Nepal Rastra Bank Publishes Directive for Banks and Financial Institutions for FY 2077/78; Good news for share investors

Nepal Rastra Bank (NRB) published a directive yesterday related to monetary policy with provisions that banks and financial institutions must follow.

NRB has also made a new rule regarding margin loans. Investors can take the maximum amount of margin loan equal to 70% of the value of shares they have. The value of their shares will be calculated from the least price: either from the LTP or the average of the last 120 days' prices.

However, if investors do not specify the purpose of the loan they take against their shares, only upto Rs. 50 lakhs can be taken as margin loan.

Note that this is not a problem for those who want to reinvest their margin loan in the stock market itself. The Rs. 50 lakh limit is only for those who want to use the amount for miscellaneous and unspecified purposes. Any margin loan taken with unspecified purposes should be brought within the limit by the end of Ashad, 2079.Furthermore, Nepal Rastra Bank is going to force the merger of commercial banks within the current fiscal year. Dev Kumar Dhakal, executive director of the NRB regulatory department, said that the commercial banks that do not participate in the encouraged merger will be forced to merge.

Also, as per the new directive, banks and financial institutions are not allowed to charge customers when they deposit money in their accounts through remittances. Nepal Rastra Bank (NRB) on Monday issued the directive to remove service charges charged by banks and financial institutions until now.

As per the instructions of the central bank, banks and financial institutions cannot charge their customers while opening their account, issuing checks, paying the stack of cheque, certifying the balance, operating the account, closing the account, giving statements, depositing remittances in the account, providing ABBS and other services.

Nepal Rastra Bank has also directed banks to invest 40 percent of the loan in the priority sectors, namely agriculture, home and small enterprises/business, energy, and tourism sector by 2081.

Meanwhile, BFI's with a distributable profit higher than 5% of their paid-up capital will be allowed to distribute 30% of dividends as cash dividend in maximum. However, companies that satisfy this requirement can't distribute cash dividend that amounts to a larger sum than their Deposit Weighted Average maintained in Ashadh 2077.