Ripples of BAFIA: Mounting Impact on the Market

The ongoing debate around the proposed amendment to BAFIA (Bank and Financial Institutions Act) has stirred noticeable waves in the stock market. The move to distinctly separate the roles of bankers and businesspersons has triggered uncertainty among investors, directly affecting market sentiment.

Although this is not a new issue—it has been in discussion for years—each time it resurfaces, it tends to shake investor confidence in the short term. Historically, such debates have flared up and then gradually faded away. However, with the amendment bill reportedly on its way to Parliament, market participants are now reacting more cautiously.

Following a slight uptick immediately after the budget announcement, the NEPSE index has declined for two consecutive days. On Tuesday, it dropped by 35 points, and on Wednesday, it fell another 11.97 points to close at 2646.95. Analysts say this decline is partly due to psychological pressure stemming from the BAFIA amendment issue.

The proposed changes in BAFIA seek to bar individuals involved in banking from simultaneously engaging in commercial business activities. This could potentially affect many board members and executives of banks and financial institutions, prompting investors to reevaluate their holdings in such entities.

Meanwhile, the delayed appointment of the new Governor, lack of stock market-friendly policies in the recent budget, and the legal uncertainty caused by the proposed BAFIA amendment have all contributed to the erosion of investor confidence.

Experts argue that while such regulatory uncertainty may create temporary market shocks, the long-term impact can be mitigated through strong policy direction, transparency, and consistent regulatory communication. For now, building investor trust remains the most urgent task for the government and regulatory bodies.