Government Unveils 21-Point Action Plan to Revive Nepal’s Capital Market

The Ministry of Finance has unveiled a 21-point “Capital Market Strengthening and Revival Action Plan, 2083” aimed at revitalizing Nepal’s sluggish capital market, restoring investor confidence, and introducing policy and structural reforms to make the market more competitive, transparent, and investment-friendly.

The action plan comes amid a prolonged slowdown in the economy and capital market, compounded by the economic impact of the devastating Bhote Koshi River flood on August 26, 2026. The government has said the measures are intended to support broader economic expansion and improve the functioning of the banking, financial, industrial, infrastructure, investment and capital market sectors.

The plan covers reforms ranging from IPO pricing and mutual funds to corporate bonds, institutional investment, NRN participation, margin lending, buybacks, taxation and risk management.

1. Market-Oriented IPO System and Price Discovery
The Securities Board of Nepal (SEBON) will immediately issue general eligibility guidelines for Initial Public Offerings (IPOs). It will also develop sector-specific eligibility criteria for hydropower, manufacturing and processing, hotels and tourism, agriculture, and pharmaceutical industries. The board will introduce a market-oriented public issuance system, including a price discovery mechanism and reforms to the securities allotment system, by the end of Poush 2083.

2. Strengthening Mutual Funds and Developing New Instruments
SEBON will introduce a policy to transform mutual funds into professional, diversified, transparent, risk-aware, technology-friendly, and long-term investment institutions. The government plans to develop instruments such as corporate bonds, money-market instruments, and exchange-traded funds (ETFs). Necessary guidelines and infrastructure will be established by the end of Mangsir 2083.

3. Institutional Reform of Securities Brokers
The board will immediately introduce a policy for the institutional strengthening and modernization of securities broker businesses. The reform aims to transform brokers into modern, professional, financially sound, technology-driven, and diversified securities service providers in line with international practices and standards.

4. Legal Framework for Modern Securities Instruments
The government will prepare separate draft bills concerning securities regulation and market infrastructure to modernize the Securities Act, 2063. The reforms will facilitate instruments and practices including margin lending, intraday trading, securities borrowing and lending, and short selling.

5. Restructuring Nepal Stock Exchange
The restructuring of Nepal Stock Exchange (NEPSE) will be moved forward in line with the report submitted by the government-formed task force on Poush 25, 2082. The initiative will focus on institutional strengthening, structural reform, and capacity enhancement of NEPSE.

6. Introduction of a New Benchmark Index
The existing NEPSE Index will continue as an All Equity Index. Meanwhile, a new benchmark index for the securities market will be introduced by the end of Mangsir 2083. The new index will consider factors such as tradable shares, market capitalization, companies’ financial condition, trading liquidity, corporate governance, and information disclosure.

7. Opening the Secondary Market to NRNs
The government plans to facilitate the participation of Non-Resident Nepalis (NRNs) in Nepal’s secondary securities market. For this purpose, proposed amendments to the Foreign Investment and Technology Transfer Act, 2075 and the Foreign Exchange (Regulation) Act, 2019 will be submitted to the Cabinet by the end of Ashwin 2083.

8. Developing the Corporate Bond Market
The government will promote the institutional corporate bond market to shift financing from a predominantly bank-based model toward market-based financing. Necessary amendments to the existing bond regulations will be made, with implementation targeted by the end of Ashwin 2083.

9. Promoting Specialized Bonds
The government will encourage the issuance of specialized debt instruments, including green bonds, disaster bonds, social bonds, project-specific bonds and environmental bonds. A policy covering the use of proceeds, investment, and disclosure requirements for such instruments will be formulated by the end of Ashwin 2083.

10. Strengthening the Secondary Market for Government Securities
The government plans to ensure an active secondary market for Treasury Bills and Development Bonds. SEBON will review transaction charges and prepare the necessary policy and market infrastructure by the end of Ashwin 2083.

11. Making Share Buybacks and Share Splits Practical
SEBON will develop regulatory, policy, and other infrastructure to make share splits and share buybacks more practical and implementable. The reforms will be developed after consultation with stakeholders and are targeted for completion by the end of Magh 2083.

