In a significant policy shift, the Securities Board of Nepal (SEBON) has amended its Securities Issuance and Distribution Directive 2024, allowing Non-Resident Nepalis (NRNs) to invest in the country’s secondary market. This 8th amendment removes several longstanding legal hurdles while introducing a series of conditions to regulate NRN investments.
The new provisions permit NRNs to participate in the stock market through joint investment companies. These companies must issue between 10% and 49% of their shares to NRNs and register with SEBON before launching Initial Public Offerings (IPOs). The IPOs will be exclusively available to NRNs for a period ranging from four to 15 days. However, these shares must consist of at least 1,000 units and can only be traded among NRNs. Further, IPO shares cannot be traded for one year after issuance, and rights shares can only be transferred within the NRN community.
According to SEBON Executive Director Nabaraj Adhikari, the amendment aims to attract NRNs to Nepal’s capital market, facilitating the mobilization of more capital within the country. This development comes in response to persistent demands from the NRN community to permit investment in the secondary market.
Last month, during its annual general meeting in Kathmandu, the Non-Resident Nepali Association (NRNA) pledged to establish a Rs 10 billion development fund. The fund will focus on primary share investments, particularly in the infrastructure sector, aligning with the government’s broader objective of encouraging NRN participation in sectors like hydropower and real estate listed on the stock market.
The initiative follows the recommendations of a four-member study committee formed by SEBON in 2023, which was tasked with identifying and addressing legal and technical obstacles to NRN investment. For years, the government has emphasized leveraging the capital, technology, and expertise of the Nepali diaspora to bolster national development.
Despite this progress, the policy has drawn criticism. Stock market analysts argue that the restrictions placed on NRN investment limit its transformative potential, especially when compared to the more open policies in other countries that encourage expatriate capital inflow. As of now, only Nepalis residing in the country can participate in Nepal’s primary and secondary markets, making this amendment a cautiously optimistic step toward opening up the nation’s financial system to the global Nepali community.
