Government to Make NEPSE Restructuring Report Public, Major Changes Proposed in Ownership and Governance

The government has decided to make public the restructuring report of Nepal Stock Exchange Limited (NEPSE). A meeting of the Council of Ministers held on Thursday approved the decision to release the report prepared by the high-level recommendation committee. The move has brought the long-discussed reform of the country’s only stock exchange into the public domain, drawing renewed attention from investors and market stakeholders.

The decision follows the formation of a study committee on December 2, mandated to assess the existing structure of Nepal Stock Exchange Limited and propose reform measures. The committee, led by former Nepal Accounting Board chairperson Prakash Jung Thapa, was given a 50-day timeline to conduct the study and submit recommendations. The report was submitted to the Ministry of Finance nearly three weeks ago.

According to the report, NEPSE requires comprehensive reform to function as a modern, efficient, and competitive market institution. The committee has proposed short-term, medium-term, and long-term reform options, concluding that the current structure—covering ownership, capital base, management practices, and technological capacity—is no longer adequate to meet the growing demands of Nepal’s capital market.

Capital Expansion and Ownership Restructuring Proposed

One of the key recommendations of the report is to increase NEPSE’s paid-up capital from the existing Rs 1 billion to Rs 3 billion. To achieve this, the committee has suggested issuing 30 percent of shares to the general public through an initial public offering (IPO), bringing in a foreign strategic partner, and mobilizing additional capital from domestic institutional investors.

The report notes that restructuring models adopted by countries such as India, Pakistan, and Bangladesh could be adapted to Nepal’s context. At present, the Government of Nepal holds a 58.66 percent stake in NEPSE, followed by Rastriya Banijya Bank, Employees Provident Fund, Nepal Rastra Bank, Laxmi Sunrise Bank, Prabhu Bank, and a small share held by securities brokers.

Recommendation to Dissolve Current Board

As a first step toward restructuring, the committee has recommended dissolving the existing board of directors and forming a new board composed of professional experts nominated by shareholder institutions. The report argues that transforming NEPSE from a government-controlled entity into a commercially driven, technology-oriented, and competitive institution requires fundamental changes in governance.

The committee has also emphasized the need to strengthen human resource capacity, streamline decision-making processes, and reinforce institutional governance. Without such reforms, the report warns, NEPSE will struggle to keep pace with market growth and technological advancements.

Two Options for Government Shareholding

The committee has proposed two alternatives regarding the government’s shareholding in NEPSE. Under the first option, the government would retain a 25 percent stake while selling the remaining shares. The second option allows for the complete divestment of government ownership. In both cases, the report recommends selling shares through an open bidding process, preceded by a due diligence audit and proper valuation of the exchange.

Additionally, the report suggests allocating 15 to 25 percent of shares to a strategic partner while limiting ownership of any domestic institution to a maximum of 5 percent. Among local institutions, commercial banks have been identified as the preferred investors due to their financial strength and market experience.

Focus Shifts to Implementation

The restructuring committee includes representatives from NEPSE, Nepal Rastra Bank, the Securities Board of Nepal, and the Ministry of Finance, along with independent experts. With the Cabinet’s decision to make the report public, attention has now shifted to how the government will prioritize and implement the recommendations.

Market participants believe that the direction chosen by the government will have a long-term impact on transparency, efficiency, and credibility of Nepal’s capital market. As investors await clarity on implementation, the restructuring of NEPSE is increasingly seen as a critical step toward modernizing the country’s financial ecosystem and restoring confidence in the stock market.