Bangladesh Bank has disbursed the first tranche from a fund to assist the small investors affected by the capital market debacle.
The central bank’s spokesperson M Mahfuzur Rahman said Tk 3 billion had been deposited at an account of the Investment Corporation of Bangladesh (ICB) on Monday.
The stock market fell sharply in 2010 and the downslide continued for the next two years.
The government came up with a Tk 9 billion ‘re-financing scheme’ for the retail investors to boost the capital market on May 29 this year.
Prime Minister Sheikh Hasina had promised the package for the retail investors.
The ICB will distribute the money among the investors through merchant banks and brokerage houses, the Bangladesh Bank official said.
The ‘re-financing scheme’ is the first move to revitalise the market besides the government measures to form mutual funds.
A Memorandum of Understanding (MoU) was signed among the Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC) and ICB on Thursday to jointly supervise the fund.
The institutions recently prepared a guideline for running the fund.
As per the policy, individual investors who had suffered huge losses between Jan 1, 2009 and Nov 30, 2011 having invested up to Tk 1 million in the capital market will be eligible for the benefit.
The affected retail investors will enjoy a 50 percent waiver of interest rates for the loans they will take.
The remaining 50 percent will be kept in block accounts and their loans will be rescheduled with a maximum nine percent interest.
Under the scheme, the loan will have to be paid back over a three-year period in three-month instalments. The small investors will be able to invest in the capital market again from these accounts.
While rescheduling loans or granting fresh ones, the relationship between the investors and the merchant banks or the stockbrokers will be considered on a ‘case-to-case’ basis.
For this, the victim investors will have to apply to the merchant and the stockbrokers.
However, those who had already availed of the interest rate waiver facility from the merchant banks or the stockbrokers will not be eligible for the facility.
The capital market crash that started in 2010 led to a full-scale collapse the following year. The average turnover at the beginning of 2012 amounted to billions but was reduced to just Tk 3 billion before the year ended.
The Dhaka Stock Exchange had lost Tk 280 billion in market capitalisation in one year forcing 300,500 small investors out of the market that year.
Any merchant bank or stockbroker can take loans from the ICB for providing their clients with interest waiver facility. For this, they will have to submit necessary documents.
The merchant bank or stockbroker will apply to the ICB and their applications will be scrutinised by the bank’s loan granting committee.
The fund’s tenure will expire in December 2016.
The ICB will have to submit reports to the finance ministry’s Bank and Financial Institutions Division every three months on the overall situation of the loan disbursement.
Source: Bd news24