Lukewarm response delays CDS operations

KATHMANDU, MAR 31: 

The absence of depository participants (DP) and company listings has delayed the operation of Nepal’s first central depository system (CDS) in spite of it being all ready to start business.

“We are ready to start dematerialising shares by the beginning of next month, however, it cannot be done if no listed company registers their securities with us and if there are no depository participants to hold the demat account of investors,” said chief executive of CDS and Clearing Subodh Sharma Sigdel, at a press meet here today.

The Immediate Action Plan designed by the finance ministry had directed the company to begin operations by mid-April. The capital market regulator recently provided licence to one merchant bank — Civil Capital –– to work as a depository participant but it is yet to apply for membership at the company.

There are nine more companies that have applied for the licence of depository participants including merchant banks, financial institutions and a brokerage firm. Central depository system will dematerialise the physical scrips and make the transfer, clearing and settlement of shares faster and hassle free. 

But CDS requires depository participants who will hold the investor’s records in a dematerialised form. They will act like a bank for the securities while the company is going to be the clearing house which will settle the account after each share transaction.

The chances of listed companies voluntarily coming and getting their securities registered at CDSC seems slim. Companies have to pay as high as Rs 500,000 to get their shares registered without any direct benefit for them. 

“We are trying to communicate with the companies that coming into CDSC’s system will reduce their share-handling cost substantially due to dematerialisation,” pointed out Sigdel, adding, a company has to pay about Rs 100 to print one share certificate, at present, but after CDSC, printing will not be required.

Source: THT