Nepal Rastra Bank Increases Loan Limit Against Share Collateral

Kathmandu. Nepal Rastra Bank has made arrangements to increase the limit of loans given against share collateral.  

By amending the consolidated directive on Friday to implement the provisions mentioned in the monetary policy, the central bank has made arrangements for margin lending up to 80 percent based on the strength of listed companies.

Previously, there was a provision to provide loans up to 70 percent of the lower of the average price of the last 6 months or the current price against share collateral.  

In the current circular, licensed banks and financial institutions can provide loans up to an additional 10 percentage points by preparing a product paper based on the strength of listed companies.  

While preparing such a product paper, it has been stated that the size of the paid-up capital, the minimum period of securities listing, the condition of profit and dividend distribution and its period, credit rating, compliance with regulatory arrangements, and whether the regular general meeting has been completed should be included.

The Nepal Rastra Bank has also clarified that such a product paper must be placed on the website of the licensed institution, and it is not allowed to re-evaluate the shares held as collateral for such loans once disbursed and based on that, to determine the additional loan limit or provide additional loans.

The Nepal Rastra Bank had mentioned in the monetary policy that it would change the existing arrangements related to margin lending based on the strength of listed institutions. The Bank and Financial Institutions Regulation Department has stated that the central bank has made this arrangement to implement this matter.