Money
CDS approves three more clearing banks
Three more banks have been allowed to handle fund transfers for share transactions cleared through CDS and Clearing Limited, a subsidiary of the Nepal Stock Exchange (Nepse).Three more banks have been allowed to handle fund transfers for share transactions cleared through CDS and Clearing Limited, a subsidiary of the Nepal Stock Exchange (Nepse).
Nepal Investment Bank, Siddhartha Bank and Prabhu Bank have been licensed to act as clearing banks from Sunday. Previously, only Global IME Bank was permitted to act as clearing bank.
According to CDS and Clearing, Nepal Investment Bank will operate as the lead bank among the four clearing banks. The lead bank will be the focal institution to handle the overall clearing process.
Nepse’s Assistant Spokesperson Murahari Parajuli said all concerned bodies can deal directly with the lead bank that will coordinate with other clearing banks.
Clearing banks transfer money between buyers and sellers of shares who clear their trades through CDS and Clearing.
They also 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 one and a half years ago. After stockbrokers began complaining about delays in fund transfers due to the sole clearing bank being overwhelmed by the growing volume of share trading on the secondary market, CDS and Clearing agreed to allow three more clearing banks.
“More clearing banks means share transactions can be expected to be settled on time,” said Dev Prakash Gupta, chief executive officer of CDS and Clearing, at a programme on Friday.
The Clearing and Settlement Bylaw 2013 allows CDS and Clearing to appoint clearing banks. Commercial banks earning a profit and having few non-performing loans can operate as clearing banks.
The Securities Board of Nepal had also been asking CDS and Clearing to increase the number of clearing banks.
Besides appointing multiple clearing banks, CDS and Clearing has also introduced a ‘net settlement’ system in the clearing process.
Under this system, stockbrokers can deposit only the net amount received from the purchase and sale of stocks daily. Currently, brokers have to transact the amounts of both buy and sell orders registered with them through the clearing bank.
Meanwhile, CDS and Clearing has also introduced a centralised system in the operation of Application Supported by Blocked Amount (ASBA).
The centralised system enables the authority to assess the application, account verification and other related jobs through an integrated form during the issuance of primary shares.