NRB Removes Rs. 20 Crores Limit on Share Pledge Loan for Institutional Investors
July 26, 2024 | Investopaper
Nepal Rastra Bank has announced changes in its monetary policy regarding share-pledge loans for institutional investors. Governor Maha Prasad Adhikari revealed that the central bank has removed the previous cap of Rs. 20 crores on institutional loans backed by shares.
Under the revised policy, individual investors will still be subject to a 15 crore rupee limit on share-backed loans. This cap remains unchanged, ensuring that individual investors continue to have defined borrowing limits.
The central bank’s policy shift is designed to address ongoing issues in the stock market. Specifically, it seeks to reduce the direct loan investments made by banks and financial institutions and to promote margin trading as a more effective alternative. Margin trading, where investors use borrowed funds to trade securities, is seen as a key strategy for increasing market liquidity and investment activity.
To support this initiative, the Nepal Rastra Bank has approved 34 brokerage firms for margin trading. These firms are now authorized to engage in margin trading activities, which is expected to boost investment in the capital market. The removal of the Rs. 20 crore rupee limit on institutional share-pledged loans is intended to facilitate greater investment flexibility for institutional investors, thereby supporting the overall growth and stability of the capital market.
