BFIs can invest in secondary market only for a period of over a year

Published On: May 26, 2021 06:50 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, May 26: Nepal Rastra Bank (NRB) has barred banks and financial institutions (BFIs) from making short-term investments in the secondary market, at a time when the stock exchange market is witnessing a whopping rise in transactions.

Issuing a unified directive on Tuesday, NRB permitted the BFIs to invest in stocks of listed companies only for a period of more than a year. Likewise, the BIFs are also prohibited from investing in the stocks of microfinance companies.

Recently, the BFIs have been found investing large amounts of money in the country’s secondary market due to having excess liquidity resulting from a fall in loan investment to real sectors. With this reason, the BFIs have been able to earn a hefty amount of profit as of the third quarter of the current fiscal year even when the economy is reeling under the impacts of the pandemic.

The central bank’s capping measures seem to prevent the BFIs from over exposure in share-trading, said the NRB officials.

Apart from purchasing shares, the central bank has also enforced a restriction on the selling of shares by the BFIs.  According to NRB, the BFIs can now sell the stocks only up to one percent of the primary capital of their investment amount in shares. “The BFIs can sell the stocks that they purchase as of Monday (May 24, 2021) in any amount by mid-July, the end date of this fiscal year,” reads the NRB directive. 



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