An insight into the relationship between Deposits and Net Profit of Commercial Banks in Nepal

A study conducted by sharesansar.com shows that for every Rs.1000 increase in deposits of commercial banks, their net profit increases by Rs.28.92.

The study was conducted using the unaudited Q4 data from fiscal year 2070/71 of 30 commercial banks in Nepal.

The analysis showed a very strong positive linear relationship between the two variables.

Correlation quantifies the relation between two variables and gives the direction and strength of the association.The correlation coefficient between deposits and net profits is 0.88. This suggests a very strong positive relationship between the deposits collection and net profit of banks.

Regression analysis is a technique to assess the relationship between a response/dependent variable and the predictors/independent variables.

For every Rs.1000 increase in deposits, the year end net profit of the banks increases by Rs.28.92.

The regression line can be represented as: Y=-522369.16+(0.0289 x X).

The R squared value is 0.7838 which indicates that deposits accounts for 78.38% of the variation in net profits.