The Settlement Guarantee Fund, established in 2075 BS to protect Nepal’s stock market settlement system, has finally received its Permanent Account Number (PAN) after eight years. Yet, despite resolving what was long cited as a major obstacle, the fund is still not operational.

Around Rs 11 crore has accumulated in the fund through contributions from NEPSE, CDS & Clearing Limited and stockbrokers. The fund was intended to provide a financial backstop if buyers fail to settle payments or brokers face temporary liquidity problems during the settlement process.

Stockbrokers argue that there is now no major obstacle to starting the fund, as the PAN has been obtained and other preparations are largely complete. However, NEPSE says the fund still lacks the infrastructure and operating framework required for fund mobilisation, expenditure management and risk management.

The fund was established eight years ago with the objective of strengthening settlement security in Nepal’s capital market. It is to be managed by a five-member committee representing NEPSE, CDSC, securities dealers and stockbrokers.

For the first five years, brokers contributed 0.5% of their net profits to the fund, followed by 0.25% annually thereafter. Despite the accumulation of funds, the continued delay in putting the mechanism into operation raises questions about institutional coordination and the implementation of capital market reforms.