The Ministry of Finance’s Capital Market Action Plan 2083 proposes a significant shift in the way Nepal’s capital market operates. The reforms aim to make the market more investor-friendly, liquid, transparent, and sophisticated by reducing capital gains tax, enabling better loss adjustment, opening secondary market access to NRNs, and introducing modern tools such as margin lending, intraday trading, short selling, and securities lending. At the corporate and institutional level, the Action Plan also seeks to broaden avenues for capital raising, strengthen institutional investment, develop new debt instruments, and establish stronger frameworks for PE/VC investment. Together, these measures point towards a deeper and more diversified capital market capable of attracting wider participation and channeling more capital into Nepal’s economy.
Here is a summary of the key reforms the Action Plan proposes to transform Nepal’s capital market.
| Area / Subject | Existing Regulatory Provision & Practice | Proposed Provision in Action Plan (2083) | Strategic Objective & Target |
| Capital Gains Tax (CGT) Rates (Individual Resident) | • Short-Term (≤ 365 days): 7.5% • Long-Term (> 365 days): 5.0% | • Short-Term (≤ 365 days): Reduced to 5.0% • Long-Term (> 365 days): Reduced to 3.75% | Incentivize long-term individual holding and make trading costs competitive. |
| Capital Loss Offset Mechanism | No automated, real-time capital loss set-off against gains within the clearing/settlement system during the tax year. | Automated loss set-off against capital gains within the same fiscal year through the clearing and settlement system, taxing only net capital gains. | Prevent unfair taxation on gross gains and simplify investor tax accounting. |
| Non-Resident Nepalese (NRN) Secondary Market Access | FITTA 2075 and Foreign Exchange Act 2019 lacked explicit legal mechanisms for NRN trading in secondary equities. | Amend FITTA 2075 and Foreign Exchange Act 2019 to explicitly enable NRN secondary stock market participation. | Tap foreign diaspora capital to expand market liquidity. (Aswin end, 2083) |
| BFI Secondary Market Trading Limits | A minimum of 6 months holding duration. | Enforce a minimum holding duration of 45 days for BFI equity investments. | Curb speculative risk and short-term market manipulation by banks. (As soon as possible) |
| Market Index Structure | Single primary All Equity Index (NEPSE Index). | Maintain the All Equity Index while introducing a new Benchmark Index based on tradable float, liquidity, governance, and financial health. | Track high-quality, liquid securities accurately rather than overall market cap alone. (Mangsir end, 2083) |
| Margin Lending Mechanism | Heavily dependent on BFI bank margin loans against equity collateral. | Shift to broker-administered margin lending under SEBON Margin Lending Regulations. | Modernize broker services into multi-dimensional financial facilities. (Drafting: Immediate Operationalization: Poush end, 2083) |
| Advanced Trading Tools | Absence of operational intraday trading, short selling, or securities lending mechanisms. | Enact separate regulations for Intraday Trading, Short Selling, and Securities Lending & Borrowing (SLB) under the Securities Act. | Facilitate two-way price discovery, hedging, and continuous liquidity.(Drafting: Immediate Approval: Aswin end, 2083) |
| Share Split and Share Buyback | Absence of operational/regulatory frameworks for listed companies to split shares or repurchase equity. | Formulate comprehensive regulatory and operational guidelines for Share Splits and Share Buybacks using accumulated profits. | Allow corporate capital restructuring and enhance investor value. (Magh end, 2083) |
| Sectoral IPO Pricing | Generic IPO guidelines applied across all industries without tailored price discovery. | Implement specialized qualification criteria and book-building/price discovery for Hydropower, Manufacturing, Tourism, Agriculture, and Pharma sectors. | Encourage real-sector companies to go public with market-driven valuations. (Poush end, 2083) |
| Institutional Capital Allocation | Institutional funds (EPF, CIT, SSF, Insurance, Mutual Funds) hold disproportionate balances in fixed bank deposits. | Facilitate legal and structural portfolio rebalancing from bank deposits into capital market securities. | Channel long-term institutional savings into capital markets. (Mangsir end, 2083) |
| SEBON Investigative Power & Private Bonds | SEBON lacked explicit statutory investigative/prosecution powers; corporate bond issuance was restricted primarily to public entities. | Amend Securities Act 2063 to grant SEBON full investigation and prosecution authority and allow private companies to issue corporate bonds. | Deter securities offenses and broaden corporate debt market access.(Immediate) |
| Specialized Debt Instruments | Lack of dedicated guidelines for sustainable, green, or climate-focused debt instruments. | Establish policy frameworks for Green Bonds, Disaster Bonds, Social Bonds, Climate Bonds, and Project-Specific Bonds. | Promote sustainable finance and infrastructure debt funding. (Aswin end, 2083) |
| PE/VC Regulatory Framework | Basic fund registration without risk-based international standard entry/exit guidelines. | Establish an international best-practice, risk-based framework for Private Equity and Venture Capital (PE/VC) covering capital raising, valuation, and exit mechanisms. | Provide growth capital for startups, SMEs, and tech innovation. (Poush end, 2083) |
| BFI Exposure Limits & Risk Review | Existing BFI capital market exposure limits and risk weights. | Conduct a joint review by SEBON and NRB regarding BFI exposure limits, risk weights, liquidity, and concentration risks. | Safeguard financial sector stability while maintaining reasonable liquidity.(Kartik End, 2083) |
| Government Debt Secondary Market | Inactive secondary trading for government debt instruments. | Review transaction fees and prepare market infrastructure for secondary trading of Treasury Bills and Development Bonds. | Establish a liquid secondary market for government debt. (Aswin end, 2083) |
| Stock Brokerage Institutional Reforms | Traditional stockbroker service scope. | Issue policy guidelines to modernize stockbrokers into multi-dimensional, tech-friendly financial service providers. | Align brokerage standards with international best practices. (Immediate) |
| CDSC Capacity Expansion Study | Current CDSC operational capacity. | Complete a comprehensive study on structural reforms and technical capacity expansion for CDS & Clearing Ltd (CDSC). | Enhance market clearing, settlement, and central depository infrastructure (Falgun end, 2083) |
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