In a frantic bid to revive the moribund stock market, Bangladesh Bank on Wednesday (May 22) injected Tk 8.56 billion in the state-run Investment Corporation of Bangladesh (ICB) with flexible terms and conditions, senior officials at the ICB have said.
The liquidity has been injected under the capital market refinancing scheme.
Bangladesh Securities and Exchange Commission (BSEC) Executive Director Md Saifur Rahman has said the fund has been sanctioned in favour of ICB to prop up the ailing capital market.
Amid the continuous fall of stock indices that shed more than 700 points in the last three months, the finance minister has recently asked the central bank for the emergency fund to shore up the market, according to highly-placed source at the ministry.
The fund involves only 4 percent interest, as both ICB and institutional investors will be eligible to invest the fund in the stock business, said BSEC official Saifur.
He also informs that initially the fund will be invested into the capital market through the ICB's own portfolio."We are expecting a turnaround in the stock market, following the injection of the refinancing scheme.”
“Other stakeholders could also avail the fund facility on first come, first serve basis,” he added.
The government on May 2 decided to sanction Tk 8.56 billion to the affected small stock investors through the ICB.
The same day, Bangladesh Bank was told by the finance ministry to sanction the fund in favour of ICB, according to people familiar with the matter.
It is the second refinancing scheme to largely save the interests of retail investors affected by the 2010 and 2011 market crashes. In 2013, Bangladesh Bank gave a refinance scheme of Tk 9 billion to the ICB.
The new refinance scheme’s tenure has been fixed till December 2022.
Meanwhile, in the second session of the 11th parliament, Prime Minister Sheikh Hasina said the government had taken many steps to keep the share market stable. She also warned: “If anyone wants to play [with the share market], obviously we will take action against them."
Besides, the finance minister also hinted that the corporate tax should not be increased in the in the upcoming budget, and pledged to offer policy support in the budget for stock business.
He said the government was providing the fund to support the country's capital market which recently witnessed continuous price correction.
Following the recent sliding of the capital market, the ICB recently made a plea for getting the fund for the second time under the capital market refinancing scheme.
Finally, the government extended the tenure of the capital market refinancing scheme till December 31, 2022.
The market witnessed fall in four trading sessions out of five in the week as investors continued cautious share sales amid concern over the liquidity crisis in the financial sectors, stakeholders said.
They said that the liquidity crisis was getting worse day by day as the banks, which, plagued with scams and huge bad loans, were struggling to get enough funds from the depositors. The crisis affected the capital market badly.
Once the ICB starts investing the money in the capital market, the liquidity crisis will no longer exist in the market, observers have said.
DSE Director Rakibur Rahman said the decision would help ease the ongoing liquidity crunch in the capital market.