BFIs’ attraction to share loan spurs NEPSE
ShareSansar, Sept 15:
Banks and financial institutions are getting increasingly interested in the purchase of share loans over the recent days, which in turn is fueling trading at Nepal Stock Exchange (NEPSE).
BFIs have been attracted to share loans as they do not have enough scope to invest in other sectors such as real estate, infrastructure, hydropower and commodities -- despite high fluidity in the baking system.
The stakeholders maintain that they are interested in share loan because it entails comparatively high returns and lesser risks as it is easier to recover such loans.
BFIs are turning to share loan also because they have to expand their investment in
the wake of the new fiscal year.
“Share loan is also an appropriate strategy to manage the portfolio,” says a top banker.
It may be noted here that Nepal Rastra Bank (NRB) issued two reverse repo within a week’s time earlier this month to absorb excess cash in the banking system.
The central bank conducts a reverse repo whenever there is excess liquidity in the market and to contain the interest rates of bank and financial institutions (BFIs). This is done by selling treasury bills to the BFIs.
The investment in share loan is increasing as the commercial banks are slashing their interest rates.
Yet another reason that has spurred up the investment in share loan is the dividend that entails such purchase.
Stock Brokers’ Association officials too confirmed that the BFIs were increasing their investment in scrip.
“This has become a boon for the share market,” said one of them, adding that though the NEPSE index has not changed much over the recent days, the gradual rise in the volume of transaction is attributed to the expansion of banking investment in the share market.
