KATHMANDU: Nepal Rastra Bank (NRB) has made significant adjustments to the maximum loan limits against shares, increasing the cap from the previous Rs 120 million to Rs 200 million.
In a recent circular issued by NRB, revisions to the margin loan ceiling have been implemented for both institutional and individual investors.
Under the new framework, the maximum margin loan for an individual is now set at Rs 150 million, according to NRB. This marks a noteworthy increase from the previous limit of Rs 120 million for both individual and institutional investors.
Previously, the NRB had placed a cap on loans against shares at a maximum of Rs 40 million, issued by a single bank or financial institution, as part of its Monetary Policy for 2021/22.
Similarly, individual borrowers were restricted to a maximum of Rs 120 million in this category. The policy had faced criticism from share market investors.
The NRB’s initial objective was to reduce the dominance of large investors in margin lending and provide small investors with better access to financial resources for stock market investments.
To achieve this, the central bank had introduced a 4/12 policy for margin nature share securities loans, aiming to minimize credit risks and promote small investor participation.
However, due to mounting pressure from both the government and share market investors, the NRB has demonstrated flexibility by revising the upper limit on margin-type loans.
In recent times, Nepal’s secondary market has experienced a downturn, with the market index hitting a low of 1,956.92 points. This has prompted criticism of the NRB’s policies and their impact on the stock exchange market.
While the central bank removed the lower limit for the fiscal year 2022/23 through its monetary policy, it had previously retained the upper threshold at Rs 120 million. These adjustments reflect the NRB’s efforts to address concerns and adapt to evolving market dynamics.