Capital Market of Nepal: Problems and Prospects

Capital markets are the financial markets for buying and selling of long-term debt and equity
backed securities. These markets channel the wealth of savers to those who can put it to longterm productive use, such as companies or government making long term investment. In Nepal,
establishment of SEBON as the market regulator in 1993 and Nepal Stock Exchange (NEPSE) in
1994 opened an possibility to investors, both small and large, to invest in the enterprise sector
and participate in the secondary market.
Despite adopting measures like automated trading system through Wide Area Network (WAN),
the Nepalese stock market is not still taking its height. One of the issues in Nepalese capital
market is the concentration of banks and financial institutions. Out of 241 listed companies,
number of listed commercial banks is 29, development banks is 97 and finance companies is 47.
Apart from BFIs and insurance companies, only 8 hydropower companies and one telecommunication
company have entered the market while there areHydro Companies and .Telecom Service
Providers in Nepal. The concentration of BFIs is maximum as the prevailing BAFIA act make it
mandatory for such companies to float shares to the public. Similarly, the high issuance cost of securities
in Nepali capital market like SEBON registration cost, Publication cost, issue manager cost and listing
cost is another major cause of companies not to consider the capital market. In Nepal, the aggregate cost
of public issue is 0.34 percent at minimum and 24.25 percent at maximum of the issued amount while this
cost is 7.1 percent at minimum and 10.3 percent at maximum in India.
Also,