SEBON Capital Market Reform In Nepal: Chairperson Shrestha Urges Stronger Regulation
10th July 2025, Kathmandu
Santosh Narayan Shrestha, Chairperson of the Securities Board of Nepal (SEBON), has acknowledged that while Nepal’s capital market has expanded rapidly, regulatory mechanisms have lagged behind. Speaking at a meeting of the Federal Parliament’s Finance Committee on Thursday, Shrestha emphasized the urgent need to strengthen oversight and policy clarity to sustain the market’s momentum.
SEBON Capital Market Reform Nepal
Capital Market Growth Outpaces Regulation
Chairman Shrestha admitted that despite the visible progress in Nepal’s capital market, the regulatory system had not evolved at the same pace. He said that this imbalance had become more apparent since taking office and that he has been actively working to improve regulatory frameworks during his six-month tenure.
According to him, expansion without proper oversight poses long-term risks. He also pointed out that previous communications from the Public Accounts Committee and recent instructions from the Finance Committee had created uncertainty in the Initial Public Offering (IPO) issuance process. To overcome this, he stressed the need for clear guidance from the Finance Committee on how to proceed.
IPO Process Facing Uncertainty
Shrestha stated that various directions from parliamentary committees had introduced ambiguity in the IPO issuance process. He noted that while intentions may have been constructive, the lack of a coordinated and well-structured regulatory approach had caused confusion.
He emphasized that the Finance Committee itself must provide strategic direction on how IPOs and other capital market activities should move forward in the coming days.
Call To Reduce Money Market Dominance
Highlighting the imbalance between the capital market and money market in Nepal’s financial system, Shrestha said the latter still dominates. He underscored the importance of bringing balance by expanding capital market instruments and reducing the overreliance on traditional banking products.
“The capital market is crucial for any country’s economic growth,” he said. “In Nepal’s case, the money market still has a strong hold, and we need to change that.”
Plans To Establish A New Stock Exchange
In a significant revelation, Shrestha confirmed that there are no legal obstacles to establishing a new stock exchange in Nepal. He shared that three proposals have already been submitted to SEBON and are currently under evaluation.
Shrestha also referred to the report prepared under the leadership of former Finance Secretary Chintamani Shivakoti. According to the report, the time is ripe for the establishment of a new stock exchange, and SEBON has already entered the implementation phase.
NEPSE Restructuring In Progress
Shrestha informed the committee that internal assessments and groundwork are underway to restructure the existing Nepal Stock Exchange (NEPSE). The goal is to modernize its operations and integrate new systems that better serve current market demands.
He further noted that the restructuring plan will focus on aligning NEPSE with international standards and increasing investor confidence.
Encouraging Productive And Financially Sound Companies
Shrestha emphasized the importance of promoting financially stable and productive companies in the capital market. SEBON is giving priority to such companies and is working on bringing them to the market at premium valuations to reflect their financial strength.
He said the aim is to ensure that only companies with solid fundamentals are allowed to raise public funds, thereby protecting investors and enhancing overall market credibility.
Promoting Market Instruments: Debentures and Bonus Shares
To deepen the capital market, SEBON plans to promote alternative financial instruments such as debentures, bonus shares, and other securities. These tools will help diversify investment options and reduce the concentration of risk.
Shrestha mentioned that future amendments to the Securities Act and the government’s policy frameworks would include clear provisions for developing and applying innovative market instruments.
Need for Balanced And Inclusive Growth
Summing up his remarks, Shrestha said that while the capital market is progressing, it must evolve with the right balance between innovation and regulation. He stressed that SEBON is committed to eliminating current bottlenecks and creating a more inclusive and resilient financial ecosystem.
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