Margin Loans Surge as Risk Burden Decreases: Nepal Rastra Bank's Policy Boosts Credit Investment

In the initial four months of the current fiscal year, margin loans up to Rs 50 lakh have witnessed an 8% surge, propelled by the Nepal Rastra Bank's strategic reduction of the risk weight on these loans to 100%. This move aims to stimulate credit investment in the sector.

As of Kartik in the ongoing financial year, margin loans under 50 lakh rupees have reached a staggering 13.80 arba rupees, showcasing a substantial increase from the 12.78 arba rupees recorded at the end of the previous fiscal year in Asar.

The broader impact of this risk reduction is evident in the overall margin loan, which has seen a 6.4% uptick, reaching 81.16 arba rupees by the end of Kartik, compared to 76.30 arba rupees at the close of Asar.

The policy's ripple effect extends beyond the 50 lakh group, with loans between 50 lakh and 1 crore rupees experiencing a 0.5% increase, totaling 11.77 arba rupees in Kartik, up from 11.77 arba rupees in Asar.

Additionally, the monetary policy revisions allow individuals to secure loans up to 15 crore rupees and organizations up to 20 crore rupees on share securities, expanding the borrowing capacity from financial institutions compared to the previous limit of Rs 12 crore.

The data from Nepal Rastra Bank reveals a 4.8% surge in margin loans below 25 lakh rupees, reaching 7.37 arba rupees in Kartik, up from 7.35 arba rupees in Asar.

In response to evolving market conditions, the Nepal Rastra Bank, in its first quarter review of monetary policy, has further fine-tuned the risk weight for margin loans up to 50 lakh rupees, reducing it from 150% to 125%. This adjustment is anticipated to drive a continued increase in margin loans as the risk burden diminishes.