Banks lend Rs 7.10 billion on margin type lending

The banks have lent Rs 7.10 billion on margin type lending to the stock market investors.

The central bank fearing the stock market crash due to margin type lending had asked the banks to provide details of their margin type lending.

"The 26 banks have floated Rs 7.10 billion margin type lending," according to the central bank source.

Of the 26 banks, state-owned banks have lent the highest as Nepal Bank has floated Rs 1.47 billion and Rastriya Banijya Bank has lent Rs 1.12 billion on margin type lending.
Likewise, from among the private sector banks, Himalayan Bank has lent Rs 550 million, Global IME Bank Rs 500 million, Laxmi Bank Rs 240 million,  Kumari Bank Rs 200 million, Everest bank Rs 150 million and Nepal Investment Bank Rs 50 million.

As the banks are sitting on a huge pile of cash, the investors have been finding margin type lending a boon that has pushed the Nepal Stock Exchange (Nepse) to as high as over 800 points.

Fearing the crash – like earlier – the central bank has last week sought a detailed information from the banks. The market has, however, reacted to the central banks expected intervention and second quarter closing.

NRB eases margin lending, investors dig in heels

Nepal Rastra Bank (NRB) has relaxed the margin lending provision today due to investors' pressure.
The central bank has relaxed the maintenance margin by five per cent. "Banks need not give margin call if the share price goes down by 10 per cent or the loan goes up by 55 per cent," said the central bank's circular to the banks. Earlier, banks were directed to give margin call if the loan went above 50 per cent, as according to the central bank's rule, they could not lend more than 50 per cent against shares.
Similarly, investors can renew 75 per cent of the loan against shares, if they pay the remaining 25 per cent and its interest, the central bank added. Earlier, investors were allowed to renew only 50 per cent of the loan against shares.
However, investors think that the NRB directive has yet not addressed their demands. They want a 100 per cent renewal provision. According to them the central bank's regulation is also against the Company Act. "Shares are also assets," said Ramchandra Bhattarai, an investor. "We want 100 per cent renewal provision," he said adding that today's circular of the central bank do not address their concern.
The investors want commitment from the concerned authorities -- the Finance Ministry, Securities Board of Nepal (Sebon) and Nepal Stock Exchange (Nepse. Otherwise, they have threatened to continue their protest programmes. "We are going to halt Nepse transactions tomorrow as well," Bhattarai said adding that the Finance Ministry and Sebon should at least show concern.
Investors brought the share transaction to a complete halt for the second day today at Nepse to pressurise the government to concede their demand. they said it must act on behalf of them as Nepse has witnessed a 'sort of crash'.
General Investors' Association, Nepal Investors' Forum and Nepal Securities Investors' Association have put forward a 22-point charter of demands before the government which includes demands for ending the policy of changing 19 per cent promoters' shares into general shares and setting new criteria for taxes on capital gain tax.
Investors allege that the government has not taken steps to upgrade the capital market. According to them, the overflow of number of shares in the market has brought Nepse down as the number of investors did not increase commensurately.
Issuing a statement, Nepse voiced grave concern over the protest of investors. "The current protest of investors has blocked regular work of Nepse and this is not fair," it stated.
Chairman of Stockbrokers' Association, Nanda Kishor Mundada, said that the investors were forced to go on strike due to the government apathy.
There is an investment of Rs 3.75 billion in the domestic stock market. The market closed at 485.14 points on Thursday -- the last day of last week's trading.