45-Day Share Holding Rule for Banks in Nepal Still Awaiting Nepal Rastra Bank Circular

Kathmandu, Nepal: The government’s announcement to reduce the minimum holding period for shares purchased by banks and financial institutions in the secondary market from six months to 45 days has yet to become operational.

The proposed reform was included in the government’s Capital Market Strengthening and Revival Action Plan, 2083, unveiled by the Ministry of Finance as part of a broader effort to revive Nepal’s capital market, increase institutional participation and improve market liquidity.

However, the policy cannot take effect simply through the Ministry of Finance announcement. Nepal Rastra Bank (NRB) needs to make the necessary regulatory arrangements, meaning banks and financial institutions continue to operate under the existing regulatory framework until the central bank formally issues the relevant directive or circular.

What Is the Proposed 45-Day Share Holding Rule?

Under the government’s action plan, banks and financial institutions would be required to formulate investment policies designed to reduce speculative risk in their secondary-market securities investments.

The plan specifically calls for NRB to arrange provisions under which the minimum investment period would be 45 days.

The reform is intended to provide banks and financial institutions with greater flexibility to participate in Nepal’s secondary stock market while maintaining a defined investment horizon.

The government expects the measure to support:

• Greater institutional participation in the stock market
• Improved secondary-market liquidity
• More active institutional investment
• Better portfolio management flexibility for banks and financial institutions
• Broader development of Nepal’s capital market

Why Has the 45-Day Rule Not Been Implemented Yet?

The key issue is regulatory implementation.

The Ministry of Finance can announce policy direction through its capital-market action plan, but the detailed regulatory framework applicable to banks and financial institutions falls within the authority of the relevant regulators, particularly Nepal Rastra Bank.

The action plan therefore requires NRB to make the necessary arrangements. Until those arrangements are formally issued, the proposed 45-day period does not automatically replace the existing requirement.

This has created uncertainty among investors and market participants who are waiting to know exactly when the 45-day share holding rule will become effective.

Is the Existing Six-Month Rule Still Applicable?

Until the required regulatory change is formally implemented, market participants should not assume that the 45-day provision is already operational.

The government has announced the policy direction, but the implementation mechanism still requires the central bank's regulatory action.

Therefore, the important distinction is:

Government Action Plan = Policy announcement

NRB Circular/Regulatory Amendment = Operational implementation

This distinction is particularly important for banks and financial institutions planning their secondary-market investment strategies.

Reports of Coordination Issues Between the Ministry of Finance and NRB

The delay has also generated discussion about policy coordination between the Ministry of Finance and Nepal Rastra Bank.

Some media reports have attributed the delay to differences over the process through which the 45-day provision was announced. One report citing NRB sources claimed that Governor Dr. Biswo Nath Poudel was dissatisfied with the announcement being made without sufficient prior coordination. However, that claim has not been officially confirmed by Nepal Rastra Bank.

NRB spokesperson Gurup Prasad Paudel has indicated that the necessary process is underway and that the circular will be issued after the required regulatory procedures are completed.

Accordingly, the available public information supports describing the measure as pending regulatory implementation, rather than as a formally cancelled policy.

Why Is the 45-Day Rule Important for Nepal's Stock Market?

Banks and financial institutions represent an important segment of Nepal's financial system. Allowing them greater flexibility in managing secondary-market securities investments could affect institutional participation and market liquidity.

The government's broader action plan also includes reforms relating to institutional investors, margin lending, capital gains taxation, NRN participation, corporate bonds, market infrastructure and the review of banks' investment limits and risk arrangements.

The plan separately calls for SEBON and NRB to review existing arrangements governing banks' and financial institutions' capital-market investments, including investment limits, risk weights, collateral adequacy, liquidity and systemic risk.

As a result, the 45-day holding provision should be viewed as part of a broader capital market reform package, rather than as an isolated regulatory change.

What Should Investors Watch Now?

For Nepalese stock market investors, the most important development to watch is the official Nepal Rastra Bank circular or regulatory amendment.

Investors should look for clarification on:

1. The official effective date of the 45-day rule
2. Whether the rule applies to newly purchased shares or existing holdings
3. How the 45-day period will be calculated
4. Whether there are specific exceptions
5. How the provision will interact with existing investment limits
6. The investment-policy requirements that banks and financial institutions must follow

Until these details are formally clarified, investors should avoid treating the 45-day provision as an immediately effective trading rule.

45-Day Share Holding Period and NEPSE Market Liquidity

The proposed reduction from six months to 45 days could potentially give banks and financial institutions greater flexibility in managing their securities portfolios.

The government has presented the reform as part of its wider effort to make Nepal's capital market more dynamic and investment-friendly. The action plan also seeks to expand institutional participation and improve the overall market infrastructure.

However, the actual market impact will depend on the final NRB framework, the investment policies adopted by individual banks and financial institutions, market conditions and the extent to which institutions participate in the secondary market.

What Does This Mean for NEPSE Investors?

For retail investors following the NEPSE stock market, the announcement is important because institutional participation can influence trading activity and liquidity.

However, the announcement itself should not be interpreted as an immediate change in daily trading conditions.

The practical trigger will be the official NRB regulatory circular.

Until then, investors should continue to monitor official announcements from Nepal Rastra Bank, the Ministry of Finance and the Securities Board of Nepal (SEBON).

Conclusion: When Will the 45-Day Rule Be Implemented?

The government's plan to reduce the minimum investment holding period for banks and financial institutions from six months to 45 days represents one of the notable measures in Nepal's 21-point capital-market reform programme.

However, the measure still requires regulatory implementation by Nepal Rastra Bank.

NRB has indicated that the necessary process is underway, but an official effective date depends on the issuance of the relevant regulatory instruction or circular.

Therefore, the key question for Nepal's capital market remains:

When will Nepal Rastra Bank officially issue the circular implementing the 45-day share holding period?

Until that happens, market participants should distinguish between the government's policy announcement and the actual regulatory implementation.

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Disclaimer: This article is for educational and informational purposes only and should not be considered a buy, sell or hold recommendation. Investors should conduct their own research and review official regulatory announcements before making investment decisions.

FAQ: 45-Day Share Holding Period for Banks in Nepal

1. What is the proposed 45-day share holding rule in Nepal?

The government’s capital-market action plan proposes that banks and financial institutions maintain a minimum investment period of 45 days for their secondary-market securities investments, with Nepal Rastra Bank responsible for making the necessary regulatory arrangements.

2. Has the 45-day rule already been implemented?

The government has announced the policy, but implementation requires the relevant regulatory action from Nepal Rastra Bank. The official NRB circular or regulatory amendment is therefore the key step for operational implementation.

3. Who will implement the 45-day share holding provision?

Nepal Rastra Bank is responsible for making the necessary regulatory arrangements applicable to banks and financial institutions.

4. Why does the government want to reduce the holding period?

The measure is part of a broader capital-market reform programme intended to encourage institutional participation, improve liquidity and make the capital market more dynamic while controlling speculative risk.

5. Does the 45-day rule apply to individual investors?

The proposed provision specifically concerns the investment policies of banks and financial institutions in the secondary securities market. It should not automatically be interpreted as a new holding-period requirement for individual retail investors.

6. What should NEPSE investors watch next?

Investors should monitor official announcements and regulatory directives from Nepal Rastra Bank, the Ministry of Finance and SEBON for the effective date and detailed implementation provisions.

7. Will the 45-day rule increase NEPSE liquidity?

The government expects greater institutional participation to support capital-market activity and liquidity. However, the actual effect will depend on how banks and financial institutions implement their investment policies and how market participants respond.

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