Government accepts NEPSE restructuring report; 25% stake proposed for strategic partner

KATHMANDU: The Government of Nepal has formally accepted the long-awaited Nepal Stock Exchange (NEPSE) restructuring report, endorsing a plan that proposes bringing in a strategic partner with a 25 percent ownership stake, a major policy shift aimed at modernizing Nepal’s capital market infrastructure and reducing state dominance in the secondary market operator.

A Cabinet meeting held Thursday approved the report prepared by a study committee led by Chartered Accountant Prakash Jung Thapa. The government has also decided to make the report public, signaling the start of structural reform in Nepal’s securities market framework.

Capital Expansion Plan to Reach Rs 3 Billion

The committee has recommended increasing NEPSE’s paid-up capital from the current Rs 1 billion to Rs 3 billion, in line with the Securities Market Operation Regulations, which require secondary market operators to maintain a minimum paid-up capital of Rs 3 billion.

Three capital expansion options have been proposed:

Bonus share issuance

Rights share issuance

Fresh share issuance at a premium price

The report suggests that issuing additional shares at a premium could attract new investors while also mobilizing the funds necessary for service expansion, technological upgrades, research and development, and the establishment of support institutions linked to capital market services.

In the immediate term, the committee considers bonus share issuance the most suitable option. However, it states that before moving toward rights or fresh share issuance, clarity regarding the entry of a strategic partner is essential.

Proposed Ownership Restructuring

The restructuring blueprint significantly alters NEPSE’s ownership structure:

Strategic Partner: 25%

Banks and Insurance Companies: 43.66%

General Public: 15%

Government-owned Institutions: Reduced to 15.73%

Currently, the Government of Nepal holds 58.66% of NEPSE shares. Other shareholders include:

Rastriya Banijya Bank: 11.23%

Employees Provident Fund: 10%

Nepal Rastra Bank: 9.5%

Laxmi Sunrise Bank and Prabhu Bank: 5% each

The proposed structure marks a sharp dilution of direct government ownership, opening the door for private sector and institutional participation.

Governance and Conflict of Interest Concerns

The report highlights conflict of interest issues arising from the presence of the government and Nepal Rastra Bank in NEPSE’s ownership. According to the committee, this has constrained the regulatory independence of the Securities Board of Nepal (SEBON) and hindered capital market development.

It also points to bureaucratic dominance in NEPSE’s board, which has allegedly slowed decision-making, weakened professional autonomy, and limited adoption of modern market technologies.

The committee concludes that NEPSE’s board should be restructured to ensure a majority of independent experts, enhancing professionalism, governance standards, and operational efficiency.

Reform Imperative

The committee argues that significant and continuous investment is required in human resources, physical infrastructure, research, innovation, and service expansion. Without capital augmentation and governance reform, NEPSE risks lagging behind regional stock exchanges in terms of market depth, technology, and investor services.

The five-member committee had been formed on Mangsir 2 with a mandate to submit its report within 50 days, reflecting the government’s urgency to overhaul Nepal’s capital market ecosystem.

The acceptance of the report marks a pivotal step toward transforming NEPSE into a more autonomous, professionally managed, and investor-friendly exchange aligned with global capital market practices.