Find papers

FIN 208

Financial Markets and Services

TU BBA · Semester 6 · BBA curriculum effective from 2021

Requirement
required
Credits
3
Questions
21 questions

Chapter-wise questions

21 past questions across 7 units

Open a chapter to study questions grouped by unit and syllabus topic, with step-by-step solutions.

chapter-wise questions loaded.

Unit 1: The Introduction of Financial System

Report problem
  1. Asked on 2025 Exam[2 marks]2025 paper

    State the meaning of non-depository institutions with example.

    View model answerHide model answer

    Meaning of Non-Depository Institutions

    Non-depository financial institutions are financial intermediaries that do not accept traditional transactional demand or savings deposits from the general public. Instead, they obtain funds by selling financial contracts, collecting insurance premiums, receiving pension contributions, issuing shares or debentures, and providing specialized investment and risk-pooling services.

    Key Examples:

    1. Insurance Companies: (e.g., Nepal Life Insurance Company, Rastriya Beema Sansthan) which fund operations through policy premiums and invest in long-term capital assets.
    2. Pension & Retirement Funds: (e.g., Employees Provident Fund / Karmachari Sanchaya Kosh, Citizen Investment Trust) which pool mandatory payroll deductions to provide retirement benefits and capital financing.
    3. Mutual Funds & Merchant Banks: (e.g., NIBL Ace Capital, Global IME Capital) which pool investor funds to purchase diversified portfolios of equities and bonds.
  2. Asked on 2025 Exam[10 marks]2025 paper

    Describe the concept of financial system. Discuss about the components of Nepalese financial system.

    View model answerHide model answer

    Comprehensive Analysis of the Financial System and Its Nepalese Components

    1. Concept of the Financial System

    A financial system is an integrated institutional framework composed of financial institutions, markets, regulatory authorities, instruments, and legal settlement arrangements that together facilitate the transfer of funds from net savers (surplus spending units) to net borrowers (deficit spending units).

    It performs three vital functions:

    1. Savings Mobilization: Aggregates granular, liquid savings from millions of households into massive capital pools.
    2. Capital Allocation: Channels resources to corporate enterprises yielding the highest risk-adjusted social and economic productivity.
    3. Liquidity and Payment Clearing: Ensures rapid, secure settlement of financial promises, contract obligations, and trade liabilities.

    2. Core Components of the Nepalese Financial System

    The Nepalese financial system is structured into five interdependent pillars:

    NEPALESE FINANCIAL SYSTEM

    Regulators Institutions Markets
    • NRB • Class ‘A’, ‘B’, ‘C’,‘D’ • NEPSE
    • SEBON • Insurance (Life/Non) • Money Mkt
    • Beema • CIT, EPF, SSF • Forex Mkt
    Pradhikaran • Cooperatives

    A. Regulatory Authorities

    1. Nepal Rastra Bank (NRB): The central bank, empowered by the NRB Act 2058 and BAFIA 2073, regulates all bank and financial institutions (BFIs), foreign exchange transactions, and the national payments system.
    2. Securities Board of Nepal (SEBON): Regulates capital markets, public issues, stock exchanges, and licensed merchant bankers under the Securities Act 2063.
    3. Nepal Insurance Authority (Nepal Beema Pradhikaran): Apex statutory regulator for life, non-life, and reinsurance companies under the Insurance Act 2079.
    4. Department of Cooperatives: Regulates thousands of savings and credit cooperatives across Nepal.

    B. Financial Institutions (BFIs and Non-BFIs)

    • Class ‘A’ Commercial Banks (20 banks): Full-service corporate and retail banking, deposit-taking, industrial loans, and letter of credit (LC) operations.
    • Class ‘B’ Development Banks & Class ‘C’ Finance Companies: Regional development and consumer hire-purchase finance.
    • Class ‘D’ Microfinance Financial Institutions (MFIs): Collateral-free group lending to rural and underprivileged demographics.
    • Specialized Statutory Non-Bank Funds:
      • Employees Provident Fund (EPF / KSK)
      • Citizen Investment Trust (CIT / NLK)
      • Social Security Fund (SSF)

    C. Financial Markets

    1. Money Market: Short-term wholesale liquidity market utilizing T-Bills, interbank call money, Repo/Reverse Repo, and central bank standing facilities.
    2. Capital Market: Long-term equity and debt financing anchored by the Nepal Stock Exchange (NEPSE) as the sole licensed secondary trading floor, supported by CDS and Clearing Ltd.
    3. Foreign Exchange (Forex) Market: Pegged NPR/INR trade clearance and foreign convertible currency management.

    D. Financial Instruments

    • Debt Securities: Government Treasury Bills, Development Bonds, Corporate Debentures, and Municipal Bonds.
    • Equity Instruments: Ordinary shares, Rights shares, and Mutual Fund Units.

    E. Financial Services & Payment Infrastructure

    • High-value wholesale settlement via Real-Time Gross Settlement (RTGS).
    • Retail interbank transactions through connectIPS, National Payment Switch (NPS), automated clearing house (NCHL), and digital wallet networks.