Kathmandu. Nepal’s economy has been slowing down in recent years. Banks and financial institutions have started looking for new investment areas as the industrial and commercial sectors have not been able to demand the expected loans. In the meantime, their attention has been focused on the stock market.
In the last few months, banks have been providing share loans at cheaper interest rates. Moreover, due to the flexibility in monetary policy, the expansion of share mortgage loans has increased rapidly.
According to nepal rastra bank data, out of the total deposits of Rs 7,303.53 billion collected by banks and financial institutions in the last fiscal year, rs 5,581.20 billion has been disbursed. Out of this, Rs 140.70 billion has been disbursed for share mortgage loans. This amount has increased by more than Rs 50 billion compared to the previous year.
Commercial banks, in particular, have been at the forefront of this sector. Last year, they disbursed rs 116.80 billion in share mortgage loans. Which is about 46 billion more than the previous year. Development banks have invested Rs 19.54 billion and finance companies rs 4.35 billion.
In recent times, it seems that it has become easier for investors to take loans as interest rates have been limited to single digits. Krishi Bikas Bank is offering share loans from minimum 5.84 to maximum 8.34 percent, Everest Bank from 6.27 to 8.27 percent, Rastriya Banijya Bank from 6.3 to 6.8 percent, Siddhartha Bank from 6.34 to 9.59 percent and Citizens Bank from 6.35 to 9.35 percent. Apart from this, most of the banks have been maintaining low interest rates on share loans.
The flexibility of monetary policy and its impact on markets
Last year, the Rastra Bank had taken steps to encourage the stock market through monetary policy. The risk weight of share mortgage loan has been reduced to 100 percent. The loan limit for individual investors has been increased to Rs 250 million while there is no limit for institutional investors. Investors say this has made it easier to expand more credit in the stock market.
With the expansion of credit, there has been an increase in share trading. The government collected Rs 16.54 billion in capital gains tax in the last fiscal year alone. The NEPSE index, which had dropped to 1800 points last year, has increased to 3000 points in July 2081.
However, according to investors and experts, the stock market has not yet increased. Experts say that although it is expected to reach the 3000 point, now this possibility is disappearing for the time being. “Now during the festive season, the market will fall further and then there will be pressure for the second quarter,” said a source. ’
The expansion of share mortgage loans has increased the reach of investors in the market. However, the risk has also increased.
If investors rely heavily on the stock market by taking loans, then the credit security of banks may also be questioned when the market fluctuates. Despite this, banks have adopted a strategy to reduce passive liquidity and invest in profitable sectors.
At present, new IPOs are coming in the stock market. Easing interest rates, monetary policy flexibility and aggressive lending by banks have created optimism in the market. However, regulators and investors need to exercise caution to make the expansion sustainable in the long run. Otherwise, experts have pointed out that this trend, which focuses only on short-term benefits, can be a challenge for the economy in the future.
