Risk weight on margin loans reduced to 100%

KATHMANDU: The Nepal Rastra Bank (NRB) has reduced the risk weight for margin lending from 125% to 100%.

In the third-quarter review of the Monetary Policy for Fiscal Year 2024/25 released on Sunday, the central bank has maintained the policy rate at 5%, the deposit collection rate at 3% and the bank rate at 6.5%. The mandatory cash reserve and statutory liquidity ratios also remain unchanged. However, banks are now required to maintain 90% of the cash reserve daily.

These are the first major policy measures taken by the central bank since the new governor, Dr Biswo Poudel, assumed office.

“To improve the investment environment, the Nepal Rastra Bank Foreign Investment and Foreign Loan Management Regulations will be issued, incorporating the latest amendments to the Foreign Exchange (Regulation) Act and the Foreign Investment and Technology Transfer Act, the review states.

Additionally, a new procedure for certifying cheque dishonor cases will be introduced, it added.

According to the NRB, banks and financial institutions facilitated an additional loan flow of Rs 367 billion over the first nine months of 2024/25. “Of this, 11.4% (Rs 236.86 billion) was directed toward construction, 9.6% (Rs 78.02 billion) to the industrial production sector, 8.3% (Rs 34.33 billion) to the consumer sector, and 5.2% (Rs 51.50 billion) to the wholesale and retail trade sector,” the central bank said. “The incremental growth in loan disbursement has contributed to the expansion of economic activity.”
Trust receipt loans for imports increased by 60.4% during the period, while demand and other working capital loans grew by 17%. Margin loans for share trading also rose significantly by 37.8%, it added.

NRB expects loan disbursement to improve further in the coming days due to low interest rates.