The government has agreed to act as the guarantor for a Tk 30 billion loan to the state-run Investment Corporation of Bangladesh to overcome the ongoing liquidity crisis and boost investments in the capital market.
After receiving the state guarantee letter, the ICB will apply for the loan from Bangladesh Bank. If the ICB is unable to return the money for any reason, the government will have to repay the outstanding amount under the guarantee.
ICB Chairman Prof Abu Ahmed said the agency would begin the loan application process after receiving the guarantee letter.
Ahmed, who took over as the investment firm's chairman on Aug 29, told bdnews24.com: "After a lot of effort, we have been able to convince the authorities that the funding will allow the ICB to move forward. The finance advisor supported us in this regard. If we get money, the liquidity in the capital market will also increase."
"The ICB funds were previously misused. Investment had been made in weak entities. The ICB will come out of it."
The ICB had submitted a draft plan to the Ministry of Finance on the utilisation of the central bank loan.
On Wednesday, the ministry's Financial Institutions Division sent a letter to the ICB seeking a detailed report in light of the plan.
On how the loan would be used by the agency, Ahmed said the ICB has some high-interest deposits, for which it has to pay around Tk 9 billion annually in interest.
The ICB will not retain a portion of those high-interest deposits and a plan will be made to invest the remaining funds in the capital market in phases.
Trading and indices in the capital market trended upwards in the immediate aftermath of the student-led mass uprising toppled the Awami League government on Aug 5, before losing momentum after a couple of weeks.
After Aug 14, the share market saw a steady decline, with the key index losing as many as 100 points in a single day.
The Bangladesh Securities and Exchange Commission, or BSEC, later formed a probe panel to look into the matter.
The ICB said it sought the interim administration's assistance due to a liquidity crunch in the market, which also hindered its ability to invest.
Led by the finance advisor, a meeting involving the Bangladesh Bank governor, the financial institutions secretary and the BSEC chairman was held on Oct 17 to review the loan application.
In the meeting, the central bank agreed to grant the loan.
Salehuddin Ahmed, finance and commerce advisor to the interim government, held a meeting with BSEC officials to discuss measures to stabilise the market on Oct 30. —bdnews24.com
