Nepal Rastra Bank (NRB) is mulling to remove the existing upper limit of Rs 120 million on margin loans.
The NRB through its Monetary Policy 2021/22 capped the limit of loans against shares to up to Rs 40 million that is issued by a single bank or financial institution. Similarly, an individual borrower has been allowed to take a maximum of Rs 120 million under this category. The share investors have long been criticizing the policy enforced by the central bank.
With the objectives to break the monopoly of large investors on margin lending, and ensure access of small investors to financial resources to invest in the stock market, the NRB had adopted a policy of 4/12 in the margin nature of share securities loans. Although the central bank removed the lower limit through the monetary policy for this fiscal year, the NRB kept intact the upper threshold of Rs 120 million.
Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel and NRB Governor Maha Prasad Adhikari are now in favor of removing the limit of Rs 120 million on share mortgage loans, according to sources familiar with the development.
Speaking at an interaction program organized to discuss challenges and solutions in the current economy organized by the Economic Media Operators Association on Wednesday, Finance Minister Paudel and Governor Adhikari expressed their positive view of removing the Rs 120 million limits on share securities.
Finance Minister Paudel said that the problem can be solved by discussing the policy of Rs 120 million applied to the share mortgage loans by the Ministry of Finance, NRB and other relevant agencies. He said that the governor is also positive that a policy solution can be found for the problems of liquidity, interest rate and stock market of Rs 40-120 million.
Minister Poudel insisted that since NRB is an autonomous institution, the government cannot dictate the interest rate of the bank. NRB officials have maintained that some temporary instruments are being used and few other temporary instruments are being removed to ensure financial stability in the country.
