The Ministry of Finance has concluded that the “10-kitta” share allotment rule needs to be reviewed as it has made investors view IPOs as a lottery rather than building a proper investment culture.
During the meeting of the Finance Committee under House of Representatives on Wednesday, Mahesh Acharya, the joint secretary of the Ministry of Finance, shared his concerns about the stock market. Acharya, who is also the head of the Financial Sector Management and Corporation Coordination Division, said that the lack of financial literacy is currently the biggest problem in the market.
The Problem with 10-Kitta Policy
He pointed out that the “10-kitta” policy has created big distortion in the stock market and its actual impact needs to be reviewed. He stated that this policy has brought the biggest risk and needs a serious rethink. According to him, because of the rule to apply for a minimum of 10 shares, investors have stopped studying about the companies they invest in.
Instead of developing habit to research before investing, investors now look at IPOs just like a lottery ticket. Acharya suggested that instead of bringing such small investors directly to the IPO market, they should be encouraged to invest through mutual funds.
Lack of Study and Rising Protests
Acharya also mentioned that most people applying for IPOs do not even open the company prospectus. They invest because they expect the share price to rise quickly, without looking at the company’s financial health or dividend capacity. Because of this mentality, when the share prices start to fall down, people even start to hold protests, he added.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
