Introduction and Importance of the Capital Market: What is a Capital Market?

The capital market is a market where long-term financial instruments, typically those maturing in more than a year, are traded. It is a crucial part of a country's financial system, providing long-term and medium-term capital to sectors like agriculture, industry, commerce, and government. The capital market is classified into two types:

1. Securities Market

2. Non-Securities Market

What is the Securities Market?

The securities market, often referred to as the capital market, has a broader scope. It involves the trading of long-term financial assets such as shares and bonds. This market brings sellers and buyers together on a single platform to conduct transactions. The securities market is divided into two main categories:

1. Primary Market

2. Secondary Market

What is the Non-Securities Market?

The non-securities market refers to the provision of long-term and medium-term capital to any organized institution or company through banks or other institutions. This type of market is not regulated by the Securities Board of Nepal (SEBON).

Importance of the Securities Market:

The securities market plays a vital role in the efficient operation of long-term capital, helping governments manage required capital and contributing to the industrialization and infrastructure development of a country. Its key importance includes:

1. Efficient allocation of long-term capital

2. Mobilization of savings and increased investment

3. Industrial development and infrastructure construction

4. Balanced and developed financial markets

5. Capital management at low cost

Role of the Securities Market in Economic Development:

The securities market serves as a mechanism for capital allocation, playing a crucial role in the economic development of a country. By channeling long-term capital into productive sectors, it accelerates economic growth. The role of the securities market can be understood as follows:

1. Efficient allocation of long-term capital

2. Facilitating capital management for the government

3. Promoting industrialization and infrastructure development

4. Raising capital at a lower cost

5. Balanced development of the financial market

This effective role of the securities market contributes significantly to the economic growth and financial strengthening of any country.