Rising NEPSE index spurs surge in share mortgage loans

Kathmandu, August 20 - As the NEPSE stock market index continues its upward trajectory, the trend in share mortgage loans is also on the rise.

According to Nepal Rastra Bank, by the end of last fiscal year, loans secured by shares had reached NPR 90.93 billion, marking an 18.06% increase from the previous year.

In comparison, by the end of previous than the last fiscal year, share mortgage loans amounted to NPR 76.03 billion across all banks and financial institutions.

The Central Bank stated that out of the total loans disbursed, NPR 55.93 billion was allocated to loans exceeding NPR 10 million, while NPR 12.42 billion was distributed in the range of NPR 5 million to NPR 10 million. Demand in these segments grew by 25.1% and 5.5%, respectively.

Last year, banks had invested NPR 44.71 billion in loans above NPR 10 million and NPR 11.77 billion in loans between NPR 5 million and NPR 10 million.

Additionally, during the review period, NPR 14.42 billion was allocated to share mortgage loans between NPR 25 million and NPR 50 million, and NPR 7.31 billion was disbursed in loans below NPR 2.5 million. This compares to NPR 12.78 billion and NPR 7.35 billion invested in these segments last year.

The monetary policy has recently revised the previous 4/12 provision, which allowed individuals or institutions to borrow up to NPR 40 million from a single bank and NPR 12 million from all banks combined. The updated policy now permits borrowing up to NPR 150 million for individuals and NPR 200 million for institutions. Additionally, the policy has removed the previous NPR 200 million cap for institutional loans.

With the NEPSE index rising from around 2,100 points to 30,000 points following these policy changes, a significant boost in loan demand is anticipated.