1.

1 Industry Profile
History of Nepalese Banking System
The initiation of formal banking system in Nepal commenced with the establishment in 1937
of Nepal Bank Limited (NBL), the first Nepalese commercial bank.9 The country's central
bank, Nepal Rastra Bank (NRB) was established in 1956 by Act of 1955, after nearly two
decades of NBL having been in existence. A decade after the establishment of NRB, Rastriya
Banijya Bank (RBB), a commercial bank under the ownership of His Majestys Government
of Nepal (HMG/N) was established. Thereafter, HMG/N adopted open and liberalized
policies in the mid 1980s reflected by the structural adjustment process, which included
privatization, tariff adjustments, liberalization of industrial licensing, easing of terms of
foreign investment and more liberal trade and foreign exchange regime was initiated. With
the adoption of liberalization policy, there has been rapid development of the domestic
financial system both in terms of number of financial institutions and as ratio of financial
assets to the GDP. As of July 2005, the number of commercial banks has reached 17 and their
branches numbered 375. A total of 60 finance companies and other Development Banks and
numerous credit cooperatives have also been established. Total financial assets in 2004/2005
reached around 54.09 percent of GDP and the M2/GDP ratio, which shows the financial
sector development or financial deepening increased from in 12.4 percent in 1975 to 50.9
percent in 2000.
In the context of banking development, the 1980s saw a major structural change in financial
sector policies, regulations and institutional developments. HMG/N emphasized the role of
the private sector for the investment in the financial sector. The financial sector liberalization,
started already in the early eighties with the liberalization of the interest rates, encompassed
further deregulation of interest rates, relaxation of entry barriers for domestic and foreign
banks, restructuring of public sector commercial banks and withdrawal of central bank
control over their portfolio management (Acharya et al, 2003). These policies opened the
doors for foreigners to enter into banking sector under joint venture. Consequently, the third

commercial bank in Nepal, or the first foreign joint venture bank, was set up as Nepal Arab
Bank Ltd( now called as NABIL Bank Ltd ). in 1984.
There after, two foreign joint venture banks, Nepal Indosuez Bank Ltd. (now called as Nepal
Investment Bank) and Nepal Grindlays Bank Ltd (now called as Standard Chartered Bank
Nepal Ltd.) was established in 1986 and 1987 respectively. There after, another 12
commercial banks have been established within the period of 12 years. Nepalese banking
system has now a wide geographic reach and institutional diversification. Although, Nepalese
financial sector is dynamic, a lot of scope for development of this sector exists. This is
because the banking and non-banking sectors have not been able to capture all the
potentialities of business till this time. It is evident from the Rural Credit Survey Report that
the majority of rural credit is supplied by the unorganized sector at a very high cost perhaps
being at two or three time of the formal sector - suggesting that the financial sector is still in
the path of gradual development. Overdue loans and inefficiency of the older and the larger
of commercial banks have aggravated and have been made to compete with the new trim
banks with no rural operations. Also, the commercial banks, domestic or joint venture have
shown little innovation and positive attitude in identifying new areas of saving and
investment opportunities. Following table reflects the present development of commercial
banking institutions in Nepal.
Present Scenario:
The Nepali financial system consists of banking and non banking sector. Bankingsector
consists of Nepal Rastra Bank (NRB) as the Central Bank and theCommercial Banks. The
non banking sector includes, financial institutions licensed by NRB like Development Banks,
Finance Companies, Microfinance DevelopmentBanks, Coop Financial Institutions, NGOs
undertaking banking activities and thoseunder different Acts like Insurance Companies,
Citizens Investment Trust, PostalSavings Offices, Employees Provident Fund, Nepal Stock
Exchange andCommodity Markets.

