During 2015 to 2019, there was a significant upsurge observed in the lending rate in Nepalese credit market. Interestingly, the lending amount also went up significantly in this period showing an anomalous relationship between lending and lending rate. This paper is an attempt to analyse this observed anomaly. We have estimated and examined the degree of elasticity of sectoral lending with lending rate in Nepalese context undertaking panel regression analysis covering all 28 commercial banks in operation in Nepal till mid-July 2019.The results show a positive and inelastic relationship to exist between sectoral lending and lending rate during the study period despite decreasingHerfindahl-Hirschman index in the same period, which means that level of competition is increasing in Nepalese banking industry. Our scenario analysis indicates syphoning of funds, and the changed role of bankersas major causes for this anomalous relationship.
Using the DEA-based Malmquist total factor productivity index, this article measures the total factor productivity of Nepalese commercial banks during the period 2010-2011 to 2016-2017. It also examines whether the ownership structure and size of banks affect their efficiency.An input-oriented DEA model is used with aggregate panel data covering all the 28 commercial banks that are currently operating in Nepal. This article adopts constant returns to scale approach to measure and compare the efficiency and productivity of banks and to establish a benchmark for their performance.Interest expense, operating non-interest expense, deposits and labor are used as inputs variables and interest income, operating non-interest income and loan and advances as outputs variables. These data are extracted from the annual reports of the respective commercial banks.The mean efficiency score measured in terms of total factor productivity changeresulted 1.008, which indicates that the efficiency level of Nepalese commercial banks has been increasingvery slowly at the rate of 0.8% annually. Ownership structure of the banksinfluences marginallyon the efficiency level of banks. The domestic private banks are relatively more efficient than the joint venture banks and the latter are comparatively more efficient than the public banks.The size of banks makes no significant difference in the efficiency level of banks.
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