22nd September 2025, Kathmandu
The Nepal Investor Forum, led by its Chairman Tulsiram Dhakal, has formally submitted a nine-point recommendation to the newly formed Capital Market Reform Task Force.
Investor Forum Submits Proposal
The task force, created by the Ministry of Finance on Ashwin 3, 2082 (September 19, 2025), is charged with developing actionable plans for systemic and procedural reforms to address the recent downturn in the country’s stock market. The Forum’s proposal, presented to Task Force Coordinator Rupesh KC on Ashwin 6, 2082 (September 22, 2025), aims to stabilize market performance, restore investor confidence, and promote long-term growth.
Background of the Capital Market Reform Task Force
The formation of the task force comes in the wake of significant market volatility, with the Nepal Stock Exchange (NEPSE) experiencing a sharp decline. The government’s swift response reflects the urgency of the situation and the recognition of the capital market’s importance to the national economy. The four-member task force is led by Rupesh KC, the acting executive director of the Securities Board of Nepal (SEBON). Its members include Sharan Adhikari, a director from Nepal Rastra Bank (NRB), Niranjan Phuyal, acting executive director of Nepal Stock Exchange (NEPSE), and Sharad Nirola, an undersecretary at the Ministry of Finance, who also serves as the member-secretary. The committee has been given a short deadline of five days to submit its report and recommendations, underscoring the government’s desire for rapid action.
The Nine-Point Recommendation from Nepal Investor Forum
The comprehensive proposal from the Nepal Investor Forum touches on several critical aspects of the market’s current regulatory and operational framework. The nine points are designed to work together to create a more robust and investor-friendly environment.
Removal of Share-Backed Loan Limits: The Forum has called for the complete elimination of restrictions on personal loans secured by shares. This is aimed at increasing liquidity in the market by allowing investors to access credit more easily using their existing portfolios as collateral.
Easier Share Purchase for Banks and Financial Institutions: The proposal recommends that the government allow commercial banks and other financial institutions to invest more flexibly in the secondary market. This would increase institutional participation, which is vital for market stability and depth.
Clear Guidelines for Share Issuance: The Forum has demanded transparent criteria for the issuance of both ordinary and rights shares. This is intended to protect investor interests by ensuring fairness and predictability in the process.
Encourage Institutional Investors: The proposal seeks to actively encourage large institutional investors, such as the Citizen Investment Trust and Employees Provident Fund, to play a stronger role in market transactions. Their increased participation could help mitigate volatility and provide a solid foundation for market stability.
Introduce Options and Futures Markets: The Forum has recommended the introduction of derivative trading tools, such as options and futures. This would provide investors with more sophisticated instruments for managing risk and would help diversify the market, attracting a new class of investors.
Eliminate Double Taxation on Dividends: A key recommendation is to abolish the current system of double taxation on dividends. Under the current system, both the company and the investor are taxed on dividends, which the Forum argues discourages dividend payouts and reduces overall returns for investors.
Scientific Lock-In Period for Founder Shares: The proposal calls for a rational and evidence-based approach to determining the lock-in periods for founder shares. This would provide greater certainty for both founders and investors and prevent speculative behavior.
Accelerate the NEPSE Listing Process: The Forum has urged the government and regulatory bodies to simplify and speed up the listing process for companies on the Nepal Stock Exchange. A more efficient listing process would encourage more companies to go public, increasing the number of investment options for the public.
Flexible Core Capital Investment Limits: Finally, the Forum has requested that the NRB provide banks with more flexibility to invest their core capital in the capital market. This would allow banks to play a more active role in the market and contribute to its growth and stability.
Conclusion and Outlook
The Nepal Investor Forum’s comprehensive proposal, combined with the government’s formation of the Capital Market Reform Task Force, signals a concerted effort to address the systemic issues plaguing Nepal’s stock market. The recommendations touch on fundamental areas of policy, regulation, and market infrastructure. By focusing on liquidity, institutional participation, tax reform, and the introduction of new financial instruments, the Forum hopes to not only reverse the current market downturn but also build a stronger, more resilient capital market for the long term. The task force’s report, which is due in a few days, will be a critical document that is expected to guide policy reforms and shape the future of Nepal’s financial sector.
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