Stabilisation Fund to lend stock intermediaries fresh Tk100cr after polls

The Capital Market Stabilization Fund (CMSF) is set to lend fresh Tk100 crore to the stock market intermediaries after the national election scheduled on 7 January, with a view to increasing fund injection in the capital market. 

The stabilisation fund aims to start disbursing loans from next week, confirmed a top official at CMSF. 

Earlier, it had lent Tk225 crore to the Investment Corporation of Bangladesh (ICB) for investing in the capital market. 

The CMSF board approved the Tk100 crore loan in an emergency meeting on Thursday. The loan will be disbursed through the Community Bank as per policy and Bangladesh Securities and Exchange Commission (BSEC) guidelines, according to a press statement. 

"The CMSF is going to contribute to the strength and stability of the country's capital market. This initiative reflects the commitment of fostering a resilient financial ecosystem that can withstand challenges and thrive in dynamic market conditions," the press statement reads.

The loan particulars

Each intermediary can avail Tk2-5 crore against the same amount of collateral at a 9% interest rate for a tenure of 180 days, which is renewable upon successful completion. 

Firstly, the interested intermediaries have to apply to the CMSF for the loan. Then, after verifying the intermediaries' information and application, the CMSF will forward the application to the bank. Finally, the bank will disburse the loans to the intermediaries within 21 working days.  

After availing the loan, the intermediaries can directly invest in the stock market, but only in stocks that have been in the 'A' category for five consecutive years.  

Also, they can lend to their customers as margin loans. The single borrower exposure will be a maximum 5% of the total available fund for loan.

Till Thursday, eight intermediaries have applied to the CMSF for the loan, according to sources. 

Who will or won't get preference for the loan 

The CMSF will give preference to intermediaries who are involved in financial literacy programs, training small investors, social welfare activities, working with disabled people, protecting the environment, and following other corporate social responsibilities.

Any stock broker or intermediary that has deficiency in consolidated customers' account (CCA), is not compliant with risk based capital adequacy and/or has had any punishment from the authorities in the last five years, will not avail the loan.

Also, an intermediary or any director of intermediary, who is a loan defaulter through Credit Information Bureau (CIB) report, will not be eligible for the loan.

About CMSF

The CMSF, which was formed in 2021, acts as a custodian of undistributed cash and stock dividends, non-refunded public subscription money and un-allotted right shares from the issuer of listed securities.

According to rules, a maximum of 40% of the cash balance of the CMSF may be used for direct buying and selling of listed securities, at least 50% of the cash balance of the fund shall be used for providing loan to market intermediaries for refinancing as margin loan, and a maximum of 10% of the cash balance of the fund may be used for investment in other securities such as fixed deposits, government securities, fixed income securities, mutual funds, and so on.

Till December 2023, the CMSF fund size stood at around Tk1,600 crore, of which nearly Tk1,000 crore is stock dividends, and the rest cash.