The illusion of margin lending as a financial panacea

NRB’s latest directives have eased margin lending rules by focusing on collateral over the debtor.

Amid investor grievances that the Nepal Stock Exchange (NEPSE) has struggled to take off under the Balendra Shah administration, the latest unified directives from Nepal Rastra Bank (NRB) have eased margin lending rules by wrongly focusing on collateral rather than the debtor. As bulls saluted a Rastriya Swatantra Party (RSP) landslide victory in the March 5 polls, the index tagged 2,970 on March 25, having bottomed at 2,469 on October 26 last year; Prime Minister Shah assumed office on March 27. The NEPSE closed Tuesday at 2,697, rallying from a low of 2,547 on July 14; the unified directives were published on July 15. So far, so good. The change in margin rules has benefited the bulls thus far.