Margin lending crosses Rs 156 billion as big investors dominate Nepal’s share market credit

KATHMANDU: Margin lending by banks and financial institutions into Nepal’s stock market has surged past Rs 156 billion, with large-ticket borrowers continuing to dominate credit flows, underscoring a growing concentration of leveraged investment in the capital market.

According to the latest data from Nepal Rastra Bank, total share-backed loans reached Rs 156.27 billion by mid-March (Falgun-end) of the current fiscal year 2025/26, reflecting a strong upward trend in margin-type lending over the past eight months.

The figures show a notable rise from Rs 140.70 billion recorded at the end of the last fiscal year, marking an increase of more than Rs 15.57 billion, equivalent to an 11.1 percent growth during the review period.

Large Borrowers Capture Over 70% of Share Loans

A deeper breakdown of the data reveals a significant concentration of credit among high-value investors.

Loans exceeding Rs 10 million (Rs 1 crore) alone accounted for Rs 109.64 billion, representing over 70 percent of total margin lending. Within this category, lending expanded by Rs 10.71 billion in just eight months.

This trend indicates that:

Institutional investors and high-net-worth individuals are aggressively leveraging bank credit
Large players continue to drive liquidity and momentum in the stock market
Market participation is increasingly skewed toward capital-heavy investors

The data suggests that even amid market volatility, big investors are maintaining or expanding their positions through borrowed funds—signaling sustained confidence or strategic accumulation.

Retail Investors Remain Marginal

In contrast, access to margin lending among small investors remains limited.

Loans below Rs 2.5 million (Rs 25 lakh) stood at just Rs 8.75 billion, with a modest growth of 7.1 percent over the eight-month period.

This comparatively low share highlights:

Structural barriers in credit access for retail investors
Risk-averse lending practices by banks toward smaller borrowers
A widening gap between institutional and individual participation in leveraged equity investment
Market Implications: Rising Leverage, Concentrated Risk

The sharp rise in margin lending—particularly among large borrowers—has several implications for Nepal’s capital market:

1. Increased Market Liquidity

Higher margin lending boosts trading volumes and supports price movements, especially in bullish phases.

2. Elevated Systemic Risk

Concentration of leveraged positions among large investors could amplify market corrections if sentiment reverses.

3. Potential Volatility Trigger

In the event of a market downturn, forced deleveraging (margin calls) could accelerate declines.

Regulatory Watch: Balancing Growth and Stability

The expansion of margin lending comes at a time when Nepal’s broader financial system remains stable, with moderate credit growth and ample liquidity.

However, the central bank is likely to maintain close oversight, particularly given:

Rising exposure of banks to stock market-linked assets
Concentration risk among a small group of borrowers
Global uncertainties, including external shocks affecting investor sentiment

The continued rise in share-backed lending signals growing financial deepening in Nepal’s capital market. However, the dominance of large borrowers raises questions about inclusivity, risk distribution, and long-term market stability.

With margin lending crossing Rs 156 billion, the evolving dynamics between institutional capital, retail participation, and regulatory oversight will remain central to Nepal’s financial sector trajectory.