Kathmandu. Share Investors Association of Nepal (SHARES) in the coming fiscal year 2083. It has sent a five-point recommendation for the monetary policy of the year 84.
The NRNA has sent these recommendations to make Nepal’s capital market more competitive, deep, liquid and investment-friendly.
Here are the suggestions
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To provide more freedom to banks and financial institutions to invest in the secondary market: The investment limits, lockdown periods and other regulatory restrictions currently applicable to banks and financial institutions in the secondary market should be reviewed and flexibility should be provided according to the market conditions. Encouraging institutions with adequate capital, liquidity and risk management capabilities to invest in the market judiciously will increase institutional participation in the market, expand transaction liquidity and contribute positively to price stability.
Improvement in Dividend Distribution Provisions of Microfinance Institutions: Instead of applying the same criteria to all microfinance institutions, adopt flexible policies in dividend distribution on the basis of financial health, capital adequacy, non-performing loans, profits and good governance conditions. Providing an opportunity to distribute appropriate dividends to financially sound institutions and meet regulatory indicators will increase investor confidence and attract more investment in this sector.
Share Mortgage Lending System to be made risk-based: The existing uniform lending system should be modified to implement a risk-based margin lending system. The loan-to-value (LTV) ratio will be determined on the basis of the company’s financial condition, market capitalization, liquidity of the transaction and risk level. This will promote investment in quality companies, control unnecessary risks and further strengthen the financial system.
To facilitate the entry and exit of investment for Non-Resident Nepalese (NRNs): Clear, simple and reliable provisions should be made to facilitate the investment of Non-Resident Nepalese (NRNs) in the capital market of Nepal and if necessary to take their investment and profits abroad through the legal reparationation mechanism. It will play an important role in bringing in foreign currency, increasing foreign investment and making Nepal’s capital market competitive in the international arena.
Policy facilitation for the active mobilization of institutional funds: {{TAG_OPEN_span_16 TAG_CLOSE_span_16}} Necessary policy arrangements should be made to mobilize the long-term funds of Employees Provident Fund, Citizen Investment Trust, Social Security Fund and insurance companies more actively in the capital market with clear criteria for risk management. With the participation of such institutional investors, long-term stability in the market, adequate liquidity and healthy investment culture will be developed.
In order to establish Nepal’s capital market as an effective base of economic development, monetary policy needs to adopt market-friendly, risk-based and modern regulatory approach. The association believes that the implementation of the recommendations presented will have a positive impact on market depth, investor confidence, institutional participation and stability of the overall financial system. “Therefore, we urge the government to prioritise these suggestions in the monetary policy review,” the statement said.
