Nepal Stock Exchange (Nepse) and 17 commercial banks today signed a Memorandum of Understanding (MoU) and Articles of Association (AoA) to establish Rs 500 million-Nepal Central Depository and Clearing Company Ltd that will ensure the smooth share trading electronically.
"Due to the busy schedule of the Citizen Investment Trust (CIT), it could not sign the MoU today," said Shanker Man Singh, general manager and chief executive officer (CEO) of the Nepse that is the majority stakeholder of the proposed central depository company.
"After CIT signs the MoU and AoA early tomorrow morning, the company will be registered," he said, adding that procurement committee will start its work and necessary manpower recruitment will also start after the formal registration of the company.
Currently, Nepse has 52.38 per cent, CIT 15.22 per cent, five of the commercial banks 2.88 per cent each and 12 commercial banks have 1.5 per cent each stake in the company.
"But the Nepse's stake in the company will be only 51 per cent," he said, adding that Everest Bank will increase its stake from present 1.5 per cent to 2.88 per cent. "After Everest Bank increases its stake, six banks -- Nepal Investment Bank, NIC Bank, Bank of Kathmandu, Himalayan Bank, Nabil Bank -- will have 2.88 per cent each. The remaining 11 banks will have 1.5 per cent each," according to the capital structure.
The board of the Nepal Central Depository and Clearing Company Ltd will have three representatives from Nepse, two from banks and one from CIT. "One independent director will also be inducted in the board," according to Singh. "Lumbini Bank's CEO Shovan Dev Pant and NMB Bank's CEO Upendra Poudel are nomited as the board members from the banks group and CIT will nominate its representative after it signs the MoU and AoA tomorrow."
The office of the company will be established within the three-km radius from the Nepse, Singh said, adding that earlier 20 banks were willing to invest in the proposed company but only 17 banks could make it today due to various technical reasons.
In October, Securities Board of Nepal (Sebon) has brought Central Depository of Securities Regulation-2010 to establish the central depository system (CDS) company that will replace the current scrip-base system of trading and change into a safe and dependable computerised book entry system.
The new clearing and settlement system will facilitate investors to have their accounts which will show their holdings, autometically debit or credit when shares are traded.
The budget for the fiscal year 2009-10 has promised to set up a fully automated Central Depository System (CDS) in six months but it took almost a year to complete the company registration process.
Nepse is planning to start trial operation of the new system from January as it will have the software by then. "CMC Ltd -- a subsidiary of the Tata Group -- is developing the software for the system and will handover the software by December 15," Singh added.
Though, the system is expected to boost investors confidence and immediate trading of the shares that takes around a month at present, the secondary market needs the support from the economy to start heating.
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