Does the decreased limit of margin type loan from 45% to 25% really affect the exposure of BFI’s on share loans?
Fri, Jul 13, 2018 10:43 AM on Economy, Stock Market, Exclusive,
-Puskar Shrestha
Margin type loan is the type of loan which is borrowed by keeping the shares as collateral. Loan borrowed as margin type loans are to be used in the investment of shares. This kind of loan facility is useful for the investors who are actively engaged in monitoring and managing their investments.
In the recently unveiled Monetary Policy, the limit for the margin type loans have been decreased from previously maintained 40% to 25% of the core capital.
The data presented below shows the core capital of the commercial banks as per the third quarter of the current fiscal year. The data given below also shows the current status of Margin Type loan as well as the excess loan the banks can float.
|
S.N. |
Bank |
Core Capital (Rs.) |
Current Floated Margin Type Loan (Rs.) |
% of core capital |
New Limit (25% of core capital) |
Excess lending capacity (Rs.) |
|---|---|---|---|---|---|---|
|
1 |
Citizens Bank International Limited |
10,076,328,992 |
2,714,747,000 |
26.94 |
2,519,082,248 |
(195,664,752) |
|
2 |
Prabhu Bank Limited |
10,496,258,632 |
2,346,048,000 |
22.35 |
2,624,064,658 |
278,016,658 |
|
3 |
Prime Commercial Bank Limited |
10,567,432,285 |
2,131,150,000 |
20.17 |
2,641,858,071 |
510,708,071 |
|
4 |
Siddhartha Bank Limited |
11,005,725,000 |
1,836,197,000 |
16.68 |
2,751,431,250 |
915,234,250 |
|
5 |
Sunrise Bank Limited |
10,183,970,000 |
1,834,684,000 |
18.02 |
2,545,992,500 |
711,308,500 |
|
6 |
NIC Asia Bank Limited |
10,670,039,000 |
1,992,796,000 |
18.68 |
2,667,509,750 |
674,713,750 |
|
7 |
Global IME Bank Limited |
12,749,574,000 |
1,959,345,000 |
15.37 |
3,187,393,500 |
1,228,048,500 |
|
8 |
Century Commercial Bank Limited |
9,218,156,985 |
1,410,803,000 |
15.30 |
2,304,539,246 |
893,736,246 |
|
9 |
Nabil Bank Limited |
16,860,118,000 |
2,348,591,000 |
13.93 |
4,215,029,500 |
1,866,438,500 |
|
10 |
Laxmi Bank Limited |
10,245,284,000 |
1,447,316,000 |
14.13 |
2,561,321,000 |
1,114,005,000 |
|
11 |
Nepal Bank Limited |
13,822,219,000 |
1,832,434,000 |
13.26 |
3,455,554,750 |
1,623,120,750 |
|
12 |
Kumari Bank Limited |
8,574,223,256 |
1,062,378,000 |
12.39 |
2,143,555,814 |
1,081,177,814 |
|
13 |
Himalayan Bank Limited |
12,960,462,439 |
1,434,444,000 |
11.07 |
3,240,115,610 |
1,805,671,610 |
|
14 |
Rastriya Banijya Bank Limited |
12,741,643,573 |
1,327,068,000 |
10.42 |
3,185,410,893 |
1,858,342,893 |
|
15 |
NCC Bank Limited |
7,499,339,000 |
727,032,000 |
9.69 |
1,874,834,750 |
1,147,802,750 |
|
16 |
Everest Bank Limited |
13,727,901,000 |
1,210,873,000 |
8.82 |
3,431,975,250 |
2,221,102,250 |
|
17 |
Civil Bank Limited |
8,709,917,710 |
745,392,000 |
8.56 |
2,177,479,428 |
1,432,087,428 |
|
18 |
Janata Bank Limited |
8,932,710,000 |
605,094,000 |
6.77 |
2,233,177,500 |
1,628,083,500 |
|
19 |
Mega Bank Limited |
9,096,000,000 |
557,462,000 |
6.13 |
2,274,000,000 |
1,716,538,000 |
|
20 |
Nepal Investment Bank Limited |
23,113,887,258 |
1,292,068,000 |
5.59 |
5,778,471,815 |
4,486,403,815 |
|
21 |
Bank of Kathmandu Limited |
11,150,991,699 |
660,776,000 |
5.93 |
2,787,747,925 |
2,126,971,925 |
|
22 |
NMB Bank Limited |
11,741,729,816 |
654,902,000 |
5.58 |
2,935,432,454 |
2,280,530,454 |
|
23 |
Machhapuchhre Bank Limited |
9,708,940,000 |
380,303,000 |
3.92 |
2,427,235,000 |
2,046,932,000 |
|
24 |
Sanima Bank Limited |
10,260,618,000 |
266,716,000 |
2.60 |
2,565,154,500 |
2,298,438,500 |
|
25 |
Nepal Bangladesh Bank Limited |
11,051,882,000 |
248,696,000 |
2.25 |
2,762,970,500 |
2,514,274,500 |
|
26 |
Nepal SBI Bank Limited |
11,786,846,000 |
0.00 |
2,946,711,500 |
2,946,711,500 |
|
|
27 |
Standard Chartered Bank Limited |
12,628,976,311 |
0.00 |
3,157,244,078 |
3,157,244,078 |
|
|
28 |
Agriculture Development Bank Limited |
17,700,930,000 |
0.00 |
4,425,232,500 |
4,425,232,500 |
|
|
Average percentage of Core Capital |
10.52% |
Excess Lending Capacity (Rs.) |
48,793,210,989 |
|||
We can clearly observe that the banks have already maintained the margin type loan under 25% of the core capital except Citizens Bank. Out of the 28 commercial banks, Nepal SBI Bank, Standard Chartered Bank and Agriculture Development Bank have not provided any amount as margin type loan.
The commercial banks have been floating margin type loan on an average of 10.52%. The commercial banks can float an excess amount of Rs 48.79 arba even after taking into consideration the amount of Rs 19.56 crore which has been floated in excess by Citizens International Bank Limited.
As a whole, the commercial banks still possess a huge capacity to be floated as margin type loans and the borrowers are unlikely to get affected due to the decreased limit of the margin type loans. However, if we view the capacity of the banks to provide margin type loan in an individual basis, the total capacity of the banks will decrease to Rs 38.26 arba if the lending capacity of Nepal SBI Bank, Standard Chartered Bank and Agriculture Development Bank are excluded.
We cannot shy away from the fact that the margin type loans does not fall as the priority of all the banking institutions. So although the overall amount seems to be of huge amount, in an individual basis the newly introduced provision will affect the BFI’s exposure towards margin type loan.
Also, the smaller financial institutions (i.e. finance companies and development banks) are likely to be affected the most because of the limitation of the percentage of margin loan. The finance companies and development banks whose core capital is not much and have high exposure towards this loan, also get impacted because of this provision. The long term effect of the newly introduced provision will be seen in the future that whether the decision of putting shackles on the financial institutions will be fruitful or not.
