Share market debate: revision in margin lending limit suggested

Lalitpur, June 21

The Security Board of Nepal (SEBON) has said that it was unfortunate that investors had taken to the street.

"This is an untoward situation, nobody wanted it," Chairman of the SEBON, Ramesh Hamal, said at a press conference organised by the capital market regulator on Tuesday evening as a group of investors chanted slogans against it at its entrance in Khumaltar.

Stocks in the United States of America, Japan and India have also gone down significantly but investors have shown patience, said Hamal.

He claimed that the SEBON was all positive about addressing the demands of the investors and has moved ahead with the implementation of various demands put forth by the agitating investors. Thus, they should call off the sit-in protests, let us work and help in making reforms happen, he stated.

Hamal said that investment from the non-resident Nepalis and reservations for migrant Nepali workers in the stock market would be facilitated soon. Likewise, creating the SMEs platform at the Nepal Stock Exchange Limited (NEPSE) is also at the final stage. The NEPSE has formulated the procedure for it and a team currently is at the Indian stock exchange to get the technical know-how of it.

"We are also positive about addressing the confusion created by the halt of share trading for about a year during the merger or acquisition of the companies listed at the NEPSE. It will be resolved by mid-August," he said.

He also informed that process to increase the capital of share brokers, tax discount on capital gain from the shares trading and issuing the Initial Public Offering of the NEPSE are in full swing.

According to him, the market was affected by the liquidity crunch, shrinking investment and economic challenges in the aftermath of the pandemic. However, indicating to the experts, he also questioned whether the current situation was the result of the Nepal Rastra Bank (NRB)'s policy to restrict the margin lending to Rs. 40 million at maximum from a bank or financial institution or Rs. 120 million in total. However, he maintained that the intention behind the policy was not wrong.

The central bank had tightened its policy on margin lending through the monetary policy of the current fiscal year 2021/22.

Hamal said that the Rs. 40/120 million might have crated a sellers' market and affected the buyers' market and suggested that there was a need to amend the policy. There was a fruitful discussion among the Finance Minister Janardan Sharma, Governor of the NRB, Maha Prasad Adhikar and SEBON in terms of making some policy reforms and implementing corrections.

According to him, greater and serious policy coordination among the regulators of the banks, insurance, and securities is needed and such coordination should be made in the leadership of the Ministry of Finance. Such cooperation will help in formulating flawless policies in the days to come.

Meanwhile, Hamal said that social media should be regulated so that it wouldn't be used to influence the stock market. "There is an advantage-seeking tendency among some investors. They are misusing social media to earn profit and push others into the crisis. It should be discouraged," he said.

 Published in The Rising Nepal daily on 16 June 2022.