NRB spokesperson rubbishes rumors about margin lending policy tightening

ShareSansar, September 3:

Nepal Rastra Bank (NRB) has said that it has no any immediate plan to tighten its margin lending policy for the banks and financial institutions (BFIs).

Talking with ShareSansar today, NRB spokesperson Manmohan Kumar Shrestha dismissed the rumors about the plan of the central regulatory bank of tightening the screw for the margin lending of the BFIs.

“I would like to clearly say that NRB do not have any immediate plan on its table to tighten the margin lending policy. These are baseless rumors that might have been spread by the big stock market players,” said NRB spokesperson Shrestha.

With the stock market taking a dive in past few days with no particular reasons, stock analysts and brokers attribute such downfall to the rumors that the NRB is introducing the policy to curb the flow of the BFIs’ money toward the bourse.

“I do not see any solid reasons for the downfall. It seems that small investors’ sentiment is swayed away by the speculations and the rumors emanating from the mouth of big investors. This was the case with the recent directives regarding the threshold on ‘held-for trading’ as well as the current rumors about the margin lending,” Narendra Sijapati, president of Stock Brokers Association of Nepal (SBAN) told ShareSansar.

Sijapati, who runs Kalika Securities Pvt Ltd, do not also see any rationale and reason behind tightening the margin lending policy. “Since the BFIs are awash with cash with no investment opportunities and the market is also in the right track which has enabled the borrowers to repay the loans on time, there are no reasons on tightening the monetary policy,” added Sijapati.

The market which was already on the correction mode started observing continuous deterioration since the NRB issued a circular to the BFIs on August 20 instructing them to limit their ‘held-for-trading’ investment to 1 percent of the total core capital.

’Held-for-trading’ refers to the debt and equity investments that are purchased with the intent of selling them within a short period of time (usually less than one year). 

NRB later clarified that its 1 percent threshold was not intended to impact the share market and it has not changed the threshold of overall 30 percent of total investment in the share market.

Though the market partially recovered another day of such clarification, the Nepse benchmark index has gone down a total of 69 points in last two weeks to close at 946 points on September 1.

“We were accused for the deteriorating the market. The big investors misinterpreted our circular just to suit their interest. The small investors were seen suffering from their manipulation. Their strategy seemed to hording the scrips bringing down the market,” said spokesperson Shrestha.

“The latest rumors might also be the part of their game-plan to manipulate the market. Small investors need to be aware of it. They have to make the informed decision rather than making decision based on the rumors,” he added.

“We have been encouraging the BFIs to go toward core functioning like increasing lending in the productive sectors and others. We do not want to touch the market unless it pose challenge to the financial health of the BFIs. We do not have any plans to tighten margin lending.”