An NRB official informed myrepublica.com that the central bank is planning to change its earlier policy that allows lending banks to renew margin lending loan against the payment of at least 50 percent of the outstanding liability to 25 percent. [break]
As per the new policy that will be finalized within few days, margin borrowers interested to renew their loans are also required to clear all outstanding interest liabilities, along with the 25 percent cash payment of outstanding principal, said an official.
The existing policy allows banks to extend loans under margin lending only for one year and borrowers will have to pay back at least 50 percent of the outstanding loan liability to renew the loans after its expiry.
Similarly, the central bank is also relaxing the margin call policy of the lending institutions. As per the existing policy, banks are allowed to extend up to 50 percent of the average market price of last 180 days or latest market price, whichever is low.
The lending banks will have to issue margin call to borrowers when market price of shares pledged as collaterals declines, asking the borrowers to pay differences so as to limit the outstanding loan amount up to 50 percent of the market price of the shares.
However, as per the new policy under consideration, the lending banks will not issue margin calls even if market prices of the collaterals-pledged shares declines up to 10 percent of the 50 percent set by the central bank.
Concerned NRB officials said the proposed changes have already been endorsed by the policy committee of the central bank and they would be sent to board of directors of the NRB for the final approval.
prem@myrepublica.com
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