Impact of Fund Management on Banksliquidity, Profitability and Productivity-A Study on Some selected PrivateCommercial Banks in Bangladesh

Abstract

The successful management of a commercial bank is very careful in consideration of three objectives liquidity, profitability and productivity. To attain the above objectives, commercial banks in practice need to set up their funds in their balance sheet composition. Management needs to decide as to what constitutes the best distribution of funds in the quest for attaining those objectives. This paper examines the impact of fund management on banks liquidity,profitability and productivity during the period from 2006 to 2010. The study was confined to five selected private commercial banks. Both primary and secondary data have been used here. The findings of the study corroborate the hypothesis that loan variable is positively and significantly correlated with profitability, productivity and is negatively correlated with liquidity. The study also finds out that fund management decisions were unsatisfactory. The main reasons for inefficient fund management were incurrence of lower profitability, rapid increase in establishment expenses, instability in monetary policy, higher amount of nonperforming loans, less attention to cost control, priority sector financing. To overcome this, the study gives some policy implication to improve fund management of banks.