Analysis of Financial Performance of Nepalese Commercial Banks using CAMEL Approach

Abstract

Bank and financial institutions require a method for assessing performance, considering some crucial financial statistics, and identifying strengths and weaknesses. The "CAMEL" model is a effective tool for assessing the performance of bank and financial institution. This model studied Capital adequacy, Asset quality, Management quality, Earnings capacity, and Liquidity condition of sample banks. The study has made a modest attempt to use the CAMEL technique to examine the performance of three commercial banks in Nepal from 2011/12 to 2020/21. Rastriya Banijya Bank, a wholly government-owned, Nepal SBI Bank Limited (NSBIL) joint venture, and Prime Commercial Bank Limited (PCBL), privately owned, were considered as a sample banks for the analysis. The result explained that PCBL and NSBIL could keep their risk-weighted assets at more excellent Tier I and II capital levels, demonstrating their financial soundness. This also revealed that NSBIL could support a higher percentage of well-performing loans. RBBL, NSBIL, and PCBL, all BFIs maintained average returns on shareholder equity and returns on assets. It also found PCBL was first in terms of the ratio of liquid assets to total deposits, followed by NSBIL banks and RBBL. In light of this, this research will be tremendously instructive to academics, researchers, and bank management. They can utilize it to create a financial plan for the effectiveness of the bank performance as a whole.