Unit 1 Introduction Overview of Financial System Prof

Unit 1: Introduction Overview of Financial System Prof. Baral Day 2

Concept and Components of Financial System Examples of A Class Financial Institutions (28) • Nepal Bank Ltd. • Rastriya Banijya Bank • Nabil Bank Ltd. • Nepal SBI Bank Ltd. Prof. Baral Day 2

Concept and Components of Financial System Examples of B Class Financial Institutions: Development Bank (by Mid-April 2018): 36 • Nepal Industrial Development Bank Ltd. • Narayani Development Bank Ltd. • Gandaki Bikas Bank Ltd. • Kailash Bikash Bank Ltd. • Sangrila Development Bank Ltd. • Tourism Development Bank Ltd. Prof. Baral Day 2

Concept and Components of Financial System Examples of C Class Financial Institutions: Finance Company (by Mid-April, 2018) : 25 • Pokhara Finance Ltd. • Pashchimanchal Finance Company Ltd. • Sagarmatha Finance Ltd. • Gorkhas Finance Ltd. Prof. Baral Day 2

Concept and Components of Financial System Examples of D Class Financial Institutions: Microfinance Financial Institutions (by Mid-April: 63) • Nirdhan Utthan Laghubitta Bittiya Sanstha Ltd. • Sana Kisan Laghu Bitta Bittiya Sastha Ltd. • RMDC Laghu Bitta Bittiya Sanstha Ltd. • Nepal Grameen Bikas Bank Ltd. Prof. Baral Day 2

Concept and Components of Financial System Savings and Credit Cooperatives (Limited banking): Number (by Mid-April 2018): 14 • Mahila Sahakari Sansthan Ltd. • Shree Manakamanal Sahakari Sanstha Ltd. • Himalaya Sahakari Sanstha Ltd. • Kisan Multiple Sahakari Sanstha Ltd. Prof. Baral Day 2

Concept and Components of Financial System Nongovernment Organizations (NGOs) Number (by Mid-April 2018): 24 • Chartare Yuba Club • Shreejana Development Center • Community Women Development Centre • Srijana Community Development Centre Prof. Baral Day 2

Concept and Components of Financial System Other Institutions: Number (by Mid-April 2018): 10 • Rastriya Sahakari Bank Ltd. • Hulas Investment Pvt. Ltd. • Batas Investment Pvt. Ltd. Prof. Baral Day 2

Concept and Components of Financial System Non-depository institutions: § Insurance companies § Pension Funds § Employee Provident Funds Insurance Companies: § Reinsurance (Nepal Reinsurance Company Ltd. ) § Life insurance (18) § Non-life insurance(20) Life Insurance: • Rastriya Beema Sasthan • National Life Insurance Company Limited • Nepal Life Insurance Co. Ltd. • Nepal Insurance Company Ltd. • Rastriya Beema Company Limited Prof. Baral Day 2

Concept and Components of Financial System Examples of Financial Instruments/Assets • Shares • Debenture • Bonds • Treasury Bills • Certificate of Fixed Deposit (CD) • Insurance Policy Prof. Baral Day 2

Concept and Components of Financial System Examples of Acts • Nepal Rastra Bank Act, 2058 • Bank and Financial Institutions Act, 2063 • Insurance Act, 2049 • Securities Act, 2063 Prof. Baral Day 2

Concept and Components of Financial System Examples of Regulations • Financial Intermediary Regulation, 2056 • Nepal Rastra Bank Soiled Notes Destruction Regulation, 2059 • Stock Exchange Operation Regulation, 2064 Prof. Baral Day 2

Concept and Components of Financial System Adopted from: Saunders & Cornett. (2013). Financial Markets and Institutions, 5 th ed. Prof. Baral Day 2

Concept and Components of Financial System Adopted from: Saunders & Cornett. (2013). Financial Markets and Institutions, 5 th ed. Prof. Baral Day 2

Concept and Components of Financial System Examples of markets • Nepal Stock Exchange Ltd. • Merchant banks Prof. Baral Day 2

Concept and Components of Financial System Examples of Monitoring Bodies • Nepal Rastra Bank • Insurance Board • Nepal Securities Board Prof. Baral Day 2

Definition of Financial System Financial system is The collection of markets, institutions, laws, regulations, and techniques through which bonds, stocks and other securities are traded, interest rates are determined, and financial services are produced and delivered around the world (Rose, 1997: 1). Prof. Baral Day 2

Components of Financial System 1. Financial institutions 1. 1 Depository institutions a. Commercial banks b. Development banks c. Finance companies Prof. Baral Day 2

