A PERFORMANCE ANALYSIS OF SELECTED BANKS IN NEPAL USING CAMEL RATING SYSTEM.

Abstract

In the economy, it is impossible to downplay the importance of the entire financial sector, especially the banking sector. Therefore, it is assumed that the banking industry can reflect the entire economy. The financial unsoundness of banks is a challenge, and auditors, investors, and researchers have been concerned. Financial performance is directly related to the return of entire stakeholders. Fluctuating banking financial performance is the biggest problem for the investors of such institutions. But in the case of Nepal, few researchers have tried to address this problem with previous data. This paper aims at analyzing the performance of the selected banks in recent scenarios. The CAMEL analysis is used in this analysis for a sample of 3 commercial banks (One government owned, one Joint-venture and another is privately owned by investors from Nepal) out of 27 Nepalese Banks listed on the NEPSE. Each component of CAMEL, (i.e. Capital Adequacy, Asset Quality, Management Quality, Earning and Liquidity) has been calculated by 12 ratios. According to the findings, EBL has better financial performance than the other two. EBL is a joint venture bank. It also discovered that RBB, a government bank, is becoming increasingly prone to non-performing loans.The study shows that joint venture banks lead others in financial performance. Finally, this research shows that the CAMEL model is one of the most effective tools for evaluating the financial performance of the Nepalese Bank. It could play an important role in the government's regulatory mechanism, and it could be used to measure the soundness of financial reports published by the bank's management team for better investment decisions for secondary market investors.