019). Factors affecting profitability of commercial banks in Ethiopia. International Journal of Research and Analytical Reviews, 6(1), 881–891.

Adhikari, P. R. (2021). Efficiency, profitability and stability of Nepalese commercial banks. The Batuk, 7(2), 15–36.

Ariyadasa, C., Selvanathan, E. A., Siddique, M. A. B., & Selvanathan, S. (2017). On the profitability of commercial banks: The Sri Lankan case. Applied Economics, 49(21), 2106–2116. https://doi.org/10. 1080/ 00036846.2016.1231909

Aryal, B. (2022). DETERMINANTS OF PROFITABILITY OF COMMERCIAL BANKS IN NEPAL [PhD Thesis, Department of Economics, TU Birendra Multiple Campus]. https://elibrary. tucl.edu.np/handle/123456789/20302

Bhati, S. S., De Zoysa, A., & Jitaree, W. (2019). Factors affecting the liquidity of commercial banks in India: A longitudinal analysis. https://ro.uow.edu.au/buspapers/1646/

Bhattarai, B. P. (2020). Effects of non-performing loan on profitability of commercial banks in Nepal. https://www.indianjournals.com/ijor.aspx?target=ijor:ijim&volume=10&issue=4&article=004

Brahmaiah, B. (2018). Factors influencing profitability of banks in India. Theoretical Economics Letters, 8(14), 3046.

Budhathoki, P. B., & Rai, C. K. (2020). The effect of specific factors on bank profitability: Evidence from Nepalese banks. Journal of Economics and Business, 3(1). https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=3522019

Dang, T. C., Nguyen, T. B., Nguyen, T. Y., Trinh, T. H., & Banh, T. T. (2021). Factors affecting the profitability of listed commercial banks in Vietnam: Does agriculture finance matter? AgBioForum, 23(1), 32–41.

Gnawali, A. (2018). Non-performing asset and its effects on profitability of Nepalese commercial banks. International Journal of Research in Business Studies and Management, 5(9), 39–47.

Hakuduwal, K. (2021). Impact of bank specific factors on profitability of NEPALESE commercial banks. Tribhuvan University Journal, 36(01), 122–133.

Jha, S., & Hui, X. (2012). A comparison of financial performance of commercial banks: A case study of Nepal. African Journal of Business Management, 6(25), 7601.

Khalatur, S., & Gushcha, S. (2018). Factors Affecting Profitability of Commercial Banks and Directions of its Improvement. https://dspace.dsau.dp .ua/handle/123456789/1753

Khanal, B. (2016). Determinants of profitability in Nepalese commercial bank. Nepalese Journal of Finance, 41.

Koroleva, E., Jigeer, S., Miao, A., & Skhvediani, A. (2021). Determinants affecting profitability of state-owned commercial banks: Case study of China. Risks, 9(8), 150.

Maharjan, S. (2022). Determinants of profitability of Nepalese commercial banks [PhD Thesis, Department of Management]. https://elibrary.tucl.e du.np/bitstream/123456789/18662/1/Full%20Thesis.pdf

Marahatta, S., Devkota, S., Shrestha, S. D., Pradhan, S., & Bhandari, S. (2016). Determinants of banks performance: A case of Nepalese commercial banks. Nepalese Journal of Management, 3(1), 82–94.

Mishra, K., & Aithal, P. S. (2021a). Foreign Aid Contribution for the Development of Nepal. International Journal of Management, Technology, and Social Sciences (IJMTS), 6(1), 162–169.

Mishra, K., & Aithal, P. S. (2021b). Foreign Aid Movements in Nepal. International Journal of Management, Technology, and Social Sciences (IJMTS), 6(1), 142–161.

Mishra, K., Kandel, D. R., & Aithal, P. S. (2021). Profitability in commercial bank–A case from Nepal. International Journal of Case Studies in Business, IT, and Education (IJCSBE), 5(1), 61–77.

