Published Sep 19, 2016
Ashish Bhandari Amrit Man Nakarmi


The inference of this study lies mainly in identifying and prioritizing financial parameters based on which financial institutions are considered efficient. This study attempts to find out the current performance of commercial banks in Nepal and develop a multi criteria model to check the health and status of these banks. This research will explore the Key Performance Indicators based on the Analytic Hierarchy Process and identify how these are affecting a bank’s performance in Nepal. The study reveals the financial positions of three public and ten private commercial banks. The data are mainly obtained from the Central Bank of Nepal annual audited financial statements of commercial banks (published by the respective banks), and a yearly economic survey. An average of four year ratios from 2008/09 to 2011/12 was evaluated to assess the financial performance of the commercial banks. Thirteen commercial banks were selected for the analysis in this study. The financial ratios used to assess bank performance were taken based on the Analytic Hierarchy Process framework in which hierarchical criteria were determined based on CAEL (Capital Adequacy, Asset Quality, Efficiency and Liquidity.


Download data is not yet available.
Abstract 2569 | PDF Downloads 73



AHP, Bank Performance, Nepal

Almazari, Ahmed Arif (2011). Financial performance evaluation of some selected Jordanian commercial banks. International Research Journal of Finance and Economics 68, 50-63.

Babić, Z, Belak, V and Tomić-Plazibat, N. (1999) Ranking of Croatian banks according to business efficiency. Proceedings of the 5th International Symposium on Operational Research. Preddvor, Slovenia.

Bakar, N and Tahir, I M. (2009). Applying multiple linear regression and neural network to predict bank performance. International Journal of Business Research and Management 2 (4), pp. 176-183. doi: http://dx.doi.org/10/5539/ibr.v2n4p176

Baral, K. J. (2005). Health check-up of commercial banks in the framework of CAMEL: A case study of joint venture banks in Nepal. The Journal of Nepalese Business Studies 2(1), 41-55. doi: http://dx.doi.org/10.3126/jnbs.v2i1.55

Bhattarai, Shashi and Shivjee, Yadav Roy (2009). AHP application in banking: unfolding Utility in a situation of financial crisis. Proceedings of International Symposium on Analytic Hierarchy Process, Pittsburgh, PA, USA.

Čehulić, Dejan, Hunjak, Tihomir and Begičević, Nina. Croatia (2011). Comparison of a bank's financial ratios using the Analytic Hierarchy Process. Proceedings of the 22nd Central European Conference on Information and Intelligent Systems, 187-193.

Dang, Uyen (2011). The CAMEL rating system in banking supervision A Case Study. Thesis Paper for Arcada University of Applied Sciences, International Business.

Gajurel, D. P., & Pradhan, R. S. (2011). Structure-performance relation in Nepalese banking industry. International Conference on Economics Business . doi: http://dx.doi.org/10.2139/ssrn.1665132

Gilbert, R, Meyer, A, & Vaughan, M. (2002). Could a CAMELS downgrade model Improve off-site surveillance? Federal Reserve Bank of St. Louis Review, 47-63.

Hunjak, T., & Jakovčević, D. (2001). AHP based model for bank performance. Proceedings – 6th ISAHP, Berne, Switzerland, 149-158.

Jabalameli, F., & Rasolinezhad, E. (2011). The ranking of chosen branches of Saderat Bank in Tehran City through the AHP and the DEA/AHP model. Proceedings of the International Symposium on the Analytic Hierarchy Process, Sorrento, Italy.

Jha, S., & Hui, X. (2012). A comparison of financial performance of commercial banks: A case study of Nepal. African Journal of Business Management, 6(25) , 7601-7611. doi: 10.5897/AJBM11.3073

Lu, T.-L., Wang, Y.-C., & Lee, Y.-C. (2013). A study on risk based banking supervision. Business and Information, 164-172.

Naceur, S. (2003). The determinants of the Tunisian banking industry. [Online] 2003. http://www.mafhoum.com/press6/174E11.

Nepal Rastra Bank. (2012). Bank supervision report.: Bank Supervision Department. doi: 10.4324/9781843140115

Rakocevic, S., & Dragasevic, Z. (2009). Analysis of the efficiency of banks in Montenegro using the AHP. ISAHP, Pittsburgh, PA, USA.

Saaty, T.L. (1980). The Analytic Hierarchy Process: Planning, priority setting, resource allocation, McGraw-Hill, Inc.

Sapkota, M. (2012). Trend analysis of Nepalese banks from 2005-2010. University of New Orleans Scholar Worls @ UNO.

Samad, A., & Hassan, M. K. (2000). The performance of Malaysian Islamic Bank during 1984-1997: An exploratory study. International Journal of Islamic Financial Services 1(3) , 1-14.

Saunders, Anthony and Cornett, Millon Marcia. (2004). Financial markets and institutions. Tata McGraw Hill Publishing Company.

Steuer, R. E., & Paul, N. A. (2003). Multiple criteria decision making combined with finance: A categorized bibliographic study. European Journal of Operational Research 150 (3) , 496-515. doi: http://dx.doi.org/10.1016/S0377-2217(02)00774-9

Thagunna, K. S., & Poudel, S. (2013). Measuring bank performance of Nepali banks:A Data Envelopment Analysis (DEA) perspective. International Journal of Economics and Financial Issues, 3(1) , 54-65.

Vaidya, O. S., & Kumar, S. (2006). Analytic Hierarchy Process: An overview of applications. European Journal of Operational Research, 169, 1-29. http://dx.doi.org/10.1016/j.ejor.2004.04.028

Vilén, M. (2010). Predicting failures of large U.S. commercial banks. Master’s Thesis for Aalto Univeristy School of Economics, Department of Economics.

Dzeawuni, Wirnkar Alphonsius and Muhammad, Tanko, CAMELs and Banks Performance Evaluation: The Way Forward (June 24, 2008). doi: http://dx.doi.org/10.2139/ssrn.1150968

Yalçın, S. N., Ali, B., & Cengiz, K. (2009). Fuzzy performance evaluation in Turkish banking sector using Analytic Hierarchy Process and TOPSIS. Expert Systems With Applications, 36 , 11699-11709. doi: http://dx.doi.org/10.1016/j.eswa.2009.03.013