Kathmandu. Dozens of problems and challenges have emerged in the financial sector management and capital market.

The Good Governance Roadmap 2082 unveiled by the government includes problems and challenges in financial sector management and capital market. The banks and financial sector and the capital market as a whole have weak regulatory and supervisory capacity.

The Ministry of Finance, Nepal Rastra Bank, Securities Board of Nepal (SEBON), Insurance Authority and other regulatory bodies have not been able to carry out evidence-based regulation and supervision.

The banking system is at risk of increasing financial risk as the quality of loans is deteriorating due to the increasing non-performing loans (NPL) in recent times. It has been found that there is a lot of debt concentration in limited and unproductive sectors.

Similarly, the investment in the productive sector decreases due to the high flow of loans in limited sectors such as real estate and share market.

It has been found that there is an opportunity for financial access only in urban areas of Nepal, and citizens living in foreign employment and rural areas have not been able to participate in financial access and capital market opportunities.  Financial and investment literacy is weak, lack of financial knowledge among all citizens is causing problems in savings, investment and loan use, and complete protection against technological risks has not been guaranteed.

With the expansion of digital banking, cybersecurity challenges are increasing, Nepal’s financial sector has not been able to fully develop and expand digital technology, and online transaction systems including TMS are frequently problematic. Due to the high transaction cost (commission and fee) in the capital market, the cost of broker commission, service charge, etc. is comparatively high, the general public is not interested in share trading.

It has been found that the financial instruments in the capital market are limited and the growth of securities other than shares (derivatives, mutual funds, bonds, etc.) is weak. Lack of functional correlation among the regulatory bodies, lack of adequate coordination among the Ministry of Finance, Rastra Bank, Securities Board, NEPSE and CDSC, low participation of institutional investors in the capital market and limited participation of institutional investors such as insurance, pension fund, investment fund etc.

Similarly, the good governance roadmap states that the companies listed in the capital market have not been able to demonstrate financial transparency and there is a tendency to hide complete and necessary information even after providing information.