How does the monetary policy affect banks’ ability to provide Margin Type Loan? (Good signal for stock market)
- ShareSansar, July 10, 2017 on Company Analysis , Exclusive , Featured , Financial Analysis , Latest , Stock Market
New monetary policy has introduced a new provision for banks to provide margin type loan (MTL). As per the new provision, Banks and Financial Institutions (BFIs) can lend up to 40% of their core capital as MTL. Core capital is the summation of paid up capital (both ordinary and covertible and irredeemable preference shares) and reserves of the company. The data of margin type loans provided by commercial banks till Q3 of FY 2073/74 shows that the new provision may be a positive signal for the growth of overall stock market.
We have analyzed how much commercial banks have disbursed as margin type loans till the third quarter and also how much they can still provide as MTL under this new policy. As per the analysis, the commercial banks have provided Rs 31.06 arba till Q3. As per the new provision, the banks can provide extra Rs 78.04 arba as MTL, if required.
|In Rs Crore|
|Total Core Capital||27,277.32|
|Limit for MTL||10,910.93|
|MTL provided till Q3||3,106.74|
From the above table, it is concluded that Agricultural Development Bank Limited (ADBL) has not given any loans against shares and it stood at the top of the table that the bank can provide loan of Rs 8.48 arba. Nepal Investment Bank Limited (NIB) can also provide more than Rs 6.63 arba loan against shares. On the other hand, Prabhu Bank Limited (PRVU) and Citizens Bank International Limited (CZBIL) can disburse the lowest amount of loans under this heading.
- Sijan Bajracharya