Kathmandu, 26 November 2025 — The Nepal Securities Board has prepared an early draft of the new margin trading rules for 2082 B.S. The board has asked brokers, market operators, and investors to share feedback before the rules are finalized.
Nepal previously had a margin trading directive issued in 2074 B.S. (2017 A.D.). That document has now been canceled, and a fresh framework is being designed to improve how margin loans are provided in the securities market.
Background of Margin Trading in Nepal
More than 36 companies obtained margin trading licenses in 2075 B.S. (2018). However, only one company started giving margin loans, and even that service did not continue long. With very limited use of the earlier system, regulators believe the new guidelines are needed to make margin trading practical and safer.
Who Can Provide Margin Facility?
The draft states that only broker companies approved by the Nepal Securities Board can offer margin loans if they meet basic conditions:
- Minimum paid-up capital: NPR 20 crore
- Must have clearing membership, deposit membership, and must follow standards set by the securities market operator
- Companies that already received a margin trading license from NEPSE in 2075 B.S. do not need a new license
- But they must submit documents again to prove they meet the new standards
Margin Loan Limits
The draft proposes strict loan caps to manage risk:
- Brokers can provide margin loans worth up to 5 times their net worth
- A single client and their immediate family cannot receive loans exceeding 20% of the broker’s net worth
- A broker cannot lend more than 20% of its net worth to one borrower or their household members
- Brokers must focus on loan diversification instead of lending a large amount to only a few clients
For example, if a broker company’s net worth is NPR 4 crore, the maximum margin it can extend is NPR 20 crore (5x). But even in that case, one client and their family would only be allowed a margin loan up to NPR 80 lakh (20% of 4 crore).
Which Shares Are Eligible for Margin Loans?
Not all listed shares qualify for margin borrowings. The draft offers a set of clear criteria:
A company’s shares can be used for margin trading only if:
- It has at least 50 lakh publicly listed shares
- Its net worth is equal to or higher than paid-up capital
- It has distributed dividends in 2 out of the past 3 years
- The share was listed after the IPO
- The company has completed at least 2 years of listing after the IPO
This means new listings that have not completed two years, or companies without dividend history, will not qualify for margin-backed trading.
Initial and Maintenance Margin Requirements
Brokers must collect margin from investors before providing loans. The proposed rates depend on NEPSE classification:
- For ‘A’ category shares: Investor must deposit 30% margin
- For ‘B’ category shares: Investor must deposit 40% margin
- For eligible shares not in A or B:** Investor must provide 35% margin
The share value to calculate margin must be the lower of:
- The 180-day average share price, or
- The current market price
Although share prices may rise during the margin holding period, brokers cannot offer extra loans based on price growth.
Margin Call and Collateral Rules
If the share price drops and the investor cannot maintain the required margin level, the broker must issue a margin call. Investors must then deposit additional money or shares to maintain their loan coverage.
Rules for collateral shares under margin call:
- Broker can accept A or B category shares as collateral
- Collateral valuation will use the lower price of 180-day average or market price
- Only 60% of that share value will be counted for collateral calculation
- If margin conditions are restored, collateral shares must be released if the investor requests
Clearing, Accounts, and Record-Keeping
The draft also includes clearing and documentation standards:
- Investors must open a separate margin trading loan account
- Investors must open a separate margin beneficiary (hitgrahi) account for margin shares
- The broker must open a margin clearing beneficiary account at the central depository for settlements
- Brokerage companies must record loan amounts and shares in separate logs
- All share values must be reviewed daily in market-to-market (MTM) format
Regulatory Expectations
Regulators want to ensure the new rules do three main things:
- Allow fair access to margin loans.
- Reduce loan default and market risk.
- Create a working system that encourages responsible borrowing and lending.