Margin Loans Surge as Investors Return to Nepal's Stock Market

Share-backed loans, commonly known as margin loans, have recorded significant growth in Nepal as improving stock market activity, abundant banking liquidity, and historically low interest rates continue to attract investors. According to the Nepal Rastra Bank's financial report for the first 11 months of the current fiscal year, margin lending increased by 15.76 percent by mid-June. During the review period, banks and financial institutions disbursed an additional Rs 22.17 billion in margin loans, taking the total outstanding share-backed loans to Rs 162.87 billion, up from around Rs 140.70 billion at the beginning of the fiscal year. The data show that large investors have driven most of the growth, with loans exceeding Rs 10 million rising by 18.04 percent to Rs 116.77 billion. Loans ranging from Rs 5 million to Rs 10 million increased by 15.51 percent to Rs 18.51 billion, while loans between Rs 2.5 million and Rs 5 million rose 9 percent to Rs 19.14 billion. In contrast, margin loans below Rs 2.5 million grew by only 3.13 percent, reaching Rs 8.43 billion. Analysts say the sharp rise in margin lending, despite weak demand for productive sector loans, reflects growing investor confidence, supported by the average lending rate falling to a historic low of 6.64 percent and regulatory easing by the central bank on share-backed financing.