Nepal Rastra Bank (NRB) has implemented three major policy changes to positively impact the stock market, including removing loan and investment limits and shortening mandatory holding periods.
Nepal Rastra Bank (NRB) has taken three significant decisions aimed at boosting the share market. The central bank has amended its integrated directive to provide greater flexibility for investors and financial institutions.
1. Removal of NPR 25 Crore Limit on Share-Backed Loans
NRB has lifted the individual limit on share-backed loans. Previously, a single investor could borrow a maximum of NPR 25 crore from all banks and financial institutions combined. On Wednesday, NRB issued a new circular removing this cap. The decision follows recommendations from the Capital Market Reform Taskforce established by the Ministry of Finance. Investors can now pledge shares to banks or financial institutions and borrow as much as required.
2. Shortened Mandatory Holding Period for Banks and Financial Institutions
NRB has eased rules on share transactions by banks and financial institutions. The mandatory one-year holding period for purchased shares has been reduced to six months. Under the amended directive, banks and financial institutions must now invest in shares or debentures of publicly listed companies for at least six months. The revised directive specifies that:
Investments in listed shares or debentures must exceed six months. Short-term speculative investments are prohibited.
Investments in unlisted shares or debentures must be adjusted through a Reserve Fund if the security is not listed within three years. Funds in this reserve cannot be used until the shares or debentures are listed.
3. Removal of 20% Primary Capital Investment Sale Limit
NRB has removed the restriction limiting banks and financial institutions to selling only 20% of primary capital investments in a financial year. The circular applies to banks and financial institutions with “A,” “B,” and “C” class licenses. Previously, only investments held for more than one year could be sold up to 20% of primary capital in a fiscal year. This restriction has now been lifted, giving institutions more flexibility in managing their investments.
These three decisions are expected to enhance liquidity, increase investor confidence, and stimulate trading activity in Nepal’s stock market.
This article was originally published on https://bajarkochirfar.com. Translated with the help of AI and reviewed by our editorial team.
