Under the leadership of Governor Dr. Bishwanath Poudel, who assumed office as the 18th governor, the central bank has systematically dismantled restrictive policy caps that previously weighed heavily on investor sentiment, trading volumes, and overall market liquidity.
The Shift from Micro-Management to Facilitation
For years, brokerage offices echoed a single major complaint: that the central bank was actively stifling the stock market. Stringent constraints—such as rigid personal loan limits of Rs 40 million and Rs 120 million, high-risk weights, and strict limits on bank stock trading—held the natural rhythms of the secondary market hostage.
However, Governor Poudel's tenure marked a decisive turning point. Initiating reforms just days into his term, Poudel moved to dismantle the regulatory walls that had kept institutional and retail investors restricted.
Over a one-and-a-half-year reform journey, the central bank implemented a series of landmark policy pivots:
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Risk Weight Reduction: In his first major move during the third-quarter review of the monetary policy, Governor Poudel slashed the risk weight on share mortgage loans from 125 percent down to 100 percent, easing capital pressure on commercial banks.
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Abolition of Loan Caps: After initially raising the single subscriber personal share mortgage loan limit from Rs 150 million to Rs 250 million, the central bank ultimately abolished the numerical cap altogether. The policy shifted toward allowing bank and borrower financial capacity to determine loan amounts.
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Portfolio Freedom for Financial Institutions: The central bank removed the 20 percent cap on the primary capital sale of shares with a tenure of one year, giving financial institutions back the autonomy to manage their portfolios independently.
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Tiered LTV Ratios: Moving away from traditional blanket limits, the central bank introduced a tiered maximum loan-to-value (LTV) ratio of up to 80 percent for listed companies that demonstrate strong financial soundness, good governance, and regular dividend payouts—incentivizing investment in fundamentally strong stocks over speculation.
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Shorter Institutional Holding Periods: To re-establish institutional investors as active market players, NRB slashed the mandatory holding period for shares and debentures bought by banks from 6 months down to just 45 days, preventing billions in capital from remaining locked.
While the "Dr. Bishwanath Poudel Doctrine" has successfully broken the heavy regulatory chains that once suppressed the stock market—transforming the central bank from an adversary into an economic companion—the secondary market has yet to react with the expected bullish enthusiasm, remaining largely in a cautious, wait-and-see state.
With the regulatory framework now widely opened, financial analysts note that the ball is firmly in the court of investors and listed companies to prove their discipline, transparency, and maturity in utilizing this newfound market freedom.
