Nepal Rastra Bank Eases Margin Lending Rules, Allows Up to 80% Loan Against Strong Shares

Nepal Rastra Bank (NRB) has revised its margin lending policy, allowing banks and financial institutions to provide higher loans against the shares of financially strong listed companies. The new provision is expected to improve access to credit for investors while encouraging investment in fundamentally sound companies.

Under the revised framework, borrowers can now obtain loans of up to 80 percent of the value of eligible shares, compared to the previous maximum limit of 70 percent that applied uniformly to all listed companies. The additional 10 percentage points, however, will only be available for shares of companies that meet strict financial and governance standards.

According to NRB, banks must continue to calculate the value of pledged shares using the lower of two figures: the average closing price over the last 180 trading days published by the Nepal Stock Exchange (NEPSE) or the prevailing market price. The standard lending cap remains 70 percent, while institutions may extend it to 80 percent only after conducting a detailed assessment of the company’s financial strength.

To qualify for the higher lending ratio, banks are required to develop a transparent product paper outlining their evaluation methodology. The assessment must consider factors such as paid-up capital, the company’s listing history, consistent profitability, dividend payment record, credit rating, compliance with regulatory requirements, and the timely conduct of annual general meetings.

NRB has also introduced safeguards to limit excessive risk. Once a margin loan has been issued, banks will not be allowed to revalue the pledged shares to increase the borrower’s credit limit or extend additional loans based on a subsequent rise in share prices. The regulator believes this measure will help reduce speculative lending and strengthen financial stability.

Market analysts say the revised policy could improve liquidity in Nepal’s capital market by rewarding investment in fundamentally strong companies rather than encouraging speculation. Investors are also expected to focus more on corporate performance, governance, and financial transparency, as these factors will now directly influence borrowing capacity.

The central bank’s latest move reflects its broader effort to balance credit expansion with prudent risk management while supporting the long-term development of Nepal’s capital market.