Member of Parliament Hari Dhakal Provides 10 Recommendations to Finance Minister for Capital Market Reform

Nepalese Member of Parliament Hari Dhakal, known for his insights into the stock market, met with the current Finance Minister, Barsaman Pun, today to discuss potential reforms for the stock market. During this meeting, Dhakal, along with investors Gopal Swami and Naresh Joshi, provided 10 suggestions for improving the capital market.

1. The establishment of citizen investment funds, such as the NEPSE 'A' category, where 5/5 Arba shares of well-performing companies are made available for immediate purchase, aims to boost investor confidence.

2. Recommending collaboration with the Nepal Rastra Bank, Dhakal proposed that banks and financial institutions allocate 10% of their primary capital to short-term investments in the secondary market.

3. Dhakal emphasized the need for flexibility in securing loans against shares, urging the central bank to reconsider its current policy restricting banks from obtaining more than Rs. 15 Crores individually and Rs. 20 Crores collectively. Such flexibility in share-based loans could significantly stimulate the market.

4. Dhakal advocated for the immediate initiation of margin trading through brokers, ensuring a swift start to this financial practice. Clear guidelines on how brokers can obtain and manage these loans need to be established to facilitate efficient margin trading.

5. Dhakal suggested launching Initial Public Offerings (IPOs) at reasonable premiums to avoid market downturns and prevent existing investors from leaving the market. Transparency and adherence to book-building procedures should be prioritized for IPO approvals.

6. Dhakal recommended that banks and insurance companies maintain a minimum of 51% ownership by promoters. For companies with less than 51% ownership, the appointment of independent and capable directors on the board is crucial for effective governance.

7. Dhakal emphasized the immediate restructuring of the Nepal Stock Exchange, with the consideration of opening a new stock exchange if necessary. The government's sale of licenses during this restructuring process could generate substantial revenue.

8. The appointment of a competent and experienced individual as the new Chairman of the Securities Board of Nepal is crucial for fostering growth, development, regulation, and supervision of the capital market. The focus should be on appointing someone with a track record in financial market management.

9. The implementation of features like intraday trading and short selling in the NEPSE will significantly enhance market efficiency and attract daily transactions exceeding Rs. 20 Arba, potentially leading to substantial government revenue.

10. Dhakal stressed the importance of the government not imposing overly restrictive policies in the future, ensuring a secure environment for both domestic and foreign investors.