KATHMANDU, Oct 9: Banks and financial institutions (BFIs) are now required to specify the provisions for issuing a margin call on share collateral loans in the product paper of such loans.
Nepal Rastra Bank (NRB) has directed BFIs to include in the loan agreement the conditions under which a margin call will be triggered for borrowers who have taken share collateral loans.
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Similarly, if the share price declines and the borrower does not provide additional collateral, there must be a clear provision in the product paper for loan investment, specifying the sale of shares to recover the loan. There has been no policy amendment regarding this arrangement.
However, by amending the unified directive, the NRB has instructed BFIs to clearly disclose in the product paper, in a way that the borrower is informed, the provisions for margin call and the sale of shares for loan recovery.
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