Nepal Rastra Bank (NRB) has introduced a new provision allowing banks and financial institutions to provide loans of up to 80% of the assessed value of shares pledged as collateral, provided those shares belong to financially strong listed companies.

Under the central bank's latest directive, banks may increase the standard Loan-to-Value (LTV) ratio by up to 10 percentage points for companies that receive high scores under a financial strength assessment. Financial institutions have been instructed to develop and implement a transparent evaluation methodology for this purpose.

According to NRB, the financial strength of a company will be assessed based on several indicators, including paid-up capital, minimum listing period on the stock exchange, profitability, dividend payment history, credit rating, compliance with regulatory requirements, and whether the company has regularly conducted its annual general meetings.

Banks and financial institutions will also be required to publish their evaluation methodology and eligible company information on their official websites to ensure greater transparency for borrowers and investors.

However, NRB has clarified that once a share-backed loan has been disbursed, the pledged shares cannot be revalued to increase the borrower's credit limit or provide additional loans. The provision is intended to prevent excessive lending based solely on subsequent increases in share prices.

The new policy is expected to improve credit access for investors holding shares of fundamentally strong companies while maintaining prudent risk management within Nepal's banking system.