Loans taken by pledging shares have jumped sharply in Nepal. According to Nepal Rastra Bank’s latest financial report for FY 2081/82, these loans rose by nearly NPR 50 billion in just one year. The total amount reached NPR 140.7 billion, up 56% from the previous year.
This rapid rise shows how closely the stock market is linked to the lending system.
A share-backed loan, often called a margin loan, lets investors borrow money from banks by using their shares as collateral. Usually, the bank will lend up to 70% of the lower value between the share’s market price and its 180-day average price. Most loans are short-term, meant to be paid back within a year.
Most of the growth came from large loans. Loans above NPR 10 million rose by nearly 77%, hitting NPR 98.92 billion. Mid-range loans grew too, but at a slower pace. This shows that more money is flowing to bigger borrowers, which could be risky if the market turns downward.
Regulations say a company’s shares can be pledged only if it hasn’t had losses in the past three years, holds regular AGMs, and is listed on the stock exchange. Founders can only pledge up to half of their own shares, and an individual can borrow up to NPR 250 million.
Banks can allocate only up to 40% of their core capital to such loans. These rules aim to reduce risk, but in practice, full control is difficult.
Investors taking margin loans often believe the market will keep rising. This confidence can boost trading and liquidity. But when the market drops, borrowers may struggle to repay, and falling collateral values can trigger forced selling, adding more pressure.
Some market insiders believe the rise in lending limits — from NPR 150 million to NPR 250 million — partly explains the jump in total loans. Others see it as a sign that money is staying inside the market, not leaving it.
Share-backed loans can fuel investment and market growth, but they also carry a real risk of instability. If regulators don’t balance expansion with strict monitoring, even a small market shock could snowball into a financial crisis.
