KATHMANDU, April 10: Banks and financial institutions (BFIs) have been aggressively issuing loans against shares as collateral, driven by a decline in loan demand from other sectors amid the ongoing economic slowdown, official data shows.
According to records from Nepal Rastra Bank (NRB), margin lending by BFIs reached Rs 156.27 billion as of mid-March, marking an increase of 11.07 percent compared to the same period in the last fiscal year. Bankers attribute the trend to BFIs offloading excess liquidity, while investors are increasingly attracted to share loans due to a significant decline in banks’ interest rates.
Loans exceeding Rs 100 million—typically taken by large institutional and individual investors—account for the largest portion of margin lending. This category surged by 24.99 percent, rising from Rs 79.12 billion to Rs 98.92 billion.
Desperate search for missing girls as nearly 80 dead in Texas f...
Similarly, medium-sized margin loans, ranging between Rs 50 million and Rs 100 million, increased by 17.38 percent to Rs 16.02 billion, up from Rs 14.77 billion in mid-March last fiscal year.
Margin loans between Rs 2.5 million and Rs 5 million rose by 8.51 percent to Rs 17.56 billion, while the smallest loan segment—below Rs 2.5 million—grew at a relatively slower pace of 7.05 percent, reaching Rs 8.17 billion.
A stockbroker said the central bank’s lenient policies and declining interest rates have influenced credit flow in this segment. In October, the NRB lifted the maximum single borrower limit of Rs 250 million on loans against shares.
Data from the NRB shows that the average interest rate on margin loans fell by 1.52 percentage points to 6.87 percent over the past year. The weighted average interest rate on all loans also declined by 1.5 percentage points to 6.90 percent.
With bank interest rates now in single digits, the NRB’s monetary policy for the current fiscal year—which includes a reduction in risk-weightage for margin loans—has further boosted BFI activity in this segment, according to bankers. The increased credit is expected to enhance cash flow and investor confidence, potentially increasing buying pressure and improving both the stock index and trading volume.
Stockbrokers suggest the current trend could help stabilize the share market in the coming days. “Taking advantage of decline in interest rates, large investors are seen increasing heavy investment, while medium-level investors appear to diversify their portfolios by buying scrips that ensure long-term returns,” said a stockbroker who spoke on condition of anonymity.
