NRB Cuts Share Holding Period to 45 Days
Nepal Rastra Bank has reduced the minimum holding period for banks investments in listed shares and debentures from six months to 45 days while keeping the countercyclical capital buffer at zero.
Nepal Rastra Bank (NRB) has reduced the minimum holding period for shares and debentures held by banks and financial institutions from six months to 45 days.
The change has been incorporated into the Unified Directive, 2082 applicable to Class A, B and C banks and financial institutions. Under the revised provision, investments in shares and debentures of organized institutions that have issued shares to the general public and are listed on the securities exchange must be held for at least 45 days.
Previously, such investments were subject to a minimum six-month holding period.
The revised provision gives banks greater flexibility in managing their securities portfolios and responding to market conditions. However, banks and financial institutions remain prohibited from using arrangements designed to circumvent the prescribed holding period for short-term investments.
Countercyclical Buffer Remains at Zero
NRB has also maintained the countercyclical capital buffer for commercial banks at 0% for FY 2083/84.
With the buffer unchanged at zero, commercial banks will not face an additional capital requirement under this provision.
Tighter Investment Risk Controls
Alongside the shorter holding period, NRB has strengthened requirements governing securities investment and portfolio risk management.
Banks and financial institutions must maintain a board-approved investment policy covering investment objectives and strategies, eligible and prohibited investments, holding periods and conflict-of-interest management.
The policy must also establish the basis for classifying investments between the banking book and trading book, along with appropriate risk-management measures, including stop-loss provisions.
Banks are required to maintain systems for daily mark-to-market valuation, stress testing and internal risk ratings to monitor investment-related risks.
NRB has also introduced separate monthly reporting formats for banking-book and trading-book investments. Banks must submit their approved investment policies, procedures and prescribed investment-related details to the NRB's Supervision Department.
The revised framework therefore combines a shorter minimum holding period with stronger governance, monitoring and disclosure requirements for banks' securities portfolios.