High-Level Panel Urges Capital Expansion and Structural Reform for Nepal Stock Exchange
High-Level Panel Urges Capital Expansion and Structural Reform for Nepal Stock Exchange
A high-level committee formed to restructure the Nepal Stock Exchange (NEPSE) has concluded that increasing the exchange’s paid-up capital is essential for its long-term sustainability and competitiveness. The 126-page report, prepared under the coordination of former Nepal Accounting Board chairperson Prakash Jung Thapa, was made public by the Ministry of Finance, Nepal on Tuesday.
The report states that although the Securities Market Operation Regulation, 2007 requires a minimum paid-up capital of NPR 3 billion for a secondary market operator, NEPSE is currently operating with only NPR 1 billion. According to the committee, this gap has limited the exchange’s ability to modernize its services and compete with regional and international markets.
The committee has warned that without sufficient capital, NEPSE cannot make the necessary investments in technology, human resources, infrastructure, research, and service expansion. To address this, it has recommended issuing bonus shares to immediately raise paid-up capital to NPR 3 billion. If additional funding is required in the future, the report suggests mobilizing resources through rights shares or fresh public offerings.
Analysts believe this recommendation reflects growing concern over NEPSE’s weakening institutional capacity. In recent years, the exchange has struggled to keep pace with technological change, while neighboring markets have invested heavily in automation, surveillance, and data systems. As a result, Nepal’s capital market has remained relatively small and less attractive to foreign investors.
The report has also highlighted weaknesses in NEPSE’s ownership and governance structure. At present, the Government of Nepal holds 58.66 percent ownership, while the remaining shares are held by public and financial institutions. The committee argues that this structure has reinforced bureaucratic control and limited managerial flexibility.
To address this, the panel has proposed partial divestment and the introduction of strategic partners. However, it has ruled out full privatization, warning that complete government withdrawal could weaken small investors’ confidence, increase the risk of monopoly, and undermine market self-regulation. Instead, it recommends maintaining partial state ownership while gradually reducing government stakes.
Under the proposed model, strategic partners may be allowed to hold between 15 and 25 percent ownership, with a mandatory lock-in period of at least ten years. The report states that such partners should be selected from leading global stock exchanges with at least 20 years of experience and membership in the World Federation of Exchanges (WFE).
