2. STATEMENT OF THE PROBLEM

The banking sector in Nepal is growing competitive due to the presence so many commercial

banks, development banks, finance company and micro credit development banks. As the

numbers of these institutions are increasing the investment is also increasing making all these

activities correlated and complex. General public are investing in these institution with the

expectation of higher return in the form of interest, dividend etc.

In order to meet the expectation of all the stakeholders, BFIs should be able to analyze their

financial performance in regular interval to provide the management, shareholders, investors; the

idea on how is the performance of banking sector is going on?, what is not effective ?, where

should be the banks focus?, and similar questions related to financial performance of BFIs.

This research project aims to apprehend the information contained in the financial statements

with a view to know the strengths and the weaknesses of the bank, explore the relationship

between various CAMEL indicators of bank enabling to make decisions regarding the operation

of, and further investment in. So different tools are used regarding this purpose like financial

statement, CAMEL framework. The study suggests for the critical analysis of the balance sheet

of the bank and presentation of such analysis to provide for internal assessment of the health of

the bank.

Thus, this research project aims to answer the following questions

How is the performance trend and rank of commercial banks?

What is the relationship between various CAMEL components?

Is there significant relationship between bank and their quarterly and yearly CAMEL

ranking?