12. Updating Securities Regulations
The government will facilitate the implementation of updated regulations covering bonds, margin lending, and intraday trading, among others. The relevant rules and directives will be submitted for approval by the Ministry of Finance, and implementation arrangements will be completed by the end of Ashwin 2083.

13. Introducing Modern Margin Lending
The share purchasing system will be modernized and streamlined. Investors will be able to obtain loans through SEBON-licensed securities brokers under the margin lending regulations. The system is targeted to come into operation by the end of Poush 2083.

14. Amendments to the Securities Act
The government will advance amendments to the Securities Act, 2063 to incorporate provisions including investigation and inquiry of securities-related offences by SEBON. The amendment will also establish provisions allowing private companies to issue bonds, among other reforms.

15. Expanding Institutional Investor Participation
The government will establish the necessary policy, legal and infrastructure framework to ensure institutional investors can participate in both the primary and secondary securities markets. SEBON will facilitate institutional investment through appropriate policies, rules, and directives, while necessary reforms to investment policies, transaction structures, and infrastructure will be completed by the end of Mangsir 2083.

16. Rebalancing Institutional Investment Portfolios
The government plans to facilitate portfolio rebalancing among institutional investors that are currently heavily concentrated in bank deposits. Institutions such as the Employees Provident Fund, Citizen Investment Trust, Social Security Fund, insurance companies, and mutual funds will be provided with legal, policy and structural facilitation to increase their investment in securities by the end of Mangsir 2083.

17. Strengthening CDS and Clearing Infrastructure
The institutional capacity of CDS and Clearing Limited, which operates Nepal’s central depository system, will be strengthened. The government will also study structural reforms needed to support the effective operation of new securities and financial services, with the study targeted for completion by the end of Falgun 2083.

18. Reforming Private Equity and Venture Capital
The government will introduce an appropriate classification and risk-based regulatory framework for Private Equity (PE) and Venture Capital (VC). The reforms will focus on mobilization of capital, investment, dividend distribution, capital repatriation, and exit procedures for investments in startups, innovation-based businesses, high-growth SMEs, technology-focused enterprises, and high-risk, high-return projects. SEBON will prepare the necessary legal and market infrastructure by the end of Poush 2083, following stakeholder consultation and study of international best practices.

19. Reviewing Banks’ Investment and Risk Exposure
SEBON and Nepal Rastra Bank (NRB) will jointly review the existing limits and arrangements governing investments by banks and financial institutions in the capital market. The review will consider capital mobilization, direct, and indirect exposure, interconnectedness, contagion risks, financial interests, systemic risks, liquidity, returns, depositor protection, risk weights, and collateral adequacy. The review is targeted for completion by the end of Kartik 2083.

20. Reforming Capital Gains Tax
The government has proposed changes to the tax system to encourage long-term investment in the securities market. Under the proposed structure, capital gains on listed securities held by resident individuals for more than 365 days would attract a 3.75 percent capital gains tax, while gains from securities held for 365 days or less would be taxed at 5 percent. The plan also proposes allowing losses from listed securities transactions to be adjusted against gains from listed securities transactions within the same income year. The government intends to improve the capital gains calculation method by incorporating gains, losses, and settlements so that capital gains tax would be treated as final tax only on net gains.

21. Minimum 45-Day Holding Period for Bank Investments
NRB will introduce provisions requiring the boards of directors of banks and financial institutions to formulate investment policies aimed at reducing speculative risk in their secondary-market securities investments. Such investment policies will be required to maintain a minimum investment period of 45 days, with the central bank expected to make the necessary arrangements as soon as possible.

The Ministry of Finance has directed the concerned regulatory and institutional bodies to implement the reforms within the specified deadlines. The government expects the 21-point action plan to address structural weaknesses in Nepal’s capital market, broaden investment opportunities, strengthen market infrastructure and encourage greater participation by domestic and international investors.

The proposed reforms, particularly the introduction of price discovery in IPOs, new financial instruments, NRN participation, institutional investment, modern trading facilities, and changes to capital gains taxation, are expected to mark a significant shift toward a more market-oriented, transparent, and diversified capital market in Nepal.