The securities market regulator has directed two companies that recently floated shares to the public to wrap up stock allotment process within February 24, in a bid to ease the shortage of loanable funds faced by the banking sector.

Nepal Life Insurance floated 3.1 million units of shares through further public offering (FPO) on January 11, while Forward Community Microfinance offered 600,000 units of shares through initial public offering (IPO) on January 22.

As shares up for grabs were oversubscribed, Rs55 billion has been locked in coffers of different banks, according to the Securities Board of Nepal (Sebon), the securities market regulator.

This has led to uneven distribution of funds among banks, as money collected through FPO and IPO is parked in selected banks.

This, many say, has further deepened the problem at banks that are facing acute shortage of funds that could be immediately extended as loans.

The spill-over effect of this, according to many, could also be seen on the stock market, which plunged below 1,300 points on Thursday, an 11-month low.

“We hope the decision to shorten the allotment timeframe will help banks that are facing shortage of funds,” Sebon Spokesperson Niraj Giri said.

“This initiative will also help stock investors who have been complaining that they have not been able to obtain loans to invest in stocks.”

Companies that have issued shares to the public are allowed to complete share allotment process within 35-70 days of closing the FPO or IPO.

With the cut in share allotment deadline to February 24, Nepal Life will get 60 days and Forward Community will get 50 days to wrap up the FPO and IPO allotment process.

The Sebon has already directed concerned issue managers to meet the deadline. Nepal Life and Forward Community have appointed Siddhartha Capital and Nabil Invest, respectively, as their share issue managers.