28th September 2025, Kathmandu
The Capital Market Reform Task Force has submitted a comprehensive report to Finance Minister Rameshore Khanal, outlining a series of recommendations designed to modernize the financial market infrastructure, enhance transparency, and significantly strengthen investor protection mechanisms in Nepal.
Multiple Demat Accounts Opening
The core of this reform package centers on easing investor restrictions while simultaneously tightening risk management for volatile assets.
Landmark Recommendation: Allowing Multiple Demat Accounts
The most notable proposal from the task force is the recommendation to allow individual investors to hold two or more Demat (beneficiary) accounts. This marks a pivotal potential shift from the current prevailing norm in Nepal, which typically limits investors to a single electronic account for their securities.
This policy change is expected to yield multiple benefits for investors and the overall market:
- Flexibility in Portfolio Management: Investors would gain the ability to manage distinct portfolios, segregating assets for long-term investment, active short-term trading, or specialized sector allocations across different depository participants or brokers.
- Enhanced Convenience and Risk Diversification: Multiple accounts offer better convenience and the option to diversify their custodial risk, aligning Nepal’s regulatory environment more closely with international capital market practices.
- Increased Market Participation: By lowering regulatory hurdles and increasing flexibility, the measure is anticipated to encourage broader participation and greater overall liquidity in the Nepal Stock Exchange (NEPSE).
- Refining Stock Classification and Risk Control
Beyond account management, the report tackles the critical issue of market stability and risk mitigation through reformed company classification: - Objective Classification Criteria: The task force has urged NEPSE to adopt more objective and transparent criteria for categorizing listed companies. This will help provide investors with clearer signals about the compliance and financial health of the firms they invest in.
- Stricter Rules for ‘Z’ Group Stocks: Crucially, the panel recommends implementing a 100 percent cash margin requirement for all transactions involving stocks categorized in the ‘Z’ group. This group typically consists of companies with poor financial health, weak compliance, or other high-risk indicators.
The requirement dictates that investors must deposit the full amount of cash for the purchase of these high-risk shares before the transaction, effectively eliminating the potential for speculative leveraged trading in these volatile stocks. This measure is a direct step towards protecting retail investors from undue risk exposure and potential defaults, fostering a more responsible trading environment.
Strengthening Investor Protection and Grievance Redressal
A strong emphasis has been placed on improving the trust and reliability of the capital market infrastructure:
- Dedicated Complaint Management: The report advocates for establishing a dedicated and streamlined mechanism to handle investor complaints and address grievances promptly. An efficient system for resolving disputes is paramount for boosting investor confidence.
- Efficient Investigation of Securities Offenses: To combat fraud and market manipulation, the task force recommends creating a separate, specialized mechanism for the timely and effective investigation and resolution of securities-related offenses. Swift action against illegal activities is vital for maintaining market integrity and investor security.
- Broader Context and Market Modernization
These recommendations are a response to the need to modernize Nepal’s capital market and bring it up to international standards, particularly in light of the increasing influx of retail investors and recent market instability. The reforms are strategically aimed at: - Aligning with Global Practices: Allowing multiple Demat accounts and adopting objective classification criteria will help the Nepali market align its framework with international norms, which is essential for attracting foreign portfolio investment.
- Supporting Economic Growth: A robust, transparent, and efficient capital market is a foundational pillar for national economic development, capable of channeling savings into productive investments and supporting a growing base of public companies.
Implementation Outlook and Challenges
The report is currently under review by the Ministry of Finance, which will consult with key regulatory bodies—such as the Securities Board of Nepal (SEBON), NEPSE, and CDS and Clearing Limited (CDSC)—for implementation.
While the reforms are largely welcomed, regulators and market participants must prepare for certain challenges:
- Regulatory Oversight: Ensuring the new flexibility of multiple Demat accounts does not compromise anti-money laundering (AML) and Know Your Customer (KYC) compliance will be a continuous task.
- Technological Investment: Brokers and the central depository system will need significant technological upgrades to manage the increased volume of accounts and to effectively implement the stricter cash margin rules for ‘Z’ group stocks.
The implementation of these measures, particularly the permission for multiple Demat accounts and the stricter margin requirements on high-risk stocks, promises to enhance investor empowerment, enforce risk discipline, and ultimately lead to a cleaner, more robust, and dynamic capital market in Nepal.
For More: Multiple Demat Accounts Opening