Macroeconomic and micro variables influencing profitability of nepalese commercial banks

Abstract

The study intends to investigate the effect of micro and macro variables on the profitability of Nepalese commercial banks. 81 observations of 9 commercial banks from fiscal year 2012/13 to 2020/21 were taken for analysis. Return on Assets (ROA) was taken as the dependent variable. Capital adequacy ratio, non-performing loan ratio, loans and advances ratio, deposit ratio and bank size were taken as bank specific micro variable while gross domestic production, inflation rate and real interest rate were taken as macro variables to determine their influence on profitability. Descriptive and casual comparative research design was used to conduct the study using correlation, regression model and ANOVA test. The findings of the study revealed that there is positive and significant impact of CAR, LAR, bank size, GDP, inflation rate and interest rate on bank profitability. Where as non-performing loan has positive insignificant relationship and deposit ratio has negative insignificant relationship with ROA.