Nepal Bank Ltd. remained the only financial institution of the country until the foundation of
Nepal Rastra Bank is 1956 A.D. Due to the absence of the central bank, Nepal Bank has to
play the role of central bank and operate the function of central bank. Hence, the Nepal
Rastra Bank Act 1955 was formulated, which was approved by Nepal Government
accordingly, the Nepal Rastra Bank was established in 1956 A.D. as the central bank of
Nepal. Nepal Rastra Bank makes various guidelines for the banking sector of the country.
A sound banking system is important for smooth development of banking system. It can play
a key role in the economy. It gathers savings from all over the country and provides liquidity
for industry and trade. In 1957 A.D. Industrial Development Bank was established to
promote the industrialization in Nepal, which was later converted into Nepal Industrial
Development Corporation (NIDC) in 1959 A.D.
Rastriya Banijya Bank was established in 1965 A.D. as the second commercial bank of
Nepal. The financial shapes for these two commercial banks have a tremendous impact on
the economy. That is the reason why these banks still exist in spite of their bad position.
As the agriculture is the basic occupation of major Nepalese, the development of this sector
plays in the prime role in the economy. So, separate Agricultural Development Bank was
established in 1968 A.D. This is the first institution in agricultural financing.
For more than two decades, no more banks have been established in the country. After
declaring free economy and privatization policy, the government of Nepal encouraged the
foreign banks for joint venture in Nepal.
Today, the banking sector is more liberalized and modernized and systematic managed. There
are various types of bank working in modern banking system in Nepal. It includes central,
development, commercial, financial, co-operative and Micro Credit (Grameen) banks.
Technology is changing day by day. And changed technology affects the traditional method
of the service of bank. Banking software, ATM, E-banking, Mobile Banking, Debit Card,

Credit Card, Prepaid Card etc. services are available in banking system in Nepal. It helps
both customer and banks to operate and conduct activities more efficiently and effectively.
For the development of banking system in Nepal, NRB refresh and change in financial sector
policies, regulations and institutional developments in 1980 A.D. Government emphasized
the role of the private sector for the investment in the financial sector. These policies opened
the doors for foreigners to enter into banking sector in Nepal under joint venture.
Some foreign ventures are also established in Nepal such as Nepal Bangladesh Bank,
Standard Chartered Bank, Nepal Arab Bank, State Bank of India, ICICI Bank, Everest Bank,
Himalayan Bank, Bank of Kathmandu, Nepal Indo-Suez Bank and Nepal Sri Lanka
Merchant Bank etc.
The NRB will classify the institutions into A B C D groups on the basis of the
minimum paid-up capital and provide the suitable license to the bank or financial institution.
Group A is for commercial bank, B for the development bank, C for the financial
institution and D for the Micro Finance Development Banks.
Generally banks in Nepal are opened 9 am to 3 pm Sunday to Thursday and 9 am to 1 am on
Friday. But nowadays most of banks in Kathmandu are opened throughout the week.
There are 32 commercial banks, 79 development banks, 79 financial companies, 18 micro
credit (Grameen) development banks and 16 saving and credit co-operation(licensed by
Nepal Rastra Bank) are established so far in Nepal. The bank with the largest network in
Nepal is The Nepal Bank Ltd. These commercial banks and financial institutions have played
significant roles in creating banking habit among the people, widening area and business
communities and the government in various ways.

1.2 Company profile

Himalayan Bank Limited is a commercial bank which was established in 1993 in joint venture
with Habib Bank Limited of Pakistan. Despite the cut-throat competition in the Nepalese
Banking sector, Himalayan Bank has been able to maintain a lead in the primary banking
activities- Loans and Deposits.
Legacy of Himalayan lives on in an institution that's known throughout Nepal for its innovative
approaches to merchandising and customer service. Products such as Premium Savings Account,
HBL Proprietary Card and Millionaire Deposit Scheme besides services such as ATMs and Telebanking were first introduced by HBL. Other financial institutions in the country have been
following our lead by introducing similar products and services. Therefore, we stand for the
innovations that we bring about in this country to help our Customers besides modernizing the
banking sector. With the highest deposit base and loan portfolio amongst private sector banks
and extending guarantees to correspondent banks covering exposure of other local banks under
our credit standing with foreign correspondent banks, we believe we obviously lead the banking
sector of Nepal. The most recent rating of HBL by Bankers Almanac as countrys number 1
Bank easily confirms our claim.
All Branches of HBL are integrated into Globus (developed by Temenos), the single Banking
software where the Bank has made substantial investments. This has helped the Bank provide
services like Any Branch Banking Facility, Internet Banking and SMS Banking. Living up to
the expectations and aspirations of the Customers and other stakeholders of being innovative,
HBL introduced several new products and services. Millionaire Deposit Scheme, Small and
Medium Enterprises Loan, Pre-paid Visa Card, International Travel Quota Credit Card,
Consumer Finance through Credit Card and online TOEFL, SAT, IELTS, etc. fee payment
facility are some of the products and services. HBL also has a dedicated offsite Disaster
Recovery Management System. Looking at the number of Nepalese workers abroad and their
need for formal money transfer channel; HBL has developed exclusive and proprietary online
money transfer software- HimalRemitTM. By deputing our own staff with technical tie-ups with
local exchange houses and banks, in the Middle East and Gulf region, HBL is the biggest inward

