Kathmandu. Investors’ umbrella organizations have suggested to Nepal Rastra Bank Governor Bishwanath Poudel to take necessary steps for the reform of the share market.
Share Investors Association of Nepal, Nepal Capital Market Investors Association and Independent Capital Market Investors jointly submitted a memorandum to Governor Poudel today. “It is a matter of common knowledge that the Nepal Stock Exchange (NEPSE) was reopened for trading on September 18, 2002 after a gap of some time following the recent political developments,” the memorandum reads, adding, “However, the fact that the negative circuit of around 6 percent, only 720 million transactions were made, and the index declined by more than 160 points due to the loss of about 300 billion capitalization is a matter of concern for all the investors as well as the nation.” g. ’
The memorandum states that panic has spread in the market due to such a sudden drop. “The general investors have lost a large part of their capital and are psychologically depressed,” the memorandum states. Even during crises like the 1963 people’s movement, the earthquake of 2015 or COVID-19, investors had to lose a large amount of investment in the initial days with less turnover while opening the market without caution. Although there is a historic example of the market gradually rebalancing itself after the regulatory body has corrected some policy arrangements, this unexpected decline has created deep distrust among investors. ’
The memorandum states that the NRB’s proactive role is inevitable in the journey of making Nepal’s capital market safe, transparent and investor-friendly. “At this hour, we believe that only concrete initiative from the central bank would restore the confidence of the investors,” the memorandum reads.
Here are 6 tips from investors{{TAG_OPEN_strong_47 TAG_CLOSE_strong_47}}
There is a need to ease the policy provisions to enable banks and financial institutions to participate in the stock market and make the capital market more dynamic. For this, existing policy restrictions should be modified to allow banks and financial institutions to buy and sell in the secondary market easily and create an environment where they can invest voluntarily and prudently. This will not only increase long-term liquidity flow to the market, but also lay the groundwork for stability and confidence in the entire capital market.
Individual Share Mortgage Loans
Banks and financial institutions need to completely abolish the limit of Rs 25 crore for individual single-family loans. This will not only ease investors’ access but also contribute to creating a trustworthy and investor-friendly environment.
Regarding Dividend Distribution to Microfinance Institutions
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The current provision of not distributing more than 25% dividend to microfinance institutions seems to be against the principle of open economy adopted by Nepal. Therefore, this rule should be amended to provide for the distribution of dividends on the basis of the actual profit and financial capacity of the institutions. In addition, it is necessary to ensure a competitive and sustainability-oriented environment by providing full freedom to microfinance institutions.
As per the current provision, the banks and financial institutions need to revise the limit of their primary capital fund to invest in the capital market and maintain the limit as per the provisions of the Bank and Financial Institution Act, 2073.
Regarding Share Loans to be issued by banks and financial institutions to the general public{
The limit on share loans issued by banks and financial institutions has become very old compared to the current economic situation and expansion of the capital market. It needs to be increased over time. This will help ease liquidity in the market, increase investor access and keep the overall economy moving.
Regarding bringing Non-Resident Nepalese (NRNs) into the capital market
Non-Resident Nepalese (NRNs) are not in a position to easily repatriate the profit earned with their investment due to the current legal and procedural hurdles while investing in Nepal’s capital market. It is necessary to rectify this complexity and create an easy and transparent investment environment that attracts Non-Resident Nepalis. Since this will have a positive impact not only on Nepal’s capital market but also on the overall economy, it is necessary to immediately amend the policy and call for investment to Non-Resident Nepalis.
The investors have expressed confidence that addressing the above suggestions will help the capital market towards stability and sustainable development.
