Snags in software, bylaws holding up CDS operation
KATHMANDU, MAR 12 -
The long-awaited central depository system (CDS) is close to coming into full operation as two key obstacles are being resolved. The CDS system enables clearance and settlement of securities electronically besides maintaining digital records of the transfer of ownership of securities.
According to CDS and Clearing Limited, the failure of its computer software to calculate the capital gains tax and delays in the approval of its clearing and settlement bylaws by Securities Board of Nepal have been holding up full-fledged operation of the company.
“The software maker CMC Limited of India has already fixed the bugs in it and has promised to deliver it by the third week of March,” said Subodh Sharma Sigdel, chief executive officer of CDS and Clearing Limited. “The clearing and settlement bylaws that have reached Sebon are expected to be okayed by then.” He added that they were hopeful that his office would be able operate the system fully to clear and settle share trading electronically by mid-April. The office has been performing these tasks manually after the Nepal Stock Exchange handed over the responsibility to it. “Now we have all the other infrastructure including the office established and the staff in place. We are ready to start the CDS instantly once these two issues are settled,” said Sigdel.
The software used in India allows computing both the transaction cost and the capital gains tax. However, the Nepal government imposes only capital gains tax. Indian imposes capital gains tax only when sales take place within less than a year of purchase.
The software maker had suggested writing a program that calculates both the transaction cost and the capital gains tax like in India. But that was no good for Nepal, so the software had to be changed.
India gifts Rs 40m for CDS
The Indian Embassy handed over a cheque for IRs 25.6 million (Rs 40.9 million) to the Nepal Stock Exchange (Nepse) on Monday for establishing and operating a central depository system (CDS) in the country. It is the last instalment of the promised Indian aid of Rs 147.2 million, according to Nepse. Deputy chief of mission of the Indian Embassy Jaydeep Majumdar handed over the cheque to Nepse chairman Jeeva Nath Dhital.
In 2009 during the visit of the then prime minister Madhav Kumar Nepal to India, an agreement was signed between the two sides under which India would provide support to establish the CDS in Nepal.
Speaking on the occasion, Majumdar said that this was the first instance of Indian aid to Nepal in the capital market sector although its focused assistance has been concentrated on schools, roads and other development activities. “We are ready to extend additional support,” he added. Nepse chairman Dhital said that Indian would help in developing Nepal’s capital market further.
Source: The Kathmandu Post
