Nepal’s Ministry of Finance has rolled out a broad Capital Market Strengthening and Reconstruction Action Plan, 2083 in response to recent economic weakness, flood-related disruption and pressure on the stock market. The plan calls for immediate and medium-term reforms across IPO issuance, price discovery, market infrastructure, securities regulation and investor protection. It also directs the Securities Board of Nepal to make IPO rules more practical and to improve price-discovery mechanisms, particularly for hydropower, hotels, tourism, agriculture, pharmaceutical and other productive-sector companies.
The action plan proposes reforms to mutual funds, stock exchange governance and benchmark indices, including strengthening NEPSE’s institutional structure and introducing a broader All Equity Index. It also seeks legal changes to increase participation by non-resident Nepalis in the secondary market and promotes the development of a stronger corporate bond market. The ministry has additionally called for expanded use of instruments such as green bonds, mortgage bonds, social bonds, project-specific bonds and environmental bonds.
Institutional investors are another major focus. The plan aims to improve access for pension funds, citizen investment funds, social security funds, insurance companies and mutual funds, while requiring portfolio rebalancing and stronger market participation. It also calls for reforms to margin lending, securities lending, private equity and venture capital, as well as measures to make the Central Depository System more effective and improve research, disclosure and market supervision.
The government also plans to review tax treatment on long-term securities investment, including capital gains and dividend-related provisions, while tightening prudential rules on banks’ exposure to the capital market. Nepal Rastra Bank has been tasked with reviewing special-risk weights and investment limits to reduce excessive market volatility and improve financial stability. The package, in other words, is trying to fix nearly every loose bolt in the capital market at once, because apparently subtlety has left the building.