Components of Financial System 1. 1 Depository institutions d. Micro-finance Institutions e. Saving and credit cooperatives f. NGOs g. Other financial institutions Prof. Baral Day 2

Concept and Components of Financial System a. Commercial Banks (Class A Financial Institutions) Number by Mid-April : 28 Examples: Nepal Bank Ltd. , Rastriya Banijya Bank, Nabil Bank Ltd. and Nepal SBI Bank Ltd. Prof. Baral Day 2

Components. . . b. Development Bank (Class B Financial Institutions: Number by Mid-April 2018: 36 Examples: § § § Nepal Industrial Development Bank Ltd. Narayani Development Bank Ltd. Gandaki Bikas Bank Ltd. Kailash Bikash Bank Ltd. Sangrila Development Bank Ltd. Tourism Development Bank Ltd. Prof. Baral Day 2

Components. . . c) Finance Companies (Class C Financial Institutions): • Number by Mid-April, 2018 : 25 • Examples: • Pokhara Finance Ltd. • Pashchimanchal Finance Company Ltd. • Sagarmatha Finance Ltd. • Gorkhas Finance Ltd. Prof. Baral Day 2

Components. . . d) Microfinance Financial Institutions( Class D Financial Institutions) Number by by Mid-April: 63 Examples: Nirdhan Utthan Laghubitta Bittiya Sanstha Ltd. , Sana Kisan Laghu Bitta Bittiya Sastha Ltd. , RMDC Laghu Bitta Bittiya Sanstha Ltd, Nepal Grameen Bikas Bank Ltd. Prof. Baral Day 2

Components. . . e) Savings and Credit Cooperatives (Limited banking): Number (by Mid-April 2018): 14 • Mahila Sahakari Sansthan Ltd. • Shree Manakamanal Sahakari Sanstha Ltd. • Himalaya Sahakari Sanstha Ltd. • Kisan Multiple Sahakari Sanstha Ltd. Prof. Baral Day 2

Components. . . f) Nongovernment Organizations (NGOs) • Number (by Mid-April 2018): 24 • Examples: • Chartare Yuba Club • Shreejana Development Center • Community Women Development Centre • Srijana Community Development Centre Prof. Baral Day 2

Components. . . g) Other Institutions: Number (by Mid-April 2018): 10 • Rastriya Sahakari Bank Ltd. • Hulas Investment Pvt. Ltd. • Batas Investment Pvt. Ltd. Prof. Baral Day 2

Concept and Components of Financial System 1. 2 Non-depository institutions: § Insurance companies § Pension Funds § Employee Provident Funds § Credit guarantee corporation a) Insurance Companies: § Reinsurance (Nepal Reinsurance Company Ltd. ) 1 § Life insurance (18) § Non-life insurance(20) Prof. Baral Day 2

Concept and Components of Financial System Life Insurance: • Sanima Life Insurance Company Ltd. • National Life Insurance Company Limited • Nepal Life Insurance Co. Ltd. • Prime Life Insurance Co. Ltd. Prof. Baral Day 2

Concept and Components of Financial System Non-Life Insurance: • Siddharth Insurance Company Ltd. • Everest Insurance company Ltd. • Rastriya Beema Company Limited Prof. Baral Day 2

Concept and Components of Financial System 2. Financial Instruments/Assets • Shares • Debenture • Bonds • Treasury Bills • Certificate of Fixed Deposit (CD) • Insurance Policy Prof. Baral Day 2

Components of Financial System 2. 1 Primary/direct instruments – – Prof. Baral Equity/common shares Preference shares Debentures Innovative debt instrument such as warrants and convertibles Day 2

Components of Financial System 2. 2 Indirect/secondary instruments – – – Prof. Baral Mutual funds unit Security receipt Pass through certificate Day 2

Components of Financial System 2. 3 Derivatives – – – Prof. Baral Forward contract Futures Options Day 2

Components. . . 3. Relevant Acts • Nepal Rastra Bank Act, 2058 • Bank and Financial Institutions Act, 2063 • Insurance Act, 2049 • Securities Act, 2063 Prof. Baral Day 2

Concept and Components of Financial System 4. Relevant Regulations • Financial Intermediary Regulation, 2056 • Nepal Rastra Bank Soiled Notes Destruction Regulation, 2059 • Stock Exchange Operation Regulation, 2064 Prof. Baral Day 2

Components of Financial System 2. Financial markets 2. 1 Money markets 2. 2 Capital markets • • Prof. Baral Primary markets Secondary markets Day 2