Nepal’s Demat Accounts Cross 8 Million, but Numbers Reveal a Much Smaller Active Investor Base

Kathmandu — Nepal has crossed a major milestone in the expansion of its capital market, with the number of demat accounts surpassing 8 million. But a closer look at the data shows that the headline figure considerably overstates the number of individual and actively participating investors.

According to CDS and Clearing Limited (CDSC), more than 8.009 million demat accounts have now been opened across the country. MeroShare users have reached around 5.148 million, while the number of Trading Management System (TMS) accounts stands at approximately 3.45 million.

The gap between these three figures provides a clearer picture of how Nepal’s capital market has expanded.

Only about 64 percent of all demat accounts are associated with MeroShare users. The number of TMS accounts, meanwhile, is equivalent to only around 43 percent of the total demat account base.

This means there are roughly 2.86 million more demat accounts than MeroShare accounts and about 4.56 million more demat accounts than TMS accounts.

The figures suggest that opening a demat account has become widespread, but moving from merely holding securities to actively participating in the market remains much less common.

Eight million accounts do not mean eight million investors

One of the most important qualifications to the 8-million figure is the prevalence of multiple accounts.

CDSC data show that more than 562,000 investors operate two or more demat accounts. Under existing regulations, an individual is generally permitted to maintain up to two such accounts, although weaknesses in integrated verification have reportedly allowed some investors to maintain accounts beyond the prescribed limit.

Even assuming that every one of those 562,000 investors holds only two accounts, at least 562,000 of the 8.009 million accounts would be additional accounts belonging to existing investors rather than separate individuals.

On that minimum assumption alone, the number of unique demat holders would be no more than around 7.45 million. The actual figure could be lower if some individuals maintain more than two accounts.

This distinction matters because account numbers are frequently interpreted as evidence of the size of Nepal’s investor population. In reality, the number measures accounts, not necessarily people.

Inactive accounts, duplicate holdings and accounts that remain open despite little or no activity further widen the gap between registered accounts and genuine market participation.

More than sixfold growth in eight years

Despite these limitations, the expansion of demat access has been remarkable.

Nepal had only around 1.296 million demat accounts in 2075 BS. The number has since climbed to more than 8.009 million, representing an increase of about 6.18 times.

In percentage terms, the account base has expanded by roughly 518 percent over the period.

If the eight-year period is viewed on a compounded basis, demat accounts have grown at an average annual pace of roughly 25 percent. That is unusually rapid growth for a financial-market access indicator and reflects how quickly securities ownership has become accessible to ordinary households.

Much of this expansion was driven by digitisation, easier account-opening facilities through banks and financial institutions, and growing public interest in initial public offerings.

The Covid-19 period marked a particularly sharp turning point.

More than 2.015 million new demat accounts were reportedly opened in fiscal year 2077/78 alone. Another 1.543 million were added in 2078/79.

Those two years together contributed more than 3.55 million new accounts, showing how the pandemic accelerated the shift towards digital participation in Nepal’s securities market.

IPO culture drove investors into the market

The rapid increase in demat accounts does not necessarily mean that Nepal suddenly developed millions of regular stock traders.

For a large section of the public, the first point of entry into the capital market has been an IPO rather than the secondary market.

Applying for newly issued shares became considerably easier after MeroShare allowed investors to submit applications digitally, eliminating much of the paperwork and physical visits previously required.

As a result, opening a demat account became a basic requirement for households hoping to participate in public share offerings.

Recent IPOs commonly attract applications from around 2 million or more investors.

Yet that figure represents only about one-quarter of the total number of demat accounts currently in existence.

It is also equivalent to less than 40 percent of MeroShare users.

The comparison highlights an important feature of Nepal’s capital market: even among those equipped to apply for shares electronically, a substantial proportion may not participate in every public offering.

TMS figures expose the participation gap

The clearest indication of limited secondary-market involvement comes from TMS accounts.

Around 3.45 million TMS accounts have been opened, compared with more than 8 million demat accounts.

In other words, there are only about 43 TMS accounts for every 100 demat accounts.

The gap between the two stands at more than 4.5 million accounts.

While the number of TMS accounts should not automatically be treated as the number of active traders, the difference shows that millions of demat holders have not even reached the stage of establishing an online secondary-market trading account.

There is also a gap of around 1.7 million between MeroShare users and TMS accounts.

This suggests that a sizeable group of investors is digitally connected to the primary market but has not made the transition into secondary-market trading.

Nepal’s capital market has therefore been much more successful at attracting people into share ownership than at turning them into regular market participants.

Easy entry, harder transition to active trading

The difference may partly reflect how financial infrastructure has developed.

Opening a demat account has become relatively easy because banks and financial institutions provide Depository Participant services across the country.

A person can therefore open a demat account and obtain MeroShare access through an institution with which they may already maintain a banking relationship.

Entering the secondary market requires an additional step. Investors need to establish a relationship with a licensed broker and obtain a TMS account.

Although brokers have increasingly introduced online know-your-customer procedures and digital account-opening facilities, the process remains separate from opening a demat account.

For less experienced investors, that additional process can become a barrier.

The larger barrier, however, may be knowledge and confidence rather than technology.

Applying for an IPO requires relatively limited market knowledge. Investors generally submit an application and wait for allotment.

Secondary-market trading is different. Investors must assess valuation, company performance, price movements and risk before deciding when to buy or sell.

The gap between demat and TMS accounts may therefore also reflect Nepal’s broader financial-literacy challenge.

Dormant accounts inflate the total

Another issue is the growing number of accounts that may exist in the system but no longer represent meaningful market participation.

Some investors stop using their demat accounts after opening them. Others fail to pay annual renewal fees and their accounts become inactive.

There are also accounts belonging to deceased investors that may remain in the system until the necessary succession and closure procedures are completed.

As the demat system becomes older, such dormant accounts naturally accumulate unless they are regularly identified and removed from active statistics.

For policymakers and market regulators, this creates a measurement problem.

Simply announcing the total number of demat accounts provides an impressive headline, but it says relatively little about the actual depth of the capital market.

A more meaningful assessment would require data on unique investors, active demat accounts, active MeroShare users, annual IPO applicants and investors conducting regular secondary-market transactions.

Rapid expansion has not necessarily created a deeper market

The 8-million milestone nevertheless represents a major structural change in Nepal’s financial system.

Capital-market access, once concentrated among investors in major urban centres, has spread to a far broader section of the population.

Digitisation has helped reduce geographical barriers and made share ownership accessible to people who might never have visited a broker’s office or securities-market institution.

But access and participation are different things.

Nepal has been highly successful in creating infrastructure through which people can own securities. The next challenge is ensuring that those accounts translate into informed, active and sustainable investment.

The data indicate that the country has more than six times as many demat accounts as it had eight years ago, but fewer than half as many TMS accounts as demat accounts.

That gap is significant.

It suggests that the next phase of capital-market development cannot be measured simply by how many new accounts are opened.

The focus will increasingly need to shift towards the number of unique and active investors, stronger financial literacy, easier access to brokers, better investor protection and greater confidence in the secondary market.

The 8-million demat milestone therefore tells two stories at once.

It shows how rapidly Nepal’s capital market has reached ordinary citizens. At the same time, it reveals how far the market still has to go before those millions of accounts translate into equally broad and active investment participation.