Njihia, J. K. (2005). The determinants of banks profitability: The case of Commercial Banks in Kenya [PhD Thesis, University of Nairobi]. http://erepository.uonbi.ac.ke/handle/11295/22733

Nsambu, K. F. (2014). Factors affecting performance of commercial banks in Uganda a case for domestic commercial banks. http://ir.must.ac.ug/handle/123456789/390

Ojha, P. R. (2018). Macroeconomics and bank-specific factors affecting liquidity: A study of Nepali commercial banks. Journal of Business and Social Sciences, 2(1), 79–87.

Poudel, V. R. (2016). Relationship of Banks Profitability with Bank’s Specific Variables of Commercial Banks in Nepal. International Journal of Economics and Management Research, 6, 1–12.

Saber Said Al-Delawi, A. (2019). Determinants of profitability in commercial banks: A field study in a sample of the Iraqi private commercial banks. International Journal of Innovation, Creativity and Change, 6(2), 266–287.

Shukla, A. N., Tewari, S. K., & Dubey, P. P. (2013). Factors Affecting Profitability of Commercial Banks: A Rural Perspective. Agricultural Economics Research Review, 26(2). https://search.ebscohost.com/login.aspx?direct=true&profile=ehost&scope=site&authtype=crawler&jrnl=09713441&AN=93281679&h=xMBXPu%2B926uTfm20Kc8mdMjxyQUc2nKT7DeGvcTfsTK63tY0gBdDM1q5b8hJFBZPx5VkghX3TDHrLlKyhkIiqw%3D%3D&crl=c

SINGH, S. K., BASUKI, B., & SETIAWAN, R. (2021). The effect of non-performing loan on profitability: Empirical evidence from Nepalese commercial banks. The Journal of Asian Finance, Economics and Business, 8(4), 709–716.

Tharu, N. K., & Shrestha, Y. M. (2019). The influence of bank size on profitability: An application of statistics. International Journal of Financial, Accounting, and Management, 1(2), 81–89.

Tuladhar, R. (2017). Impact of credit risk management on profitability of Nepalese commercial banks [PhD Thesis, Western Sydney University (Australia)]. https://search.proquest.com/openview/b266ed86c16c3eaae0fa9096c6da8d14/1.pdf?pq-origsite=gscholar&cbl=2026366&diss=y

Yadav, R. K. (2020). A Comparative Study on Profitability Position of Selected Commercial Banks of Nepal [PhD Thesis, Central Department of Management]. https://elibrary.tucl.edu.np/handle/123456789/1082Peter, D. (1988). Dictionary of Marketing Terms. Chicago: American Marketing Association (AMA), 14(3), 64-76.

Porter, Michael E. (1980). Competitive Strategy. New york: The Free Press, 48(9), 168-176.

Shakya, Bijendra M. (2004). Nepal‘s apparel sector at crossroads: Assessment of Adjustment Problems and preparation for quota free trade. Kathmandu:GAN and co-cponsored by ITC (UNCTAD/WTO), 48(9), 84-98.

Shrestha, R.K. (2001). Marketing Strategies in Textile Industry of Nepal. An unpublished Ph.D thesis to the faculty of management, T.U. Kirtipur, 78(9), 124-146.

Shrestha, S. K. (1994). Export Marketing in Nepal. Padma Educational Traders, 94(8), 64-78.

Shrestha,S.K.(2003). International Marketing Decision: Nepalese Perspective. Kathmandu:Buddha academic Publishers and distributors Pvt.Ltd, 64(8), 264- 276.

Shuptrine, F. Kelly & Osmanski, F.A (1975). Marketing‘s changing role expanding or contracting. Journal of Marketing, 39(1), 58-66.

Wali, B.M & Kalkundrikar, A.B (1993). Export Management. New Delhi-110016: Sterling Publishers Pvt.Ltd, 48(9), 24-36.

How to Cite
Mishra, A., & Kandel, D. (2023). Examination of Specific Factors of the Form Affecting Profitability of Commercial Banks: A Case from Nepal. VEETHIKA-An International Interdisciplinary Research Journal, 9(4), 13-24. https://doi.org/10.48001/veethika.2023.09.04.002