The Securities Board of Nepal (Sebon) has granted permission to Siddhartha Bank Ltd to operate mutual fund -- a scheme that paves the way for small investors to invest in the capital market.
The bank will not now set up Siddhartha Mutual Fund as per the Mutual Fund Regulations 2011 that came into effect from September 27, 2010.
Sebon has allowed the bank to mobilize a minimum of Rs 1 billion through mutual fund.
Parishtha Poudel, director of Sebon, said promoters will also have to set up an asset management company as its subsidiary and five-member fund supervisory team before starting the mutual fund scheme.
The subsidiary company must have paid-up capital of Rs 100 million.
“Though two mutual funds are already in operation in the country, Sidhartha Mutual Fund is the first mutual fund getting permission to operate as per the newly introduced regulations,” said Poudel.
Two existing mutual funds -- Nepal Capital Market, promoted by NIDC capital market; and Citizen Investment Trust (CIT) -- were established as per the Securities Act.
Three more commercial banks -- NMB Bank, Nabil Bank and Laxmi Bank -- have also applied at Sebon for the permission to operate mutual fund.
At a time when the securities market has been witnessing long running slowdown, officials hope that the operation of new mutual fund would help provide investment inputs to investors and stabilize the capital market.
In a bid to end long-running slowdown in the capital market, the government through the budget for fiscal year 2011/12 has announced to provide concession to investments coming from institutional investors such as mutual funds.
Since the enforcement of Mutual Fund Regulations in 1996, India has been encouraging the establishment of mutual funds with cent percent exemption of tax in income as well as in return on investment of small investors.
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