CAMEL Analysis of Commercial Banks in Nepal: An Assessment of Financial Soundness

Binod Shah; Uday Kishor Tiwari

doi:10.57159/gadl.jcmm.2.4.23090

Authors

Dr. Binod Shah Faculty of Management, R. R. M. Campus, Janakpurdham, Tribhuvan University, Nepal 45600
Uday Kishor Tiwari Faculty of Management, Central Department of Management, Kirtipur , Tribhuvan University, Nepal 44618

DOI:

https://doi.org/10.57159/gadl.jcmm.2.4.23090

Keywords:

Asset Quality, CAMEL Analysis, Capital Adequacy, Commercial Banks, Management Quality, Financial Soundness, Liquidity

Abstract

This research paper seeks to perform a thorough assessment of the financial stability and efficacy of commercial banks in Nepal, utilizing the CAMELS analysis framework. The CAMEL framework, incorporating Capital adequacy, Asset quality, Management quality, Earnings capability, and Liquidity position, acts as a structured method for assessing the comprehensive health and resilience of financial institutions. By employing this framework to the commercial banks in Nepal, this study offers crucial insights into the merits and demerits of the country's banking sector. In this investigation, a quantitative, descriptive, and analytical research design is employed to execute the CAMEL analysis of commercial banks in Nepal. The study relies on secondary data, sourced from published financial reports, annual statements, and regulatory submissions of commercial banks in Nepal. A purposive sampling technique is utilized to choose a representative sample of commercial banks in Nepal. CAMEL analysis of commercial banks in Nepal yielded a favorable evaluation of financial stability. The majority of banks showcased commendable performance in various components of the framework, reflecting a predominantly robust and stable banking sector. Nonetheless, certain areas, particularly for smaller banks, necessitate vigilant observation and specific regulatory actions. The outcomes of this study can aid policymakers, regulators, and industry professionals in making enlightened decisions, addressing potential risks, and enhancing the overall financial robustness of the banking sector in Nepal.

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