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With a new stock exchange promoted by the private sector coming in the near future, the government-owned Nepal Stock Exchange (Nepse) is moving ahead with its restructuring to bring in a foreign strategic partner and domestic investors. Nepse had assigned an external expert to draft a report on its restructuring. The report has proposed to offload the ownership of the government and government agencies by adopting the practice of international capital markets. NEPSE spokesperson Murahari Parajuli said that the restructuring process has been started by changing the share structure of the stock exchange. The report has suggested keeping the company’s ownership of a single promoter not exceeding 15 percent. It is also mentioned that Nepse’s paid-up capital will reach Rs 3bn, as per the new regulatory requirement. According to the new regulation introduced by the Securities Board of Nepal (Sebon), the minimum paid-up capital of the stock exchange company should be Rs 3bn. Accordingly, the report has proposed to increase Nepse's paid-up capital from the current Rs 1bn to Rs 3bn. The report has proposed to bring a foreign strategic partner in Nepse giving a 15 percent stake which will bring the government's stake down to 33.33 percent from the current 58.66 percent and give 21.67 percent to domestic institutional investors. The report suggested Nepse issue the initial public offering (IPO) amounting to 30 percent of its paid-up capital. A Nepse board meeting on April 30 has already passed a resolution in this regard and forwarded it to the Ministry of Finance for approval. “We have submitted a proposal to the ministry to change the share structure by bringing in private investment and foreign partners,” said Parajuli. “The process will move ahead after the proposal is approved by the ministry.” Nepse has planned to bring foreign strategic partners with the objective to introduce new technologies and business strategies. It also plans to bring in domestic institutions having a good track record of corporate governance. Companies like Standard Chartered Bank Nepal, Nabil Bank, and Unilever Nepal could be brought in as domestic partners. Nepse has been trying to bring in private investments since 2007. In the FY 2010\11 budget, the government theoretically agreed to privatize Nepse. However, the progress has been very slow. With Sebon now all set to issue a license for the second stock exchange, Nepse has expedited the restructuring process.

With the move of the Nepal Rastra Bank (NRB) to reduce bank rate and extension of restructuring and rescheduling of loans till mid-July 2023, the third quarterly review of the monetary policy has given breathing space to banks and financial institutions (BFIs). Of late, the rise in non-performing loans (NPL) and non-recovery of the loans have been the biggest concern of banks. In response to the deteriorating situation, BFIs have made their recovery departments active adding more human resources while CEOs themselves have been visiting outside Kathmandu to expedite loan recovery. Unveiling the third quarterly review of the monetary policy on Friday, the NRB lowered the bank rate by one percentage point. The central bank has provided refinancing facilities to businesses that faced negative growth for consecutive two quarters. The NRB has said that loans related to hotels and restaurants, animal husbandry, the construction sector, and loans in other sectors up to Rs 50 million can be restructured & rescheduled by mid-July 2023. With the economic downturn taking a huge toll on business activities, borrowers are facing difficulties to repay their debts resulting in growth in the bad loans of BFIs. As of mid-April, 2023, the commercial banks’ NPL has reached 3.03 percent, development banks' 4.42 percent, and finance companies’ 6 percent. “As the central bank has given the mid-July, 2023 deadline for the restructuring and rescheduling of loans, it has not only given breathing space to the borrowers but also to the BFIs,” said former banker Bhuwan Dahal. “The BFIs have been publishing auction notices. Now, they can go for rescheduling and restructuring based on the borrowers’ plan.” The refinancing facility will enable businesses in the downturn-affected sectors to avail loans at cheaper rates. According to Dahal, there is a need to add momentum to the economic activities as foreign exchange reserves are in a comfortable position while BFIs’ have over Rs 200 billion in liquidity. “I think the message the NRB has given is to start giving loans to make the economy vibrant,” said Dahal. Bankers say the changes made in the third quarterly review will help them to reduce the NPLs. “Given the economic slowdown, it was difficult for the borrowers to pay their debt timely, whereas the banks were struggling in loan recovery,” said Sudesh Khaling, CEO of Everest Bank. “Now, the refinancing facility and restructuring/rescheduling policy along with the reduction in bank rate has given some space for both the borrowers and banks.” At the same time, bankers also stress that BFIs should be more responsible this time when it comes to loan restructuring and rescheduling. “Earlier, these facilities were provided during the Covid-19 period and the loans were not properly utilized which is one of the reasons behind the current economic problems,” said Khaling, adding, “Therefore, banks should be more responsible in this. Banks should work carefully to make proper utilization of these facilities.” According to bankers, restructuring and rescheduling provisions will give relief to small borrowers. But bad loans should not be forcibly converted into active loans, they say. Nepal Bankers' Association President Sunil KC said that initiatives taken by the central bank in the third quarter review of monetary policy are welcome. “This will help the ailing private sector,” he said. “The reduction in the bank rate will allow the BFIs to reduce interest rates.” According to KC, when the interest rate decreases, it could increase the demand in the market. The refinancing provision will help in liquidity management. NRB has said that the policy arrangements in the third quarterly review of the monetary policy including a reduction in bank rates and refinancing facilities will bring vibrancy to the sluggish economy. Stating that the restructuring of loans will help the borrowers, NRB Governor Maha Prasad Adhikari said the flexible stance taken by the central bank would reduce the interest rates. “We have carefully made the monetary policy flexible after taking into account the situation of the last nine months,” said Governor Adhikari in a press meet on Friday. “We have reduced the bank rate. We have provided facilities for loan restructuring by the banks themselves.” Governor Adhikari was under pressure from the Finance Ministry which wanted a flexible monetary policy while the International Monetary Fund was of the view that the time had not come to ease the monetary policy.

