Nepal Rastra Bank issues new circular for the BFIs; Risk weight decreases for share loan, Bonus and rights to be considered for margin loans and more

Nepal Rastra Bank has currently issued a circular related to Margin Lending, Stock Broker and Base Rate of the financial institutions. The recently issued circular is applicable for “A’, “B” and “C” class financial institutions.

Some of the major points of the circular are:

1. Risk weighted exposure has been decreased from 150% to 100% on the share loans
2. Margin limit for share loan has been increased to 65% from previous 50%
3. Bonus shares and right shares will be considered while floating margin calls
4. Banks and Financial institutions can lend 40% of their core capital on margin loan which previously was 25%
5. Commercial Bank can form a subsidiary company to work as a stock broker. The bank should have 51% holding of such subsidiary.