KATHMANDU: Nepal's banks and financial institutions (BFIs) faced challenges in boosting loans to the real estate sector, but they experienced a notable increase in loans against shares during the first nine months of the current fiscal year. According to data from Nepal Rastra Bank (NRB), margin loans issued by BFIs surged by 12.9 percent from mid-July 2023 to mid-April 2024. In contrast, loans to the real estate sector saw only a 4.3 percent increase during the same period.
By mid-April in the current fiscal year, BFIs had disbursed margin loans totaling Rs 86.18 billion to investors in the share market. Over the nine-month review period, an additional Rs 9.88 billion was invested under this category. Overall, BFIs extended Rs 208 billion in additional loans to the private sector during this time, with share loans accounting for 4.75 percent of the total loans issued.
Breaking down the margin loan disbursements, BFIs allocated Rs 7.89 billion in margin loans for amounts exceeding Rs 10 million, while smaller amounts between Rs 5 million and Rs 1 billion received Rs 234.6 million in margin loans. Loans in the range of Rs 2.5-Rs 5 million received Rs 1.40 billion, and those up to Rs 2.5 million received Rs 340 million in margin loans. NRB data reveals a 17.7 percent increase in margin lending for loans exceeding Rs 10 million and an 11 percent growth for loans in the Rs 2.5-Rs 5 million category.
While BFIs injected significant funds into margin loans, this influx did not enhance investor confidence in Nepal's secondary market. Despite the increase in margin lending, the Nepal Stock Exchange reported a decline in the share market index from 2,097.10 points in mid-July 2023 to 2,006.53 points as of mid-April 2024.
