The document summarizes Nepal's money and capital markets. The money market is narrow and deals in short-term instruments like treasury bills traded between the central bank and commercial banks. The capital market has a growing primary market that raises funds through shares, bonds and debentures, and a secondary market for trading existing securities on the Nepal Stock Exchange. Though the stock market has expanded, it remains dominated by banks and influenced by non-economic factors, with low representation from the real sector of the economy. Recent reforms aim to modernize trading and increase literacy.

1. Money and Capital Market

2. Financial Markets
• Financial Markets are the markets where financial
instruments are bought and sold.
• Monet market vs financial market

3. Financial Markets
• Financial markets thus work as a pool between the savers
and investors so as to mobilize the savings in the
economy.
Savers
Financial
Markets
Investors

4. Money Market
• Money market is a market where financial instruments with
maturity less than a year are bought and sold.
• Examples of such instruments are T-bills, commercial papers,
certificate of deposits, etc.
• The institutions involved are Central bank, commercial banks.

5. Money Market
• The money market is still very narrow in Nepal.
• The money market instruments like commercial papers,
certificates of deposits, banker’s acceptance, and call money are
not traded in Nepal.
• NRB and commercial banks are the players in the money market
of Nepal. There are no individuals and other companies involved
in the money market of Nepal.
• Treasury Bills are the most traded money market instrument in
Nepal.

6. Capital Market
• Capital market is a market where financial instruments with
maturity of one year or more are bought and sold.
• Examples of such instruments are shares, bonds, debentures, etc.
• The institutions involved are stock markets, merchant banks,
underwriters, commercial banks, etc.

7. Capital Market
• It is broadly divided into two major categories: Primary Market
and Secondary Market.
• Primary Market: A market where fresh securities are offered to
the public for subscription is known as Primary Market.
• Secondary Market: A market where already issued securities are
traded among investors is known as Secondary Market.

8. Key Differences
• . Basis Money Market Capital Market
Nature of Instruments Short term financial
instruments
Long term securities
Example T-bills market Share market
Involved Institutions Central bank, commercial
banks, NBFIs, acceptance
houses
Stock exchange,
commercial banks, NBFIs,
merchant banks, brokers
Liquidity Higher Lower
Risk Lower Higher
Return Lower Higher
Purpose Fulfills short term credit
requirements
Fulfills long term credit
requirements
Nature Not well organized Well organized

9. Role of Money Market
• Fulfills the short term financial requirements.
• Helps in debt mobilization of the government.
• Monetary policy implementation.

10. Role of Capital Market
• Fulfills the long term financial requirements.
• Helps in debt mobilization of the government.
• Mobilization of savings
• Capital formation

11. Status of Capital Market
• Primary Market : Mobilization through the primary
market is increasing.
Mobilization of Resources through Primary Market (Billion Rs)
Instruments 2075/76 2076/77 2077/78
IPOs 7.35 3.99 15.19
Right Share 5.88 4.41 14.05
Debenture 29.98 23.45 69.6
Mutual Fund 6.55 1.8 9.9
Bonus Share 26.7 33.68 46.21
Total 76.46 67.33 154.95

12. Status of Capital Market
• DMAT accounts reached 35 lakhs.
• Mero share accounts 26 lakhs
• Users of the online trading in secondary market : 6.6
lakhs

13. Status of Capital Market
• Mobilization through the primary market is
increasing.
• Major instruments are debenture and bonus share.

14. Status of Capital Market
• Secondary Market :
• The NEPSE index is volatile. It reached as high as 3300 in
August 2021 and fell to 2200. Currently the NEPSE is around
2600.
• The number of institutions registered at NEPSE has reached 226
of which 143 are BFIs.
• Market capitalization is around Rs. 4000 billion which is around
95 percent of GDP.

15. Problems of Capital Market
• Dominated by the BFIs
• Lack of diversifications of instruments : equity dominated.
• Lack of specialized institutions such as investment services and
portfolio management.
• Low representation of real sector
• Influenced by non-economic factors.
• Lack of literacy

16. Recent Reforms
• Online application in primary market
• Online trading in secondary market
• T+2 settlements
• Reduction in broker commission
• Book building procedure implemented.
• Risk based supervision
• Expansion in the branches of the broker houses.

17. Capital Market
• Why capital market is not working as the mirror of the
economy?
• Low representation of real sector
• Market imperfections
• Lack of stock market literacy
• Lack of institutional investors

18. Thank You