Sebon raises margin loan limit to 70 percent from 50 percent

May 03, 2022

MY Republica, May 3, 2022

KATHMANDU, Share investors can now get up to 70 percent margin loan from stockbrokers, with the Securities Board of Nepal (Sebon) enforcing a revised guideline on margin transactions last Wednesday.

Earlier, the threshold of margin lending was 50 percent. In the revised rule, stockbrokers take just 30 percent as the margin on the valuation of shares held by the investors.

Since February 2019, Sebon has been allowing brokerage firms to provide financing service for their clients to purchase stocks in the secondary market. The sector’s regulator has also revised the share valuation criteria while issuing the margin loan.

According to Sebon, brokerage firms can now consider the market prices of shares average of the past 120 days or the latest market price, whichever is low, to issue loans under the heading. Earlier, the threshold had been maintained at the shares valuation averaged of the past 180 days.

Likewise, the investors must have to maintain a margin amount of at least 20 percent of the shares valuation on a daily basis. If the margin amount drops below 15 percent, stockbrokers themselves can sell the shares by giving a four-day notice to the investors concerned.     

The brokerage firms are free to set their interest rates on the margin loan. However, they have to pre-inform Nepal Stock Exchange and Sebon about the interest rates they are charging their clients. 



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