Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s banks and financial institutions disbursed an additional NPR 34.02 billion in share-backed loans in the first nine months of the current fiscal year, a 37.8% jump from the same period last year, according to Nepal Rastra Bank (NRB). However, the Nepal Stock Exchange (NEPSE) has failed to reflect this growth, raising concerns about the utilization of these funds.
NRB data shows significant increases in share loans from July to March. Loans between NPR 2.5 million and NPR 5 million rose by 15.14%, while those below NPR 2.5 million grew by 8.6%. Larger loans saw even steeper growth: loans above NPR 10 million surged by 51.4%, and those between NPR 5 million and NPR 10 million increased by 19.4%. In contrast, last year’s nine-month growth rate for share loans was only 13%, with loans above NPR 10 million rising by 17.7%.
Despite the loan surge, the stock market remains stagnant. Experts attribute this to the diversion of share-backed loans to non-stock investments. Bharat Ranabhat, former president of the Nepal Stock Brokers Association, explained that margin lending, as these loans are often called, lacks legal mandates requiring investment in shares. “Funds may be used elsewhere, as banks and NRB lack precise data on their utilization,” he said. Banks’ preference for share-backed loans over real estate loans has further fueled this trend.
NRB currently caps individual share loans at NPR 150 million, while institutional investors face no such limits, enabling larger loans. However, capital outflows through share sales and capital gains tax exceed inflows from loans, stifling NEPSE’s growth, according to a former Stock Brokers Association president. “Despite rising loans, share demand hasn’t increased, preventing NEPSE from meeting expectations,” he noted.
The disconnect between loan growth and market performance has prompted calls for stricter regulations to ensure share loans are invested in the stock market. Without such measures, Nepal’s stock market may continue to lag despite significant credit expansion.
Your email address will not be published. Required fields are marked *
Comment *
Name *
Email *
Website
Save my name, email, and website in this browser for the next time I comment.
