Margin call only after 20 percent decline in share price

Published On: July 11, 2018 03:40 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, July 11: Banks and financial institutions can hereafter make a margin call only after reduction of the price by 20 percent according to monetary policy 2075/76. Such margin calls to the borrowers is applicable only after fall in the share price by 10 percent as of now. Margin calls are made to borrowers on the loans issued on collateral of stock to meet the required value of shares. The stock investors who were getting frequent margin calls upon the freefall of stock prices in recent months are relaxed with this provision introduced in the monetary policy on Wednesday.

However, NRB has not addressed the demand of investors to increase the valuation of the share prices to 60 percent of the stock price. The investors were lobbying to increase the valuation of the stock prices from 50 percent to 60 percent. For the purpose of providing margin lending, price valuation of the stock is calculated based on average price of the stock of past 180 days or the price of the previous day or whichever lower. The loans are issued on 50 percent of the price of the stock.



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