Kathmandu, April 27: Margin lending—long awaited in Nepal’s capital market—is finally nearing full implementation. This system allows investors to borrow from brokers using their existing shares as collateral to buy more stocks. Although repeatedly delayed due to funding and technical issues, recent developments show strong progress.
Brokers, who have limited capital, are now securing wholesale loans from commercial banks and lending to investors at the retail level. Initially hesitant, banks have begun approving large credit limits specifically for margin lending. For instance, Naasa Securities has already mobilized Rs 300 million from Nepal Investment Mega Bank (NIMB), while Kohinoor Investment & Securities has secured a Rs 750 million credit line.
Banks are also demanding daily reporting on how loans are distributed to investors, preferably through an online system, to ensure transparency and risk monitoring. However, technical challenges—such as setting up dual-account systems for investors and automated reporting—have delayed the full rollout.
According to the NEPSE system developer, final technical preparations are underway, with testing expected soon. Once completed, brokers with secured funding are ready to launch services immediately.
Despite earlier concerns about regulatory limits—particularly the central bank’s 40% cap on share-backed loans—recent approvals suggest banks are willing to operate within these constraints. Lending through brokers offers “double-layer” security: share collateral and broker guarantees.
Interest in margin lending is growing, with several new brokers applying for licenses. Since brokers can borrow up to 4.5 times their net worth, this mechanism is expected to inject significant liquidity into the market.
Once operational, margin lending will simplify access to credit, boost trading activity, and enhance investor purchasing power—marking a major step forward for Nepal’s stock market. #Nepal #stock
