How ICB plans to support stock market this fiscal

The Investment Corporation of Bangladesh (ICB) has finalised an action plan for the ongoing fiscal 2023-24 to boost its business performance as well as strengthen its support to the stock market.

For this, the corporation has signed an annual performance agreement (APA) with the Ministry of Finance on 17 July.

As per the agreement, ICB's action plans for FY24 are to invest Tk1,500 crore in the secondary market of the stock exchanges, disburse Tk350 crore as margin loans to the investors to strengthen the liquidity support to the capital market, and increase its contribution to the turnover of the bourses by trading stocks worth a total of Tk1,200 crore..

Owing to several challenges including market slowdown, high cost of funds, liquidity crunch, and over-dependence on the stock market for revenue, the ICB's stock market investment fell 50% to Tk1,271 crore in the fiscal 2022-23, compared to the previous fiscal. Its earnings also dropped by 49% to Tk714.36 crore year-on-year in FY23.

Also, it disbursed Tk381 crore as margin loans and recovered Tk382 crore in the last fiscal year, which was 63% and 72% lower respectively than FY22.

To cope up with the challenges, ICB applied to the finance ministry to obtain a Tk5,000 crore low-cost loan for ten years. It has also sought Tk3,200 crore from the Bangladesh Bank as a soft loan.

Abu Taher Mohammad Ahmedur Rahman, deputy managing director of ICB, told The Business Standard, "We are investing in the stock market by borrowing from the bank. That is why our cost of funds is very high. And if this continues, the company will not have any ability to support the stock market."

"We have asked the government for a low interest loan because we need low-cost long-term funds at this point. And the government also has shown sincerity in supporting us. So, we are optimistic about getting the loan," he added.

According to ICB, the corporation has been supporting the capital market through the Bangladesh Bank fund and its own fund since 2010, without considering its own interests.

But in the last few years, indices of the stock exchanges have faced continuous fall. In this situation, ICB took a loan of Tk11,000 crore from various banks and institutions at high interest rates to support the market. As a result, the cost of funds has increased. ICB has been paying the huge interest on loan quarterly.

Ahmedur Rahman said, "We have to pay regular interest regardless of the income coming from the stock market. Only low-cost funds can save us now."

The government formed the ICB in 1976 to fund the stock market. The corporation lends money to the private sector as a non-bank financial institution under the Bangladesh Bank. The Bangladesh Securities and Exchange Commission (BSEC) thinks that ICB has moved away from its main responsibility in doing so.

It is also alleged that ICB has not acted responsibly enough in investing in the stock market. At times, the ICB was found buying shares at inflated prices through manipulation. And for these reasons, the institution has become weak.

That is why the BSEC has decided to revamp the corporation. The stock market regulator has already submitted a plan in this regard to the finance ministry.