Nepal Rastra Bank (NRB) has introduced three key policy changes expected to bring positive momentum to Nepal’s stock market. The central bank made these amendments through its revised Unified Directive issued on Wednesday.
1. Limit on Share-Backed Loans Removed
NRB has removed the Rs. 25 crore cap previously set for share-backed loans.
Earlier, a single client could obtain a maximum of Rs. 25 crore in share mortgage loans from all banks and financial institutions combined. The new circular completely eliminates this ceiling, giving investors greater flexibility to use their shareholdings as collateral.
The decision aligns with recommendations from the Capital Market Reform Task Force, formed by the Ministry of Finance, which had advised the removal of this lending limit to stimulate market liquidity and investor participation.
With this change, investors can now borrow as much as their collateral value allows, without being restricted by the previous central limit.
2. Lock-In Period for BFIs’ Share Investments Reduced to 6 Months
In another investor-friendly move, NRB has reduced the mandatory holding period for shares purchased by banks and financial institutions (BFIs) from one year to six months.
Previously, BFIs were required to hold onto shares of listed companies for at least one year before selling. Under the revised directive, they can now sell those shares after six months.
According to the new provision, BFIs may invest in shares and debentures of publicly listed companies for a minimum of six months. However, they are still prohibited from engaging in short-term speculative trading.
The directive also clarifies that if BFIs invest in shares or debentures of unlisted companies, such investments must be adjusted within three years if the securities remain unlisted.
3. 20% Sale Restriction on Investment Portfolio Removed
The central bank has also removed the restriction that allowed BFIs to sell only up to 20% of their paid-up capital worth of investments in a fiscal year.
Previously, banks and financial institutions were permitted to sell investments equal to a maximum of 20% of their core capital within one financial year. The removal of this rule provides greater flexibility for BFIs in managing and reshuffling their investment portfolios.
This policy change is expected to improve liquidity and encourage institutional participation in the secondary market.
Overall Market Outlook
Analysts suggest that these three decisions — lifting the share loan limit, reducing the lock-in period, and removing the 20% sale restriction — will collectively boost market liquidity, investor confidence, and trading activity in Nepal’s stock market.
These regulatory adjustments signal a more market-friendly stance from Nepal Rastra Bank, aligning with broader government efforts to revitalize the capital market and attract more institutional participation.