Relation of the Commercial Banks with Economic Growth in Nepal

This paper investigates the relationship of commercial banking performance with economic growth for the case of Nepal over the period 1975-2010 using Augmented Dickey Fuller (ADF), Ordinary least Square and Granger Causality tests. The regression results indicated that deposits, Loan and advances, Assets have significant positive impact on the economic growth of Nepal. Furthermore, the Granger-Causality test suggests that there exists bidirectional causality with deposit, loan and advances and assets. It can be concluded that commercial banking performance was directly linked with the economic growth and significantly contributed for economical development in Nepal. It is therefore suggested that the national and international strategies should focus on progress of banking industry because it better encourages economic advances in Nepal.