Dr. Rewat Bahadur Karki, Chiarman of SEBON: SEBON to strengthen the supervision & regulatory functions along with modernizing of the capital market

Dr. Rewat Bahadur Karki, who is an economist as well as banking and capital market expert, has served as CEO (2006-2008) of Nepal Stock Exchange Ltd. (NEPSE). He has also worked for more than 25 years at Nepal Rastra Bank, the Central Bank of Nepal in different capacities including as Economic Advisor in the Research Department and Director in the Banking and Financial Institutions Regulation Department. He has also worked as Executive Director (1995-1998) in Mid Western Rural Development Bank of Nepal. Internationally, Dr. Karki served as an Economic Advisor to Executive Director (2002-2005) at International Monetary Fund (IMF), Washington D.C. USA, and also as an Economist (1992-1994), Bank of Namibia, Namibia.

1. It has been little over a month that you have been chairman of SEBON. What is the state of SEBON as a regulatory body?

SEBON as a regulatory body has been found to have weak supervision when it comes to the regulating market. It is mainly due to lack of manpower to do the job. There is also a dire need for organizational improvement. We intend to strengthen the organizational role in the capital market in coming days.

2. What would be your strategies to run this organization?

In the first press meet we have listed our priorities and goals. Our priorities would be to strengthen the structural and organizational part of SEBON to develop the robust supervision and regulatory framework. Implementation of Single Identity card for investors, upgrading trading automation software, internet trading, standardization of listing are few of our priorities listed in my first press meet. (Press release from the first press meet of Dr. Karki can be found at the end of this interview)

3. SEBON has not been that very active to investigate insider trading in the secondary market of Nepal. How would you address this issue?

No stock market in the world is immune from Insider trading. The main challenge is how to curtail the insider trading. There are many aspects of the insider trading. Many parties such as BoD member, staff of listed company, broker, investors etc may be involved in such insider trading. We will be working with other organizations and stakeholders to control and take actions on insider trading.

4. In Nepal, broker commission is one of the highest in South Asia. Will you address this issue in your tenure at SEBON?

We are currently using percentile system to charge broker commission based on amount per transaction. Earlier the commission was in the range of 1.5 % to 1.00 % which has been brought down to 1.00% to 0.7%. The overall transaction cost to the investors in Nepal is very high. We have already sent a proposal to the concerned Ministry regarding this issue. We will be working to establish reasonable transaction cost to the investors.

5. SEBON has not been that very active in providing trainings to the investors. What are your plans to address this issue?

I think we should have a separate educational organization providing training to the investors such as the training institute run by Bombay Stock Exchange in India. This organization would be responsible for running the accredited training of various levels to the investors. Furthermore, such trainings must be decentralized making it available to the investors outside Kathmandu Valley. I would like to push for such training organization during my tenure in SEBON.

6. What will be your effort to modernize our market as compared to other market in the South Asian region?

The state of our capital market is not in good ranking when we compare it to the South Asian region. We are only one country in the South Asia region where stock market is not fully automated.

The modernization of stock market includes three things which are trading automation, clearing automation and electronic transfer of ownership of securities. Trading automation has been achieved. We will initiate work to get to clearing automation and electronic transfer of ownership of securities to fully modernize like other market in South Asia.

7. Do you think we can implement online system where investors can trade from the comfort of their home?

We acknowledge the fact that the general investors are eager to invest through online trading from the comfort of their house. There are a lot of challenges to overcome to make this happen. First of all we have to upgrade the capabilities of various stakeholders (NEPSE, CDSC, Brokers, Bankers etc) to run an online trading. We have to work with the central bank to integrate out banking system to the capital market so that the order placed by investors can be backed by their bank balance. After we develop the necessary systems, we will introduce the online trading in our market.

8. Investors are frustrated with the application process of IPOs /FPOs in Nepal. How will you address to modernize these processes?

As I have already mentioned earlier, we will working to improve the existing infrastructure of our stock market. We have seen the days where investors used to apply IPOs using huge amount of cash. Over the course of time we have streamlined the application process, to account for the inflow of large amount of cash. Similarly, we will be devising a way to replace the existing application process for IPOs/FPOs to make it more investor friendly.

9. As a chairman of SEBON, what would you like to tell to the investors?

As a regulatory body we are upgrading the infrastructure of the market. I would like to urge all the investors to invest in the market after understanding fundamentals and basic of the listed company. I would also like to urge investors to refrain from investing on the basis of whim.