Executive Summary:

Commercial banks play an important role for economic development and foster economic growth by providing number of financial services. One of the important functions of the commercial banks is the financial intermediation functions and thus it transfers the fund from surplus units to the deficit units.  It accepts deposits and provides loan and advances to the needed people, institutions and investors. It also invests in several short term and long term projects. So the liquidity of banks must be optimally maintained. Liquidity means a business ability to meet its payment obligations, in terms of possessing sufficient liquid assets. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. In banking, liquidity is the ability to meet obligations when they come due without incurring unacceptable losses.

The major objective of the study is to determine the factors affecting the liquidity of Nepalese commercial banks. The study is based on secondary data of 10 commercial banks with 100 observations for the period of 2007 to 2016. The main source of data include various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of selected commercial banks. For the representation of more reliable and adequate population in the sample, random sampling technique has been used in this study. The research design adopted in this study is descriptive research design.
Among the determinants of bank’s liquidity, the highest positive and significant correlation coefficient is recorded between liquidity (LQ1) and non- performing loan. The liquid assets to total assets are also positively related with board money supply. The correlation between CA and liquidity is negative. Similarly, among the determinants of bank’s liquidity (LQ2), the highest positive and significant correlation coefficient is recorded between liquidity and capital adequacy. The study documents that total assets followed by gross domestic product growth rate, non-performing loans and inflation are the most dominant factors that affect the liquidity in the context of Nepalese commercial banks. 
ACKNOWLEDGEMENT
The research entitled “Determinant of liquidity in commercial bank of Nepal” has been prepared for the partial fulfillment of the requirement for Masters in Business Administration (MBA) under program of faculty management, Pokhara University. It is my immense pleasure to complete this research work under the guidance and supervision of Mr. Dipendra Karki for his guidance, motivation and support in positioning from its beginning through to the final thesis.
Sincerely,
Pushpa Poudel