Margin lending will not be lifted

Nepal Rastra Bank (NRB) rejected investor demand to lift margin saying that the interests of depositors cannot be ignored.
"NRB is more concerned for safeguarding depositors than promoting investment," said NRB acting governor Krishna Bahadur Manandhar at an interaction here today to find solutions to the capital market's problems.

The capital market has fallen to a two-year low at 515.24 points and investors have lost millions of rupees.

Though the capital market is Rs 600 billion these days transaction -- both in amount and unit shares -- have decreased.

Predicting hope, Nepal Bankers' Association (NBA) president Sashin Joshi said, "Nepali capital market is not in crisis but it needs some boost up measures."

He added that NRB should do a rethink on margin lending as banks are capable of analysing risk and benefits.

NRB took strict measures about margin lending (loan against collateral of shares) when the stock market was bullish last year. As per NRB directives, banks and financial institutions can renew loan up to 50 per cent if the lender has a good track record.

Investors have presented a 22point reform pact including increase in margin from 50 to 70 per cent, end to promoter shares in ordinary share market and appointment of new brokers. NRB has decided to issue 19 per cent of promoter shares of financial institution to public.

"Without margin lending, the capital market can't boom," said Nirmal Pradhan, an investor. According to Pradhan, increasing lending limit and stoppage of issuing promoter shares to people can help the growth of the capital market in crisis times.

Tanka Paneru, chairman of Nepse, also supported investors in stoppage of converting promoters' share to ordinary shares.
"It should be stopped for some months to make the capital market work properly," he said while assuring that Nepse would be back on track in the next six months after the introduction of central deposit system (CDS).

Finance Minister Surendra Pandey assured investors that the Ministry of Finance will solve their problems soon. "We can't compromise on the issue of safety of depositors," he said, "MoF will look for alternate procedures for margin lending."