Kathmandu, Sept 25: Nepal Rastra Bank has amended its Unified Directives, 2082, reducing the minimum period banks must hold listed shares and debentures from six months to 45 days. It has also kept the countercyclical capital buffer for banks and financial institutions at zero per cent for fiscal year 2083/84.
Market analysts say the shorter holding period could encourage banks to invest more actively in shares, bringing more funds into the secondary market. Banks are major institutional investors, but the six-month restriction had limited their activity. Analysts expect the change could increase trading and help restore investor confidence, particularly if banks buy shares during market declines.
For banks, the revised rule could create opportunities to earn more income outside lending. Loan demand has been weak, while narrower interest spreads have put pressure on their main source of earnings. Greater flexibility to buy and sell shares could allow banks to earn capital gains.
Keeping the countercyclical buffer at zero means banks will not have to set aside additional capital under that requirement, leaving more room to expand lending.
NRB has also required banks’ boards to adopt policies on when to sell investments to limit losses and when to take profits. The requirement is intended to keep their trading risks in check as the holding period falls.
People’s News Monitoring Service
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