The study investigates the role of remittances to promote financial development of selected South Asian countries over the period 1996-2017. In order to capture both depth and efficiency aspects of financial institutions two financial development indices have been constructed through Principle Component Analysis (PCA) using eight main indicators of financial development. The financial development index based on efficiency indicators has been constructed for the first time for South Asian countries. To address the issue of endogeneity among remittances and financial development generalized method of moments (GMM) has been employed for analysis. The findings show that although remittances are sent mainly for consumption purposes but in case of South Asian countries it also promotes financial development due to increase in depth and efficiency of financial institutions, thus a complementary relationship among remittances and financial development exists. Supervisor:- Dr. Farhat Mahmood