Banking News – Nepal Rastra Bank (NRB) has introduced a more flexible framework for margin loans backed by listed shares, allowing banks and financial institutions (BFIs) to determine lending limits based on the financial strength of listed companies.

According to a new NRB circular, the valuation of shares pledged as collateral for margin loans must be based on the lower of either the average closing price over the previous 180 trading days published by the Nepal Stock Exchange (NEPSE) or the prevailing market price. Banks will be permitted to lend up to 70 percent of that valuation.

NRB has also directed banks and financial institutions to adopt a company strength assessment framework when issuing share-backed loans. Under the new provision, institutions may increase the loan-to-value (LTV) ratio by up to an additional 10 percentage points for shares of companies that receive higher strength ratings.

The assessment framework must consider factors such as paid-up capital, the minimum period of stock exchange listing, profitability and dividend payment history, credit ratings, compliance with regulatory requirements, and whether the company has conducted its Annual General Meetings (AGMs) on time.

Banks are also required to publish their margin lending product framework on their official websites to ensure greater transparency.

The central bank has further clarified that once a margin loan has been disbursed, banks will not be allowed to revalue the pledged shares to increase the borrower’s loan limit or provide additional credit based on subsequent increases in share prices.