Kathmandu: The parliamentary Finance Committee has directed the government to submit a comprehensive study report within 10 days on the key challenges facing Nepal’s stock market, amid growing concerns over weak investor confidence, limited market depth, and delayed capital market reforms.
During a committee meeting on Wednesday, lawmakers instructed the government to examine a wide range of issues affecting the country’s secondary market, including the possibility of introducing short selling, launching new financial instruments, expanding institutional investment, improving coordination between the banking sector and the capital market, strengthening investor confidence, and ensuring policy stability.
The committee said the report should identify the structural weaknesses limiting the development of Nepal’s capital market and recommend practical policy measures to improve its efficiency and competitiveness.
Lawmakers Call for Long-Term Reforms
Speaking at the meeting, Rastriya Swatantra Party (RSP) lawmaker Vidushi Rana questioned government officials about their strategy for attracting long-term and institutional investment into the stock market.
Although Nepal has witnessed a rapid increase in retail investors—with millions of Demat and Mero Share account holders—the market continues to struggle with low liquidity and limited depth, she noted.
“Despite the significant investment potential created by the growing number of investors, the capital market has yet to develop sufficient depth and liquidity,” Rana said.
Diversification of Capital Market Stalled
The discussion also highlighted the slow pace of capital market diversification.
The Securities Board of Nepal (SEBON) has for years proposed introducing several new investment products, including a corporate bond market, SME exchange, Real Estate Investment Trusts (REITs), Exchange-Traded Funds (ETFs), and venture capital mechanisms. However, none of these initiatives have yet been implemented.
Lawmakers argued that the absence of alternative investment products has limited opportunities for investors and restricted the market’s ability to mobilize long-term capital for economic growth.
Concerns Over Delayed Approvals
CPN-UML lawmaker Pushpa Raj Kandel criticized SEBON for delays in approving companies seeking to issue Initial Public Offerings (IPOs) and rights shares, arguing that the slow regulatory process has constrained capital formation and investment.
He said Nepal’s capital market has not been able to channel adequate financial resources into productive sectors of the economy despite strong investor interest.
Banking Sector and Stock Market Need Better Coordination
Meanwhile, Nepali Communist Party lawmaker Parshu Ram Tamang expressed concern over the weak coordination between the banking sector and the stock market.
He noted that banks are currently holding excess liquidity, yet the capital market continues to experience sluggish performance.
“Despite banks sitting on excess liquidity, the capital market continues to move at a snail’s pace,” Tamang said.
Lawmakers stressed that closer coordination between monetary policy and capital market regulation is essential to improve market liquidity and encourage productive investment.
Focus on Investor Confidence
The committee’s directive comes at a time when Nepal’s stock market has been facing prolonged volatility and declining investor confidence. Policymakers believe that introducing new financial instruments, improving regulatory efficiency, strengthening institutional participation, and ensuring stable and predictable policies could help create a deeper, more resilient capital market.
The government is now expected to submit its findings within the 10-day deadline, outlining possible reforms to address long-standing structural issues and support the sustainable development of Nepal’s capital market.
