An open letter to Nepal’s Finance Minister on unlocking liquidity and growth
Rt. Hon. Finance Minister,
On a very recent morning in the capital of Nepal, Dhan Bahadur did everythings what careful and dedicate investors are supposed to do every morning. He studied the market, chose his stock, placed his trade, and trade executated. By the next day, the price had moved in his target selling zone. He loged in his account, ready to place sell order. But he could not. The shares were his, yet not tradeble. His shares were still moving through the settlement system of the Nepal Stock Exchange. Unfortunately, by the time shares became tradable, the selling opportunity had already passed.
This quiet delay, repeated across thousands of accounts, is not dramatic. But it is costly. Nepal’s settlement system, managed through CDS and Clearing Limited and overseen by Securities Board of Nepal, works in stages that take several days. During that time, capital is locked. It cannot move, react, or earn. In a market, that matters.
Liquidity is often described as money in the financial system. But the truth is how fast that money moves. When Dhan Bahadur invests NPR 100,000, he can trade and then must wait at least four working days before using it again. In a slower cycle, he may trade five times in a month. If settlement were faster, say T+1, he could trade many more times with the same amount. Nothing new enters the market, no injection of additional capital ,yet money moves faster and trade increases. The same money does more work. Liquidity is not just added; it is multiplied.
Now, Dhan Bahadur realize, why speed has become a priority elsewhere. Markets in India and other South Asian countries have already moved to faster settlement. Their experience tells that when investors capital moves quickly, trading becomes more smoother, price gaps becomes narrower, and investors participate more actively. A market begins to feel alive.
There is also a handsome benefit for the government. Every parts of trade creates taxable activity through capital gains, fees, and commissions. When investors can trade more frequently, the number of transactions rises. The tax rate does not need to change; the base expands on its own. In simple terms, faster settlement can increase revenue by increasing movement, not by increasing taxes burden on investors.
It is true that such a shift is not free, the cost of technology is the most. Faster settlement requires stronger systems. Brokers, banks, and clearing institutions must be connected more closely. Manual delays must be reduced. Technology must be reliable. These changes cost money and effort. But the comparison is not between spending and saving. It is between a one-time investment and a continuous return. The cost of upgrading systems is limited. The gains from faster trading, higher liquidity, greater participation, and increased revenue will continue year after year. Over time, the balance is sure.
The sustainable change always demands legal clarity and complete discipline. Settlement rules must be enforced strictly. Delays must carry consequences. Ownership transfer must be recognised quickly and without confusion. Without strong rules, even good systems will slow down.
At its heart, this issue is not technical. It is human. For Dhan Bahadur, faster settlement means he can act when he is right. It means his capital is not sitting idle while the market moves. It gives him confidence that the system works with him, not against him. When thousands of investors feel the same, the market becomes deeper, more active, and more trusted.
This is a small reform in appearance, but a meaningful one in effect. Settlement cycles do not attract headlines, yet they shape how efficiently money flows through the economy. In a country where capital is limited, using time better may be one of the simplest ways to unlock growth.
In markets, a day is not just a day. It is opportunity. Nepal cannot afford to lose too many of them.
Respectfully,
A concerned observer of Nepal’s capital market
