मौद्रिक नीतिमा पुँजीबजारको आवाज: राष्ट्र बैंकसमक्ष ११ सुझाव, लगानीकर्ताको नजर नीतिको पर्खाइमाNepal's Capital Market Speaks: Eleven Demands Land on the Central Bank's Desk

Kathmandu, June 15 — Nepal Rastra Bank is drafting its monetary policy for the upcoming fiscal year 2083/84. And before the ink dries on that document, the country's investors and capital market stakeholders have made sure their voices are heard.

Through the Monetary and Capital Market Department, eleven concrete recommendations have been formally submitted. These are not wishful thinking dressed up in policy language. They are specific, structural, and long overdue — pointing directly at the fault lines that have kept Nepal's capital market from fulfilling its potential for years.

Banks in Nepal are present in the capital market, but barely. Investment limits, lock-in periods, and a web of restrictions have kept them from playing any meaningful role in the secondary market. The first and most fundamental demand is simple — loosen these constraints. Give banks the freedom to participate more actively. When institutional money enters the market in volume, liquidity improves, volatility decreases, and the market begins to behave less like a casino and more like an economy.

The microfinance sector carries a different grievance. Institutions that have met their Capital Adequacy Ratio requirements — that have, by every measurable standard, put their financial house in order — are still blocked from distributing dividends freely under a one-size-fits-all policy. The second recommendation asks for what seems obvious: reward good performance with greater flexibility. A blanket restriction that punishes healthy institutions alongside struggling ones is neither fair nor efficient.

Margin lending against shares currently operates on a flat rate regardless of the underlying stock's quality or risk profile. A blue-chip company's shares and a barely-surviving listed firm's shares are treated identically when it comes to collateral. This makes no sense. The third recommendation calls for risk-based margin lending and the introduction of loan-to-value ratios calibrated to the actual risk of the security in question. The result would be a more rational, more stable market — one where credit flows to quality rather than flooding indiscriminately.

Liquidity in Nepal's capital market has been a chronic problem, not an occasional one. It returns as a crisis every few years, and each time the response is reactive rather than structural. The fourth recommendation proposes a durable fix — mandate that banks allocate a defined proportion of their total loan portfolio to share-collateral lending. Predictable supply of credit into the market, rather than feast-and-famine cycles, is what long-term market health requires.

Millions of non-resident Nepalis send billions of rupees home every year. They are, by any measure, deeply connected to Nepal's economic fate. And yet they largely stay away from its capital market — not out of disinterest, but because getting money out is complicated. Repatriation of profits and principal remains a bureaucratic maze. The fifth recommendation cuts to the heart of this: simplify entry and exit. Make it easy for diaspora Nepalis to invest and to leave when they choose. The remittance dollars are already coming — what is missing is a mechanism to channel even a fraction of that into productive investment.

The sixth recommendation has perhaps the most immediate transformative potential. Nepal's Employee Provident Fund, Citizen Investment Trust, Social Security Fund, and insurance funds collectively hold hundreds of billions of rupees. Most of it sits in low-yield instruments because policy has never clearly enabled these institutions to invest meaningfully in the capital market. Analysts have said for years that unlocking even a portion of this institutional capital would reshape the market's depth and stability overnight. The recommendation asks for exactly that — clear policy facilitation to get these funds moving.

Interest rate volatility is not just a macroeconomic inconvenience. For capital market investors, it makes long-term planning nearly impossible. When the cost of money swings unpredictably, equity valuations swing with it, and confidence erodes. The seventh recommendation calls for the Interest Rate Corridor to be used as it was intended — to keep rates stable and predictable. A market cannot mature when its most basic pricing signal is unreliable.

The eighth recommendation is the most conceptually significant of all eleven. Nepal Rastra Bank has never formally recognized the capital market as a productive sector within its monetary policy framework. The consequences of this omission are real — investment flowing into the capital market is treated with suspicion rather than as an economic contribution. Granting this recognition would open policy space for banking sector funds to flow toward the capital market without running into regulatory friction at every turn. It is a change in how the central bank thinks about the market — and that shift in thinking matters more than almost any specific rule change.

Nepal's capital market is almost entirely equity-based. Shares go up, shares go down — and that is essentially the whole story. The ninth recommendation argues for something that most developed markets take for granted: a functioning corporate bond market. If companies could raise capital by issuing bonds directly to the market, they would be less dependent on bank credit. Investors would gain an entirely new asset class. And the market would develop the kind of depth that equity alone cannot provide. A working group to facilitate corporate bond issuance is the specific ask.

The tenth recommendation is technical but its impact would be felt by every investor in the country. Today, anyone who wants to invest across multiple financial institutions must complete Know Your Customer verification separately at each one. It is repetitive, time-consuming, and entirely unnecessary in an age of digital infrastructure. A Central KYC platform with API integration would allow a single verification to work across the entire system. The process of investing would become faster, simpler, and genuinely digital.

The eleventh and final recommendation is the most forward-looking. Securities Lending and Borrowing, Alternative Risk Investment Funds, Broker Financing, and Commercial Paper frameworks — these instruments exist in virtually every mature capital market in the world. Their absence in Nepal is not a minor gap. It is one of the primary reasons the market lacks depth, limits sophisticated risk management, and remains inaccessible to the kinds of institutional and foreign investors who could transform it. Introducing these instruments would not just add products to a shelf — it would signal that Nepal is serious about building a market that competes regionally.

All eleven recommendations point in the same direction. More investment leads to higher production. Higher production creates jobs. Jobs drive economic growth. Economic growth builds a prosperous Nepal. This is not an investor's slogan — it is a description of how economies actually work, and why a functioning capital market is not a luxury but a necessity.

Nepal Rastra Bank will announce its monetary policy soon. How many of these recommendations it absorbs — and how seriously — will say a great deal about whether the central bank sees the capital market as a peripheral concern or as a central pillar of the country's economic future.

Investors are watching. The market is waiting.

The author is a member of the Monetary and Capital Market Department of the Rastriya Swatantra Party (RSP). Views expressed are the author's own.