Since a long, the stock market is in the downward trend, along with the market, the margin lending provided by BFIs is also slowing down.
As per Nepal Rastra Bank (NRB), BFIs extended margin lending of Rs 76.30 billion in the last FY. in the previous FY, such lending was Rs 80.50 billion.
The domestic stock market fluctuated between 1800 index to 2200 index many times, however, it could not go uptrend. Tightening of stock market by the central bank and failure to bring market supportive policies by the government are the main reason for the downsizing of the stock market. As a result, investors reduced margin lending from BFIs.
Fueled by NRB policies on stock market, NEPSE index is falling continuously for the last two years.
NRB set 150 percent risk weight for margin lending above Rs 2.5 million. However, this year, it has set 100 percent risk weight for margin lending upto Rs 5 million.
BFIs hesitate to extend loans to sectors that have huge risk weight as they will have to allocate more funds. Thus, the margin lending is in decreasing trend. Time and again, investors are demanding to amend the policy however, the central bank has not reconsidered its policy.
The margin lending started declining after NRB introduced 4-12 crore policy. Under the policy, an investor can take Rs 12 crore/120 million margin lending from 4 BFIs and Rs 4 crore/40 million from one bank. Later, the bank removed Rs 40 million limit while it kept Rs 120 million intact. The margin lending which once reached Rs 108 billion started falling after the policy.
In the FY 2078/79, BFIs extended Rs 106 billion margin lending which has declined by 24.3 percent in these two years.
