NEPSE trading

#NepalRastraBank #InvestmentRe
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By Sandeep Chaudhary

Investment Reform 2082: BFIs Can Now Sell Shares After 6 Months Instead of 1 Year

Investment Reform 2082: BFIs Can Now Sell Shares After 6 Months Instead of 1 Year

The Nepal Rastra Bank (NRB) has unveiled a major regulatory reform under the Unified Directive 2082 (2025 AD), marking one of the most significant policy changes in Nepal’s banking and capital market sectors in recent years. The central bank has officially reduced the mandatory investment holding period for banks and financial institutions (BFIs) from one year to six months, allowing them to sell shares and debentures after six months of acquisition instead of waiting for a full year. This reform, termed as the “Investment Reform 2082,” aims to promote liquidity, flexibility, and institutional participation in the secondary market.

Background: The One-Year Restriction

Under the previous directive, BFIs were required to hold investments in listed shares, debentures, and other securities for at least one year before disposal. This rule was introduced to control speculative activities and ensure financial stability. However, market analysts and institutional investors had long criticized the policy for dampening market liquidity and limiting the role of large institutions in NEPSE (Nepal Stock Exchange).
The one-year lock-in period discouraged banks from participating actively in trading, leading to a decline in institutional volume and reduced vibrancy in the capital market.

New Provision: Six-Month Holding Period for Listed Securities

Responding to market concerns, NRB’s new directive has now shortened the lock-in duration. The revised provision clearly mentions:

“Banks and financial institutions may invest in the shares and debentures of organized institutions listed in the stock exchange for a period of not less than six months. No short-term investment shall be made in such securities.”

This means banks and financial institutions can sell their listed shareholdings after six months, providing more portfolio flexibility while maintaining a safeguard against excessive short-term speculation. The reform strikes a balance between liquidity and stability, enabling banks to engage more efficiently with market opportunities.

Rules for Unlisted Company Investments

While listed securities have been given more flexibility, NRB has retained strict supervision over unlisted investments.
If BFIs invest in shares or debentures of unlisted organized institutions, such securities must be listed within three years of investment. If not, the equivalent investment amount must be transferred to an Investment Adjustment Fund, drawn from retained earnings. The directive clarifies that the amount in the fund cannot be used until the investment is officially listed, ensuring accountability and transparency.

20% Sale Restriction Removed

NRB has also removed the previous rule that restricted BFIs from selling more than 20% of their paid-up capital worth of investments per fiscal year. The removal of this ceiling enhances liquidity management and provides banks with full discretion to rebalance or liquidate holdings as needed, based on market dynamics and financial performance.

Impact: Boost to Institutional Participation and Liquidity

Experts believe this reform will inject fresh energy into Nepal’s stock market by reactivating institutional participation. Commercial banks and development finance institutions, which had previously maintained minimal exposure to equities due to strict holding rules, can now adopt more flexible investment strategies.
The change is expected to improve NEPSE’s liquidity, trading frequency, and overall depth, while maintaining safeguards through reporting and governance compliance.

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