Find out the flexibility of commercial banks in providing margin loan; Citizen Bank in the lead

• Dheerusha Tiwari

With NRB’s direction to commercial banks to focus their credit lending towards highly productive sectors, banks are forced to limit their lending in the less productive sectors. One of the sectors that have been affected from this specific decision is the share market. This article emphasizes on margin lending, loan portfolio and deposit of commercial banks as of second quarter of FY 2074/75. Margin loans: Margin loan is type of loan where banks provide loan to investors in order to buy the stocks of the listed companies. As of second quarter of FY 2074/75, the average amount of margin loan that commercial banks in Nepal provide to investors is around Rs 1.36 arba. Citizens Bank international Limited (CZBIL) has the highest amount of margin loan facilitating investors with fund for investors as per second quarter of FY 2074/75. The margin loan of CZBIL stands Rs 291.73 crore. Furthermore, NICA has a margin loan portfolio of Rs 230.56 crore followed by NABIL with margin loan worth Rs 223.18 crore.  Banks such as Agriculture Development Bank Limited (ADBL), Nepal SBI Limited (SBI) and Standard Chartered Bank Limited (SCB) have restrained themselves from providing margin loan as of the second quarter financial reports. The bank with the least margin loan is Nepal Bangladesh Bank (NBB) that amounts to Rs 26 crore. Similarly, banks such as Prabhu Bank Limited (PRVU), Sunrise Bank Limited (SRBL), Prime Commercial bank Limited (PCBL) and Global IME Bank (GBIME) have margin loan that ranges between 200 crores to 230 crores. The provided bar diagram provides a better picture of margin loans among commercial banks.

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Margin loans out of total loans: Several commercial banks have their own sectors of priority for the disbursement of credit. For instance, some banks might prefer real estate loan while others might prefer corporate loans. Banks preferring real estate loan will give better facilities to real estate loan clients. In the similar way, the article intends to identify out of total loans floated by the commercial bank, what percentage of loan compromises of margin loan. This is further justified by the bar diagram below: CZBIL compromises of 5.47% of the total loan as margin loans. This is the highest percentage of contribution of margin loans among the commercial banks. CZBIL is further followed by Sunrise Bank Limited (SRBL). The mentioned bank constitutes of 3.76% of total loans as margin loan. Finally, Prime Commercial bank Limited has 3.31% as margin loans out of total loans while Prabhu Bank Limited (PRVU) has around 3.10% margin loans out of total loans floated. NICA that has second highest amount of margin loan among commercial banks concentrates 2.26% of the total loans towards margin loans. On the other hand, NABIL; seen in third position in the margin loan among commercial banks contributes 2.21% as margin loans out of the total amount of loans. The bank that has emphasized the least towards the margin loans is SANIMA Bank (0.46%), Nepal Investment Bank (NIB) (0.59%), Machhapuchre Bank Limited (MBL) (0.64%) and Nepal Bangladesh Bank (NBB) (0.64%).

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Total loans and advances:          As of the second quarter of FY 2074/75, Nepal investment Bank (NIB) is leading in terms of loan and advances among the commercial i.e. loans worth Rs 113.67 arba. Rastra Banijya Bank (RBB) and NIC Asia (NICA) occupy the second and third position in terms of loans and advances worth Rs 110.65 arba and Rs 102.20 arba respectively. The bank with the least loan and advances is Civil Bank Limited (i.e. Rs 33.55 arba).

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Total deposit collection: The recent increment in the interest rate of fixed deposit of commercial banks has come into notice to the general public. It is important for commercial banks to expand both the loan as well as deposit portfolio. The bank that has the highest deposit collection in the recent quarter is Rastriya Banijya Bank (RBB) with Rs 149.10 arba, followed by Nepal investment Bank limited (NIB) with Rs 129.85 arba. Finally, NABIL Bank is in the third position in terms of deposit collection with a collection worth Rs 121.29 arba. Civil Bank Limited (CBL) has the least deposit collection worth Rs 37.01 arba followed by Nepal Bangladesh bank Limited (NBB) with Rs 41.89 arba.

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Provided the analysis, what views do you have on these commercial banks? With less concentration of these banks on margin loan, to what extent would it affect you as an investor? Please provide your views.