Surge in Share Mortgage Loans: A Rising Trend in Nepal's Financial Landscape
The utilization of share mortgage loans for share purchases is steadily on the rise, with more than Rs 3 Arba pledged in the month of Poush alone, according to data from Nepal Rastra Bank. Until mid-Ashadh in the previous fiscal year, banks and financial institutions had disbursed Rs 76.30 Arba in share mortgage loans. Presently, the total disbursement has reached Rs 84.29 Arba.
The surge in share mortgage loans commenced after the relaxation of policies by Nepal Rastra Bank. In the current fiscal year's monetary policy, the central bank initially set the risk burden for share mortgage loans up to Rs 50 lakh at 100 percent. Subsequently, during the first-quarter review, the risk burden was reduced for above Rs 50 lakh from earlier 150% to 125%, and the limit was increased from earlier 12 crore to 15 and 20 crore for individual and institutions, leading to a notable increase in substantial loans.
The data indicates a significant growth in loans exceeding Rs 1 crore by 14%, while loans ranging between Rs 50 lakh and Rs 1 crore have increased by 8%, underscoring the trend of larger loans gaining prominence. Investors' propensity to take on more significant loans is evident, with loans exceeding Rs 1 crore reaching Rs 51.30 Arba from Rs 44.71 Arba as of Ashadh. Loans falling within the range of Rs 5 lakh to Rs 50 lakh have seen a 2% increase, and loans below Rs 25 lakh have also witnessed a 1.9% rise.
Bankers attribute the heightened demand for loans in banks to the flexible policies adopted by Nepal Rastra Bank on share mortgage loans. The current limits for margin loans have been raised to Rs 20 crore for institutional investors and Rs 15 crore for individual investors.
Additionally, the risk weight of share mortgage loans has been reduced to 125%, contributing to the overall increase in share mortgage loans. With the stock market gradually gaining momentum, investors are leveraging loans to invest, encouraged by reduced interest rates and the positive trajectory of the stock market. Bankers observe a recent surge in demand for share mortgage loans.
