This course focuses on the conceptual and operational aspects of the different components ofNepalese financial system and covers the operational aspects of Nepalese financial system.The course covers concept and components of financial systems; financial instruments,interest rate and taxes, depository and non-depository financial institutions, ancillaryfinancial services, operation of primary and secondary markets, acts and regulation related tothe operation of the financial system and regulatory authorities, foreign exchange system,foreign reserve and balance of payments.

This course aims to equip students with the operational aspects of Nepalese financial system.This will develop the theoretical understanding and practical insight on financial instruments,the implication of interest rate and taxes in the supply and demand of funds in the financialmarkets, depository and non-depository financial institutions, ancillary financial services,operation of primary and secondary markets, regulation and regulatory authorities of thefinancial system and exchange rate system, foreign reserve and balance of payment.

Unit 1: Introduction (LH 15)

Concept of financial system; Components of financial system with reference to Nepalesefinancial system; Size of overall Nepalese financial system; Structure of Nepalese financial
sector; Process of funds transfer from surplus units to saving units; Functions and role offinancial intermediaries in the financial systems.

Unit 2: Financial Instruments and Interest Rates (LH 15) 
Concept of financial instruments; Functions and types of financial instruments: moneymarket and capital market instruments, derivative securities, mutual fund units;Financial instruments available in Nepalese financial system; Loanable funds theory of interest: Supplyand demand of loanable funds, equilibrium interest rate, factors affecting the interest rate;
Components of interest rate; Terms structure of interest rate; Determination of interest rate in Nepalese financial markets; Base interest rate, interest rate spread, interest rate corridor;
Implication of inflation and tax on interest rate

Unit 3: Depository Financial Institutions (LH 20) 
Concept of depository institutions; Fundamental functions of depository institutions;Classification of depository institutions in Nepal; Major products of depository institutions;Financial statements and major indicators of performance of depository institutions;Supervision by Nepal Rastra Bank: Onsite and offsite supervision and supervisory tools;Saving and credit cooperatives in Nepal: role, structure and size and monitoring and regulation.

Unit 4: Non-Depository Financial Institutions (LH 20)
Concept and types of non-depository institutions; Risk management industry: types of risk management industry, fundamentals of risk management industry, and role  of   risk management industry in the mobilization of saving and protection of individual and socialwealth; Mutual fund industry in Nepal: types, size, and structure; Pension funds: Concept, fundamentals of provision for pension; Types and practices of pension fund in Nepal; Social welfare funds and other retirement schemes.

Unit 5: Ancillary Financial Services (LH15) 
Investment banking industry: concept and functions, the structure of investment banking in Nepal; CDS & Clearing Ltd.: role and functions; Depository participants: concept and functions; Securities dealer and broker; Credit rating agencies: Concept, functions and credit rating agencies in Nepal; Deposit and Credit Guarantee Fund: role and functions; CreditInformation Bureau of Nepal: its products and services.

Unit 6: Primary Market Operations (LH 15) 
Concept and role of primary markets; Legal provision regardingthe issue of stocks anddebenture in Nepal; Process of initial public offerings; Further public offering and rightsissue; Application and allotment process of securities in Nepal

Unit 7: Secondary Market Operations LH 15
Concept, functions and role of secondary markets; Buying and selling the securities in thesecondary markets and settlement of the transactions; Stock market Index: NEPSE, float, sensitive index; Construction and interpretation of NEPSE Index; Market capitalization andmarket return.

Unit 8: Financial Regulations and Regulatory Authorities LH 20
Major provisions of relevant Acts: NRB Act, Bank and Financial Institution Act, ForeignExchange Act, Bank Offensive Act and Anti-money Laundry Act; Insurance Act, andSecurities Act; Role and power of Nepal Rastra Bank, Insurance Board, Nepal SecuritiesBoard as regulatory authoriti

Unit 9: Exchange Rates, Foreign Reserve and Balance of Payment LH 15
Exchange rate system in Nepal; Concept and components of foreign reserves; Concept ofbalance of payments and balance of trade; Structure of balance of payment of Nepal; Funds
flows as foreign direct investment of multinational companies and international financialinstitutions in Nepal