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Increase in Share Pledge Loan Flow

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NEPSE trading

Increase in Share Pledge Loan Flow

Recently, there has been an increase in the flow of share pledge loans from banks and financial institutions. According to statistics from Nepal Rastra Bank, the demand for investment in share pledge loans has risen, particularly when the demand for loans in other sectors has weakened, resulting in a notable increase in the demand for share purchases.

Key Reasons:

  • Flexible Monetary Policy: The central bank's flexible stance towards the stock market, reflected in the current fiscal year's monetary policy, has led to an increase in the flow of loans against shares.

  • Continuous Growth of the Stock Market: As investments in the stock market have increased, the demand for share pledge loans has also risen.

Statistics on Share Pledge Loan Flow:

  • Total Increase:

    • 18.1% Increase: As of the end of Ashad 2080/81, a total of NPR 90 billion in share pledge loans were disbursed, compared to NPR 76.3 billion in the previous fiscal year 2079/80.

  • Loans Above NPR 10 Million:

    • 25.1% Increase: As of Ashad 2081, loans above NPR 10 million reached NPR 55.93 billion, compared to NPR 44.71 billion in the previous year.

  • Loans Between NPR 5 Million and NPR 10 Million:

    • NPR 12.42 billion: As of Ashad 2081, compared to NPR 11.77 billion in the previous year.

  • Loans Between NPR 2.5 Million and NPR 5 Million:

    • 12.8% Increase: Reached NPR 14.42 billion in 2080/81, compared to NPR 12.78 billion in the previous year.

  • Loans Below NPR 2.5 Million:

    • 3.9% Increase: Reached NPR 7.31 billion as of Ashad 2081, compared to NPR 7.03 billion in the previous fiscal year.

Policy Amendments and Impact:

  • Amendment to Share Pledge Loan Limits: Nepal Rastra Bank revised the previous policy limit of NPR 4 million and NPR 12 million to NPR 15 million and NPR 20 million, respectively.

  • Abolishment of 'Margin Nature of Share Pledge Loan' Limit: The maximum limit of NPR 20 million will be abolished, as announced in the current fiscal year's monetary policy, leading to an increase in the flow of loans above NPR 10 million.

Conclusion:

Despite adequate liquidity in banks and financial institutions, the increase in share pledge loans is due to the flexibility in monetary policy and the growth of the stock market. The flow of loans against shares is expected to continue increasing in the coming days.

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