The government will have to rush to spend more than 60 percent of the capital expenditure in the remaining two months to meet its spending target. The federal budget for this fiscal had initially set a capital expenditure target of Rs 380.38bn, which was slashed to Rs 313.85 percent in the half-yearly review of the budget. The Financial Comptroller General Office (FCGO) data shows capital expenditure has amounted to Rs 125.67bn till mid-May (Baisakh). This means the government will have to spend Rs 3.13bn daily to meet the revised annual spending target. With only two months left for the current fiscal year, the government's capital expenditure has remained dismal as ever. The FCGO data shows only 40 percent of the capital expenditure has been spent in the first 10 months of the current fiscal year. Official statistics show that the government has managed to spend only 72 percent of the capital budget on average every year. The majority of capital spending takes place in the last month of the fiscal year i.e., Asar (mid-June to mid-July). The report of the Office of the Auditor General (OAG) also shows that 40 percent of the total capital expenditure takes place in Asar. While utilization of capital expenditure remains disappointing, 66.40 percent of the recurrent expenditure has been spent during this period. According to FCGO, the government has spent Rs 786.74bn in recurrent expenditure till mid-May. The total government expenditure in the first 10 months stood at Rs 1047.76bn, which is 58.41 percent of the total budget. The situation in revenue collection is much more severe this year than the capital expenditure. The government has been able to meet only 53.9 percent of the revenue target by mid-May as revenue collection stood at Rs 756.25bn. During the review period, the total income of the government stood at Rs 797.34bn. Half of the federal government’s revenue comes from taxing imported goods. The federal government’s major revenue collectors— the Department of Customs (DoC) and Inland Revenue Department (IRD) have reported poor revenue collection as of mid-May of the current fiscal year. IRD collected revenue worth Rs 34.46bn in Baisakh (mid-April to mid-March) this year compared to Rs 35.66bn during the same period last year. The total revenue collection of the IRD in the first 10 months of this fiscal stood at Rs 371.59bn compared to Rs 378.32bn during the same period of the last fiscal. The department has not been able to meet its target from the beginning of the current fiscal year. IRD, which set a target to collect Rs 489bn in the first 10 months of the current fiscal year, has achieved only 76 percent of the target. Budgetary operation FY 2022/23 (First 10 Months)

The price of gold has increased by Rs 200 per tola in the domestic market on Monday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 111, 000 per tola today. The gold was traded at Rs 110,800 per tola on Sunday. Meanwhile, tejabi gold is being traded at Rs 110, 450 per tola. It was traded at Rs 110, 250 per tola. Similarly, the silver is being traded at Rs 1,375 per tola today.