remittance handling Bank in Nepal. All this only reflects that HBL has an outside-in rather than
inside-out approach where Customers needs and wants stand first.HBL recently completed its 21
years of banking in the Nepalese banking industry. We take great pride in being able to meet the
expectations of the Customers, employees, shareholders, regulators and other stakeholders who
have been providing relentless support to us through these 21 years. HBL continues to be one of
the leading banks in Nepal and we strongly believe we can take the Bank even to greater heights
in the upcoming future.
We have been pioneering many products and services in Nepal and innovation continues to be
the order of the day for HBL. Like in the past, we feel we stand a good chance of introducing
new products and services to the banking industry of Nepal where not only our customers but
customers being served by other banks and financial institutions would also benefit. With a
strong capital base, quality human resource and strong governance in place, we can only move
forward and upward.
Going forward, the focus of the Bank in the next few years will be around capacity building of
its human resource, diversification of its portfolio, enhancement of returns, introduction of new
products and services and building a robust risk management system to make it resilient and
adversity proof.

1.3 Vision, Mission, Goals and Objectives

Vision:
Himalayan Bank has the vision of becoming a leading bank of the country by gaining substantial
business growth through premium products and services to cus-tomers, thus ensuring attractive
and substantial returns to all our stakeholders.

Mission:
Himalayan Banks mission is to become the preferred provider of quality financial services in the
country.

There are two components to our mission: preferred provider and quality financial services.
We believe that our mission will be accomplished only by satisfying these two important
components with the customer at the focal point of all our efforts.

Objective:
To become the Bank of first choice is the main objective of the Bank.

1.4 Origin of the Report:

The purpose of this report is to focus practical experiences of HBL in my day-to-day work as a
part of my internship period.

Methodology what I have applied to prepare this Report

1.
2.
3.
4.

Observation
Projection Techniques
Depth Interviews
Interaction with the Customers and Colleagues

Sources of Data
1.
2.
3.
4.
5.
6.

Doing practical work in different desks

Study of old files/documents/formats
Personal investigation.
My colleagues and Customers
Collection of Data from different statements and abstracts
Internet, Brochures, annual report etc

1.5 Objective of the Report

The main objective of this report is to fulfill partial requirements of B.B.A degree program. In
order to be able to obtain the B.B.A degree program from Christ University of Bangalore, every
student is required to do internship program in a well-reputed organization for 45 days in fifth
Semester. After the internship period, each student or intern has to submit a report about the
respective organization. I have completed my internship program in Himalayan Bank Ltd and
prepared a report on the bank.
As one of the main objectives of internship is to gather job experience, I have tried to put some
of the experiences that I have learnt from my internship in this report.
The specific objectives of this report are:

1.
2.
3.
4.
5.

To present an overview of Himalayan Bank Ltd.

To appraise the performance of Himalayan Bank Ltd.
To apprise financial performance of Himalayan Bank Ltd.
To identify the problems of Himalayan Bank Ltd.
To recommend solutions for any problems of Himalayan Bank Ltd.

1.6 Methodology of the study:

Both the Secondary and Primary Sources have been used to collect data for this research paper.
1. Collection of Secondary Data:
Data regarding the operations of Himalayan Bank Ltd. and analysis of financial statement were
collected from secondary sources like annual report, Brochures, Manuals and Publications of
Himalayan Bank Ltd.
2. Collection of Primary Data:
Most of the data and information were collected from my practical experience and queries from
the executives while doing our assignment period at Himalayan Bank Ltd. Information and data
regarding products & services, interest rates & charges, banking operations, organization
structure, management personnel, and policies were collected from these sources.

1.7 Limitations of the report:

To prepare the internship I encountered some limitations. The limitations are given below1. Limitation of time was a major constraint in making a complete study, due to time
limitation. The duration was only twelve weeks. It was too limited to cover all the
banking area. Many aspects could not be discussed in the present study.
2. Lack of comprehension of the respondents was the major problem that created a lot of
confusion regarding verification of conceptual question.
3. Confidentiality of data was another important barrier that was faced during the process of
this study.

4. As being an intern, it also created some problems as I was unable to acquire hands-onexperience in all the departments, due to the banks policy of maintaining secrecy and
also because I did not get the opportunity in all the departments.