Banks are not permitted to invest in microfinance stocks.

Banks are not permitted to invest in microfinance stocks.

Banks and financial institutions are no longer permitted to purchase microfinance company stock. The NRB has prohibited BFIs from investing in microfinance companies’ stock. A circular was issued to enforce the new provision made in the third quarter monetary analysis, which included such instruction.

If BFIs purchased microfinance company shares before Jestha 10, 2078 BS, they must sell or divest those shares by Poush end, 2078 BS. Banks will no longer be able to make short-term deposits in company stock.

“Only up to 1% of the primary capital from assets with a term of more than one year can be sold in a fiscal year. This clause, however, will not be considered an impediment to selling the shares invested until Jestha 10, 2078 BS by Ashad end 2079 BS,” the circular notes.

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Banks can only float 70% of the average price of the last 180 working days published by Nepal Stock Exchange Limited or the prevailing market price of the share while disbursing share pledge loans. Previously, it was only possible to obtain a share pledge loan on the basis of a 120-day valuation.