NRB Lifts Cap on Margin Lending

The Nepal Rastra Bank (NRB) has removed the lending ceiling on margin loans, paving the way for further expansion of this form of credit in the stock market.

The central bank’s latest move is expected to accelerate the growth of margin lending. Previously, NRB had categorized margin loans as risky and non-productive credit, discouraging banks from excessive exposure by setting strict limits.

On Wednesday, NRB lifted the maximum single-borrower limit of Rs 250 million on margin loans. According to the central bank, easing restrictions in recent years has already contributed to significant growth in this segment.

During fiscal year 2024/25, when overall lending by banks and financial institutions rose 8.4 percent, margin lending recorded the highest growth. Margin-type loans expanded by 56.2 percent. As of mid-July 2025, commercial banks alone had disbursed Rs 87 billion in margin loans, up from Rs 47.88 billion a year earlier—an increase of 81.82 percent.

The growth trend has continued in the current fiscal year, with margin lending increasing 2.7 percent in mid-July compared to mid-June, NRB data show.

Under NRB directives, banks can lend up to 40 percent of their core capital as margin loans. Commercial banks, which collectively hold around Rs 600 billion in core capital, are thus allowed to provide up to Rs 240 billion in margin lending. Based on this, banks still have the capacity to extend an additional Rs 152 billion in credit.

Currently, only six banks have margin lending exceeding 30 percent of core capital, while that of five banks remain below 10 percent. Standard Chartered Bank Nepal has no margin lending at present.

Investor Chhotelal Rauniyar said the NRB’s move would improve liquidity in the stock market and stimulate growth. “Setting limits in a market that was already expanding was counterproductive, and we had opposed it,” he said. “With better liquidity and lower interest rates, removing the cap will have a positive impact on the market.”

In fiscal year 2021/22, NRB had imposed limits of Rs 40 million per borrower from a single financial institution and Rs 120 million across the financial system for margin lending. NRB gradually eased these restrictions before completely removing the ceiling this week.

The move follows the government’s decision to implement recommendations from the Capital Market Reform Task Force, prompting NRB to fully remove the cap on margin lending on Tuesday. Until recently, the central bank had maintained a Rs 250 million per-borrower ceiling for margin loans.