Photo: Collected
Aiming to alleviate liquidity crunch and foster a vibrant capital market, the state-owned Investment Corporation of Bangladesh (ICB) is set to receive a substantial fund ranging from Tk 3,000 to 5,000 crore. Bangladesh Bank (BB) will provide this substantial amount to ICB at a concessional interest rate of 4 percent. The Ministry of Finance will act as the guarantor in this arrangement, according to sources within the Finance Division of the ministry.
Sources say that due to various reasons, the state-owned institution ICB is incurring losses. A decision has been taken to provide a fund to bring the loss-making institution to profitability and to build it as a financially capable institution. The Ministry of Finance has given consent in the context of ICB's proposal. ICB will apply to BB for the fund during the current April.
Regarding this, Bangladesh Securities and Exchange Commission (BSEC) Chairman Professor Shibli Rubayat-Ul-Islam told The Daily Messenger, “We have communicated with the Ministry of Finance and Bangladesh Bank to increase ICB's capability. They have responded positively to providing the fund.”
According to ICB's information, it has a loan of Tk 9,500 crore from government and private banks. Due to this loan, it has to pay at least Tk 100 crore in interest to the banks every quarter. If it gets Tk 5,000 crore from BB, it will repay Tk 2,500 crore of the major loans from the banks. And if it gets Tk 3,000 crore, it will repay a loan of Tk 1,500 crore. As a result, the amount of interest on loans will decrease.
The concerned individuals say that on one side, the institution will become financially strong. It will invest the interest amount in the capital market. The remaining half of the fund will be used to support the capital market through investments. This will eliminate the market's liquidity crisis, and investors' confidence will increase. New domestic and foreign investors will be attracted to the market.
When asked about the plan, Investment Corporation of Bangladesh (ICB) Chairman Professor Dr. Suborna Barua told The Daily Messenger, “We are passing days in a bad situation by taking loans from banks at high interest rates. We have submitted a written proposal to the finance ministry, and we have received their consent. Now, we will apply to Bangladesh Bank. We have completed all the processes.”
He added, “After getting this money, ICB's financial capability will be enhanced, and investments in the capital market will also be increased.”
ICB's Managing Director (MD) Md. Abul Hossain told The Daily Messenger, “We have submitted two types of proposals to the government. One is that the government can provide ICB with a fund of Tk 5,000 crore from its own fund. In that case, we will pay an interest rate of 2 per cent.”
“The other proposal is that if the government takes a loan of Tk 5,000 crore from Bangladesh Bank and provides it to us, the interest rate for this fund will be 4 per cent. Now, the Ministry of Finance is facilitating taking the loan from Bangladesh Bank. After getting this money, we will repay major bank loans and invest in good stocks that control the market,” he added.
When asked about this, Bangladesh Bank's Executive Director and spokesperson Md. Mezbaul Haque told The Daily Messenger, “Necessary measures will be taken if ICB's application comes.”
According to ICB's information, the institution currently has an investment of Tk 13,000 crore in the capital market. Its associate institutions, ICB Mutual Funds, have an additional investment of Tk 5,500 crore. If it gets this new fund of Tk 5,000 crore, ICB's direct investment in the capital market will stand at Tk 20,000 crore.
When asked about the impact of the fund on the capital market, Dhaka Stock Exchange PLC's Managing Director Dr ATM Tariquzzaman told The Daily Messenger, “If the government provides Tk 5,000 crore, a portion of the fund will come to the capital market, and it will have a positive impact on the market.”
“However, the crucial point is that if ICB fails to invest in good stocks with skill and wisdom in its portfolio, no matter how much fund is provided, it will not be of any use to the market. ICB must invest in good stocks with skill,” he added.
Associate Professor at the University of Dhaka, Al Amin, said, “ICB's fund is good news for the market. However, if ICB manages the fund properly and utilizes it for the development of the market, good results can be achieved.”
He added, “ICB must refrain from buying shares of bad companies.” He advised against being associated with manipulation groups and daily trading, saying, “ICB should invest in good stocks for the long term. This will restore investors' confidence in the market and ICB.”
Messenger/Fameema
