In the first five months of the current fiscal year, banks and financial institutions (BFIs) extended loans totaling Rs 17.85 billion secured by shares.
Nepal Rastra Bank (NRB) reports that during the review period, margin loans rose by 19.8%. By mid-July, the end of FY 2023–2024, the BFIs had given out Rs 90.09 billion in margin loans; by mid-December, that amount had grown to Rs 107.94 billion.
The BFIs’ lending in shares as collateral increased by multiple times, in contrast to the 3.5 percent growth in private sector lending overall between mid-July and mid-December. Bankers claim that the significant drop in deposit interest rates and the continuous slowdown of the nation’s economic activity drew investors to the secondary market to inject funds.
The BFIs’ lending against share collateral fell 18.1% in the previous fiscal year. After the central bank removed the Rs 200 million ceiling on loans for institutional investors to engage in margin trading in share securities as part of its flexible monetary policy for the current fiscal year, the demand for margin loans began to increase this year.
The NRB reports that the biggest growth, 27.3 percent, was seen in margin loans of at least Rs 10 million. By obtaining loans from the BFIs, the major investors contributed an extra Rs 15.25 billion to the share market during the review period. Through margin loans, investors in this sector contributed a total of Rs 71.18 billion.
In a similar vein, margin loans between Rs 5 million and Rs 10 million increased by 11.3%. During the review period, investors contributed an additional Rs 1.40 billion to this group.
The margin loans in the Rs 2.5 million to Rs 5 million investment area went up by Rs 856.7 million (5.9%). Less than Rs 2.5 million in investments increased by Rs 336.7 million, or 4.6%.
Between mid-July and mid-December 2024, banks and financial institutions (BFIs) lent the private sector a total of Rs 178.29 billion. According to the data, the BFIs increased private sector loans by 3.5 percent.
In contrast to the moderate increase of 2.3 percent (Rs 110.01 billion) over the same period in the previous fiscal year, private sector lending during the review period this year was significantly higher, according to Nepal Rastra Bank (NRB). Comparing the number to the central bank’s goal of 12.5 percent growth this year, however, is not encouraging.
The industrial production sector saw a 5.4% increase in outstanding BFI loans during the review period, followed by the construction sector (3.5%), wholesale and retail sector (3.8%), transportation, communication, and public sector (3.6%), service industry sector (5.0%), and consumable sector (3.6%). Credit to the agriculture sector, however, fell by 0.7%.
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