The Performance of Nepalese Commercial Banks on International Trade Facilitation through Geographical Coverage of Correspondent Banks

Correspondent banking is a critical mechanism for facilitating cross-border payments and international trade especially in developing and import-reliant economies like Nepal. The paper discusses how the geographical coverage of the correspondent banks affects the performance of the Nepalese commercial banks in facilitating international trade. The study adopts a deductive research design based on a positivist research philosophy and uses quantitative research design as it is cross-sectional. A structured questionnaire was used in order to collect primary data by interviewing 300 employees in 20 Nepalese commercial banks in trade finance, treasury, compliance/AML, remittance/SWIFT, and senior management functions. Cronbach alpha was used to test the instrument and the reliability was confirmed as 0.898. Perceptions of correspondent bank geographic reach and trade facilitation performance were measured using descriptive statistics, mean analysis and chi-square tests. These findings show that the coverage of the wider geographical base of the correspondent banks plays a huge role in improving the capabilities of Nepalese banks to facilitate international trade through the increase of cross-border payments efficiency, availability of various currencies, issuance of letters of credit, and reduction of risk. The statistical outcomes of the research show that there is a strong positive relationship between the geographic coverage and the trade facilitation performance of correspondent banks, so the null hypothesis is rejected. Nevertheless, other significant limitations in the study include regulatory compliance costs and de-risking practices which moderate these benefits. The paper finds that correspondent banking is a necessity to Nepal and that reinforcement of correspondent networks and complementary regulatory policies and digital infrastructure is a key to carrying on effective international trade facilitation and global financial integration.