KATHMANDU, March 25: The banks and financial institutions (BFIs) in the country invested an additional Rs 26.95 billion in margin loans in the first seven months of the current fiscal year as they showed flexibility to invest in the sector after the lockdown and pandemic hit the country.
Margin lending is a type of loan that the BFIs issue to the borrowers against stocks in security. According to Nepal Rastra Bank, the BFIs invested a total of Rs 77.35 billion in margin loan as of mid-February this year, which was 70 percent more than the loan amount issued under this heading in the same period last year.
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According to the stockbrokers, the BFIs have been lenient in providing loans to the borrowers by accepting shares in collateral citing the soaring index of the stock exchange market amid high liquidity existing in the banking sector.
The Nepal Stock Exchange index that hovered around 1,400 points last July has now jumped to more than 2,500 points in the first seven month of the current fiscal year. “As the banks also struggled to find suitable sectors to invest, they have injected such a high amount in the highly lucrative stock market,” a stockbroker said.
