शेयर बजार उकास्न सरकारको २१ बुँदे ‘बुस्टर डोज’ : पुँजीगत लाभकर घट्यो, इन्ट्रा–डे र सर्ट सेलिङ खुलाइनेGovernment's 21-Point 'Booster Dose' to Uplift the Stock Market: Capital Gains Tax Reduced, Intraday and Short Selling to be Opened

KATHMANDU — To bring Nepal's capital market back on track from a prolonged cycle of stagnation and despair, the government has introduced an ambitious and comprehensive '21-Point Reform and Revival Action Plan'. To mobilize an economy hit hard by the dual blow of natural disasters and economic recession, the Ministry of Finance has formulated a strategy to 'overhaul' the structural, legal, and policy frameworks of the securities market.

Moving beyond traditional stock buying and selling, this action plan aims to transform Nepal's stock market into a modern, international-standard market equipped with new financial instruments, the entry of institutional investors, and tax concessions.

Major Relief for Investors: Tax Reduced, Loss Adjustment Facility

The strongest and most directly encouraging aspect of this action plan for investors is the revision made to the Capital Gains Tax (CGT). It has been proposed that long-term investors (holding shares for more than 365 days) will now only need to pay a 3.75% CGT. Similarly, for short-term investors (holding for less than 365 days), this rate will be set at 5%.

Furthermore, the government is going to address the long-standing demand of investors for 'loss adjustment' (Netting). The government is moving towards implementing a scientific clearing system where the loss incurred in one transaction can be adjusted against the profit of another transaction within the same fiscal year, levying tax only on the 'net profit'. Analysts say this will help minimize investment risks in the market and boost morale.

Modern Tools from 'Short Selling' to 'Share Split'

Until now, the Nepali market has been operating on a 'one-way' system where profits can only be made when the market goes up. However, this action plan announces an amendment to the Securities Act, 2063 to introduce 'Short Selling', which allows profiting even when the market falls, and 'Intraday' trading, which allows buying and selling on the exact same day.

In addition, globally practiced mechanisms like margin lending and securities borrowing & lending will be implemented. The government has set a timeline to prepare the policy framework by the end of Magh 2083 for provisions allowing companies to purchase their own shares ('Buy Back') and 'Share Splits' to make shares more accessible to small investors by dividing them.

Opening Entry for Institutional Investors and NRNs

With the market currently dominated by small and retail investors, there is a recurring problem of massive fluctuations caused by minor rumors. To counter this, the government is paving a mandatory legal and structural path for the Citizen Investment Trust, Employees Provident Fund, Social Security Fund, and insurance companies to pull their investments from fixed bank deposits and inject them into the stock market.

Similarly, the government is preparing to give legal shape to the long-discussed but unimplemented plan to bring Non-Resident Nepalis (NRNs) into the secondary market by the end of Ashwin 2083. For this, necessary amendments will be made to the Foreign Investment and Technology Transfer Act and the Foreign Exchange Act. This is certain to increase the inflow of fresh funds into the market.

45-Day 'Lock-in' for Banks, Ban on Speculation

To regulate the investment of banks and financial institutions in the capital market, the Nepal Rastra Bank is going to impose new restrictions. To control speculation aimed at booking short-term profits, a 'lock-in period' will be implemented, mandating that shares bought in the secondary market by banks cannot be sold for at least 45 days.

Additionally, the action plan mentions that the Rastra Bank and the Securities Board will formulate a new policy by the end of Kartik 2083 after evaluating the overall investment limit, risk weight, and systemic risk of banks in the capital market.

Restructuring of NEPSE and New 'Benchmark Index'

The government is also revising the monopoly of the Nepal Stock Exchange (NEPSE) and its traditional index measurement system. Keeping the current NEPSE index limited merely as an 'All Equity Index', a new and realistic 'Benchmark Index' will be brought into operation by the end of Mangsir 2083, based on market capitalization, corporate governance, liquidity, and the financial condition of the companies. This will give investors a clear picture of which companies are truly strong and which are weak.

Furthermore, separate sector-wise criteria (for hydropower, agriculture, tourism, and manufacturing) and a price discovery system like 'book building' will be made mandatory for IPO issuances.

Conclusion: Implementation Remains the Main Challenge

Overall, this 21-point action plan by the Finance Ministry is the most ambitious and 'bold' step in the history of Nepal's capital market. It outlines a clear blueprint to expand the market beyond just equity to include corporate bonds, green bonds, and private equity and venture capital (PE/VC) frameworks.

However, in the context of Nepal, the effective implementation of policies has always been a tough nut to crack rather than the formulation itself. The success of this action plan and the future of the capital market will heavily depend on how strong the coordination is among the Securities Board, NEPSE, CDSC, and the Rastra Bank within the stipulated timeframe (Poush/Magh 2083).