Market Watch

Margin lending terms to be eased

Published by Octron on December 27, 2010

The high-level Financial Sector Coordination Committee has instructed Nepal Rastra Bank (NRB) to relax existing Margin Lending-loans extended to shareholders against share certificate as collateral–a provision the committee hopes would rejuvenate the long-time sluggish stock market. “Nepal Rastra Bank (NRB) would take decision on softening the existing provisions for margin lending to give a new lease of life to the slowing capital market,” Finance Minister Surendra Paney told Republica on Saturday.

NRB–the central monetory authority–had tightened margin lending some 28 months back when the bench mark Nepal Stock Exchange (Nepse) index touched the all-time peak of 1175.38 points. The government is under mounting pressure to relax the margin lending provisions after the Nepse index slipped more than 50-month low at below 400 points. As per the existing provision, banks and financial institutions are issuing loans worth 60 percent of the market value of stock on the basis of half of the average price of the previous 180 days against the deposit of stock certificates.

NRB Governor, Dr. Yuba Raj Khatiwada, has already said that the central bank would review its provision on margin lending in a bid to revive investors´ confidence on the stock market. The review is being considered mainly after investors blamed the central bank´s tight policy on margin type lending as one of the key reasons behind stock market´s dismal outlook.

Source: Republica

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