Development Banks Issue Loans Worth Rs 19.86 Billion in Share Pledge
18th February 2026, Kathmandu
The financial landscape of Nepal has witnessed a notable surge in margin nature lending as of the mid fiscal year 2082/83, with the development banking sector playing a pivotal role in fueling capital market liquidity. According to the latest data compiled for the period ending in Poush 2082 (mid January 2026), the total volume of loans disbursed against the pledge of shares across all banking tiers has reached a staggering 152.82 billion rupees. This represents a significant 34.32 percent year on year increase from the 113.77 billion rupees recorded during the same period in the previous fiscal year. Within this broader banking ecosystem, development banks, classified as Class B financial institutions, have carved out a substantial niche, contributing 19.86 billion rupees to the total share pledge loan portfolio.
Development Banks Issue Loans
The distribution of these loans reveals a high concentration among national level development banks, which have leveraged their expanding capital bases to cater to retail and institutional investors. Muktinath Development Bank Limited has emerged as the clear leader in this segment, with an outstanding share pledge loan portfolio of 4.05 billion rupees. This aggressive positioning by Muktinath is consistent with its status as the largest development bank in Nepal in terms of paid up capital and deposit base. Following closely is Garima Development Bank, which has disbursed 2.71 billion rupees in margin nature loans. Both institutions have historically competed on various financial indicators, and their dominance in the share pledge sector underscores their strategic focus on diversifying their credit portfolios toward liquid collateralized instruments.
Other key participants in the national level development bank category include Mahalaxmi Development Bank with 2.34 billion rupees and Shine Resunga Development Bank with 2.32 billion rupees. Lumbini Development Bank also maintains a significant presence with exactly 2.00 billion rupees in share pledge lending. These five institutions alone account for the majority of the Class B sector’s exposure to the stock market. Meanwhile, Kamana Sewa Bikas Bank, Jyoti Bikas Bank, and Shangrila Development Bank have also reported active portfolios ranging from 1.60 billion to 1.78 billion rupees. On the smaller end of the spectrum, regional and smaller national banks such as Excel, Green, Saptakoshi, and Sindhu Development Banks have more modest exposures, with Sindhu recording the lowest active portfolio at 82.52 million rupees. Notably, Narayani, Karnali, Corporate, and Salapa development banks have opted to stay out of this specific lending segment during the review period, likely due to internal risk management policies or a focus on microfinance and SME lending.
The surge in share pledge lending is largely attributed to the recent policy shifts by Nepal Rastra Bank (NRB). In late 2081 and early 2082, the central bank implemented several amendments to its Unified Directives that eased the constraints on margin lending. One of the most impactful changes was the removal of the 25 crore rupee individual cap on margin nature loans, allowing banks more flexibility in determining their own lending limits based on their internal risk assessment and capital adequacy. Additionally, the reduction in the minimum holding period for banks before they can sell pledged shares in the event of a default has provided a safety net for financial institutions, encouraging them to expand their share loan portfolios even during periods of market volatility.
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From a market perspective, the 152.82 billion rupees circulating as margin loans has provided essential fuel for the Nepal Stock Exchange (NEPSE). Higher lending volumes typically correlate with increased trading turnover and improved price discovery, as investors can leverage their existing holdings to take new positions. However, analysts warn that such rapid growth—over 34 percent in a single year—introduces a high degree of systemic risk. Since these loans are secured by equity, a sharp and prolonged downturn in the stock market could trigger a wave of margin calls. If borrowers are unable to fulfill these calls, banks are forced to sell the collateralized shares on the open market, which can create a downward spiral of selling pressure and further price declines.
To mitigate these risks, the Securities Exchange Board of Nepal (SEBON) and Nepal Rastra Bank have introduced stricter monitoring tools for brokerage firms and banks. Brokers are now required to implement a daily mark to market system to revalue collateral and ensure that investors maintain a minimum margin, typically around 20 percent of the loan value. For development banks, maintaining a healthy capital adequacy ratio is critical, especially as their non performing loan (NPL) levels have seen a slight uptick in the current fiscal year due to broader economic challenges. Investors are advised to be cautious of the leverage they carry, particularly when interest rates fluctuate, as the cost of borrowing directly impacts the net profitability of their stock market investments.
In conclusion, the development bank share pledge loan portfolio of 19.86 billion rupees is a vital component of Nepal’s capital market infrastructure. Led by Muktinath and Garima, the sector has demonstrated an impressive ability to facilitate liquidity and support investor participation. While the current growth trajectory is positive for market sentiment, the inherent volatility of the stock market necessitates a balanced approach to margin lending. Both banks and investors must remain vigilant, ensuring that credit expansion is matched by robust risk management practices to safeguard the long term stability of Nepal’s financial system.
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