CDC-Nepal to work for CDS

A group of banks, Nepal Stock Exchange (Nepse), Citizen Investment Trust (CIT) and Credit Information Bureau (CIB) has established Central Depository Company of Nepal.

The Central Depository Company of Nepal (CDC-Nepal) will have 50 per cent shares of Nepse, 10 per cent share of CIB, 15 per cent of CIT and 25 percent of a group of six commercial banks — Standard Chartered Bank, Nabil Bank, Nepal SBI Bank, Bank of Kathmandu, Nepal Investment Bank and NIC Bank — as promoters. “They have signed Promoters Agreement,” said a source at the Securities Board of Nepal (Sebon).

According to the draft regulation of the Central Depository System (CDS) — sent to the finance ministry for its nod — the company should have over Rs 100 million capital.

The increase in volume and number of share transactions after the automation of Nepse has created demand for the establishment of CDS that offers safety and convenience compared to holding securities in physical form, enhances liquidity by instantaneous transfers and delays, thefts, interceptions and subsequent misuse of certificates eliminated.

“After the CDS comes into operation, paper certificates would be converted into digital form and the ownership transformation will be completed within a lesser period of time that will provide more opportunities to investors for immediate exploitation of information and it will help control fraud as well,” Shanker Man Singh, managing director of nepse said at an interaction on ‘Establishing Central Depository System in Nepal’.

During the interaction, Cyrus Khambata from Central Depositary Services (India) presented paper on the various facets of CDS with relevance to Nepal.
However, Rewat Bahadur Karki, former MD of the Nepse said that Clearing and Central Depository System (CCDS) should be set up as the clearing is yet another key aspect and problem.

Finance Secretary Rameshwor Khanal, deputy governor Krishna Bahadur Manandhar, chairman of the Sebon Sur Bir Poudel, Pramod Bhattarai from Nepse, Ram Kumar K, C D Deshpande of CNC and Vinay Apsongikar of CMC took active part in the interaction. “We still have traditional system of dealing with share certificates with enormous paperwork that is time consuming and involves various problems,” Singh said

The main functions of the CDS are centralised database and accounting for setting up the depository is to accelerate growth of scripless trading, with major thrust of individual participation and creating competitive environment, responsible to the user’s interest and demands to enhance liquidity. In the Budget speech,Finance Minister Surendra Pandey claimed that CDS will start operating by October 17.

Source: THT