Decision to add more clearing banks buoys investors

Published On: March 25, 2017 01:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, March 24: The decision of the Nepal Stock Exchange (Nepse) to add three more clearing banks has elated investors who have been facing delay in settlement and payment of trading transactions. 

Following intense pressure from investors and the Securities Board of Nepal (Sebon) - the capital market regulator - Nepse decided to appoint three new clearing banks for settlement and clearance of securities related transactions in the stock market. Investors and stakeholders of the securities market say that the additional clearing banks will ease the settlement process.

Nepse had selected Nepal Investment Bank Ltd, Siddhartha Bank Ltd and Prabhu Bank Ltd as the new clearing banks, following a competitive evaluation process. An evaluation committee formed by Clearing and Central Depository System Company Ltd (CDSCL) had recommended three banks to the board of directors of Nepse. Altogether, 11 commercial banks had submitted the letter of intent to work as a clearing bank.

So far, Global IME Bank Ltd is the sole clearing bank for securities-related transactions.  With the full-fledged dematerialized form of trading system replacing the paper-based trading since last year, average daily turnover has jumped to Rs 1 billion from Rs 400-Rs 500 million of the past. There were complaints that the clearing and settlement process was getting delayed due to sudden rise in transaction due to introduction of paper-less trading system. 

Though the Nepse had been dragging its feet to appoint more clearing banks, it took the decision to add new commercial banks following instruction from the capital market regulator. 

Stock brokers have lauded the decision. 

“We have heard that the Nepse has decided to add clearing banks. It is a very positive development as clients have been facing hurdle for settlement of transactions in the lack of adequate number of clearing banks. With more clearing banks coming into operation, settlement and clearance of transactions will be faster as works will be distributed among them,” Priya Raj Regmi, president of Stock Brokers Association of Nepal, said. 

Murahari Parajuli, the spokesperson for Nepse, told Republica that the newly appointed clearing banks will start operation after Nepse signs contract with them and completes necessary technical works. 

Investors are hopeful that the difficulties in getting clearance and settlement of securities after trading will be resolved after three clearing banks start operation. “There was lot of pressure on the only one bank. Now there will be three more banks. It will make it settlement of transactions of securities easier, simpler and effective,” Nabin Panday, a stock investor, said.

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