Nepse told to name 2 more clearing banksThe Securities Board of Nepal (Sebon) has asked the Nepal Stock Exchange (Nepse) to establish two more clearing banks to speed up share transactions.
The Securities Board of Nepal (Sebon) has asked the Nepal Stock Exchange (Nepse) to establish two more clearing banks to speed up share transactions. Presently, there is only one clearing bank, Global IME Bank, and brokers have been asking that the number be increased in view of the rising volume of transactions.
Sebon spokesperson Niraj Giri said they had asked Nepse on Wednesday to form three clearing banks by mid-March. Nepse can select two other commercial banks as clearing banks, he said.
Clearing and Settlement Bylaw 2013 allows Nepse to appoint clearing banks. Commercial banks earning a profit and having few non-performing loans are eligible candidates.
Clearing banks transfer money between buyers and sellers of shares through CDS and Clearing. They receive deposits from investors wishing to buy shares through their stockbrokers, and transfer the money to CDS and Clearing. CDS and Clearing then sends the money to the sellers through the clearing bank.
Global IME was appointed as a clearing bank last year, and Nepse has been conducting transactions through it. However, stockbrokers have been complaining about delayed transactions because the sole clearing bank has
not been able to handle the volume.
Giri said they had asked for more clearing banks as the volume of transactions was expected to swell after the demat system is implemented fully.
“Depository participants have been established in 45 districts to convert physical shares into electronic format, and one clearing bank will certainly be overwhelmed by the increased volume,” he said.
The introduction of more clearing banks is also expected to promote competition in the sector besides ensuring faster service to investors. “In the context of the full implementation of demat shares, more clearing banks will help expand share transactions from outside the Kathmandu Valley,” Giri said.
According to Sebon, only 2.73 percent of the total share transactions worth Rs1.36 billion are done from the valley. Nepse has been carrying out transactions from Pokhara, Narayanghat, Dhangadhi, Dharan and Biratnagar besides the valley.
Paperless share transactions became mandatory for all the listed companies from January 15. The demat system is expected to increase share transactions in the future. Following the implementation of electronic transactions, Nepse has planned to extend brokerage services from
other parts of the country.
Priya Raj Regmi, president of the Stockbrokers Association of Nepal, said that the establishment of additional clearing banks would help to process transactions faster. “As the clearing process will be divided among a number of banks, transactions will be cleared faster,” he said.
Regmi said the provision would also facilitate share transactions from outside the valley. “As stockbrokers will not have to depend on a single bank, it will simplify transactions from those locations,” Regmi said.