The High-level Economic Reform Commission has recommended that the government facilitate easier access for Non-Resident Nepalis (NRNs) to participate in Nepal's capital market.

In its report submitted to the government on Friday, the commission proposed granting NRNs direct access to both the primary and secondary markets. It argued that involving NRNs in the capital market would bring not only capital but also valuable expertise and global networks, thereby boosting economic activity in the country.

The commission also highlighted the need to manage potential financial instability arising from the large-scale inflow and outflow of capital in the short term. It suggested that such risks could be mitigated through proper regulation.

Despite ongoing discussions over the years, efforts to integrate NRNs into Nepal’s capital market have yet to be implemented. The Securities Board of Nepal (SEBON), the capital market regulator, has studied this matter and submitted its findings to the Ministry of Finance. A four-member committee has also been formed to explore ways of introducing NRNs to the capital market.

The commission, chaired by former Finance Secretary Rameshwor Khanal, presented 13 key recommendations aimed at developing and expanding the capital market.

One of its major suggestions is to amend Sections 9 and 10 of the Foreign Investment and Technology Transfer Act, 2075, to enable NRNs to invest individually in the secondary market without needing to set up a capital investment fund.

The commission also recommended restructuring key institutions—SEBON, Nepal Stock Exchange (NEPSE), and CDS and Clearing Limited. It urged reducing transaction fees on large-scale share trades and introducing a transparent system for issuing shares through the premium pricing and book-building methods. Additionally, it called for timely implementation of bond trading in the secondary market, increasing the number of experts on SEBON's board, and ensuring margin trading services through broker companies.

Another key recommendation is to allow hydropower companies to issue Initial Public Offerings (IPOs) only after beginning commercial production. The commission also urged the government to bring the commodity exchange market into operation and to pass the Public Warehousing Act to support this.

13-point key recommendations of the commission for capital market development and expansion:

1. Promote investment by mobilizing financial instruments through public awareness about the capital market.
2. Initiate secondary market trading of government bonds without delay.
3. Allow NRNs to trade in the secondary market by amending Sections 9 and 10 of the Foreign Investment and Technology Transfer Act, 2075. Permit individual trading based on NRN citizenship identity cards without requiring a capital investment fund. Limit repatriation to 50% of invested capital twice a year.
4. Amend the Securities Act, 2063 to restructure SEBON. Remove the representation of the Nepal Chartered Accountants Association, Nepal Chamber of Commerce and Industry, and the Ministry of Law, Justice and Parliamentary Affairs. Increase expert representation from one to two members.
5. Enable margin loans for securities transactions through broker companies.
6. Grant autonomy to SEBON, strengthen regulatory and supervisory roles, and ensure adequate staffing.
7. Permit primary share issuance by hydropower companies only after commercial production begins.
8. Convert government-owned corporations into public limited companies and sell shares to the private sector. Mobilize resources through bond issuance rather than government loans.
9. Reduce transaction fees for high-volume share trades.
10. Restructure NEPSE, increase its capital, and allow private sector participation. Similarly, restructure CDS and Clearing Ltd. and expand institutional participation in securities depository services with sufficient staff.
11. Operationalize the commodity exchange market by enacting the Public Warehousing Act.
12. Simplify procedures, reduce costs, and support private manufacturing companies in issuing shares and bonds via the capital market.
13. Develop a transparent system for issuing shares through premium pricing and the book-building method, while raising public awareness about these processes.