Four more zero-coupon bonds to hit market within a year

FE Team | Published: June 11, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

FE Report
At least four more zero-coupon bonds are likely to hit the country's bond market within one year following necessary measures taken in this connection in the proposed budget for the fiscal 2007-08.
'We are expecting to float at least four zero-coupon bonds within six months to one year next,' Bangladesh Leasing and Finance Companies Association (BLFCA) Chairman Anis A Khan told the FE Sunday.
Currently, four zero-coupon bonds, issued by four non-banking financial institutions (NBFIs), are in the market.
The companies are Industrial Promotion and Development Company of Bangladesh Limited (IPDC), Industrial Development Leasing Company of Bangladesh Limited (IDLC), United Leasing Company Limited, and Industrial and Infrastructure Development Finance Company Limited (IIFCL).
Anis, who is also chief executive officer (CEO) and managing director (MD) of IDLC, thanked Finance Adviser AB Mirza Azizul Islam for exempting the income generated from zero-coupon bonds from payment of income tax.
He believed the pragmatic steps would help revive the stalled securitisation initiative, an alternative and cheaper source of financing, especially for resource-strapped financial institutions.
"Successful securitisation deals and other bonds will lead to lowering of the cost of funds of financial institutions, which will in turn allow them to pass on the benefits to their clients," the BLFCA chairman added.
Finance Adviser Mirza Azizul Islam in his budget speech Thursday last proposed abolition of the provision of all up front and advance tax on government bonds to create a competitive market for such bonds.
As an alternative source of financing investment, the finance adviser also proposed exemption of income, generated from zero-coupon bonds, from payment of income tax.
The BLFCA chairman requested the government that such exemption should be extended also to bonds and securities issued by banks and NBFIs to infuse dynamism into the bond market.
"As it is, there is no real secondary bond market in the country, and such a step will help establish a vibrant securities trading market in tandem with issuance of bonds," Anis observed.
The government earlier introduced two new bonds of five and ten-year terms to boost the secondary bond market and promote savings through attracting the fixed income groups for investment in these instruments.
The BLFCA also hailed the government for abolition of special tax facilities for investment in house property, land and vehicles, enhancement of tax-exempted income limit and introduction of universal self-assessment procedures in the proposed budget.