Nepal Rastra Bank (NRB) has directed banks and financial institutions to reduce the limit of renewal of margin lending -- lending against collateral of shares -- by 50 per cent.
NRB has taken the move to control margin lending in response to reducing share prices.
According to NRB directives, banks and financial institutions can renew loan of those borrowers who have repaid 50 per cent loan.
They should have paid total interest of their loan, said NRB. This directive will further affect the Nepali capital market. Nepal Stock Exchange (Nepse) is in a bearish trend since September.
Furthermore, NRB has fixed limits for investment in shares and debentures for class `B' and `C' banks and financial institutions. Class `B' companies can invest 20 per cent of paid up capital per company whereas the limit is 10 per cent for class `C' companies.
Meanwhile, NRB has prohibited financial institutions' boards of directors from using the official letterpads of the institutions.
Chairpersons and directors cannot use official letterpads for correspondence, NRB said. It has also prohibited non-executive chairpersons from working as chief executive officers.
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