The government will sit to devise strategies for issuance of sovereign guarantee against Tk 50 billion to be provided to the state-run ICB aiming to inject into the ailing capital market, sources said.
The loan will be taken from the Bangladesh Bank (BB) at an interest rate of 4.0 per cent. The finance ministry will act as the sovereign guarantor in favour of the loan, according to a senior official of the Financial Institute Division (FID).
The meeting is expected to be held at the FID tomorrow (Thursday) on issuing the guarantee against the proposed loan with an eye to receiving the fund with the FID secretary in the chair.
The state-run entity will borrow the long-term loan at an interest rate of 4.0 per cent. The finance ministry will act as the sovereign guarantor in fovour of the loan, according to an FID senior official.
He mentioned that the ICB is suffering hefty losses due to various reasons. So, it has been taken the fund to convert the loss-making agency as a profitable one. The ICB already proposed to the BB for the fund.
When contacted, ICB managing director Md Abul Hossain said, "We've already presented our action plan on the loan to the FID how the loan will be used. Regarding the issue, we have given a proposal, seeking the loan."
He mentioned that it has a loan of around Tk 120 billion from government and private banks, including different agencies. Now it is quite impossible to operate the activities of the ICB by taking bank loan due to higher interest rates that is compelling to borrow other sources instead banks.
An ICB source said every quarter the ICB has to make payment around Tk 1.0 billion in interest to the banks concerned.
He also added that regarding the loan, the finance ministry has given positive consent.
He also explained that around Tk 25 billion is expected to be made as repayment to the banks loans and rest of the amount is also expected to inject for supporting the share market if the loan is received finally.
A high official said the finance ministry is going to provide a sovereign guarantee for the fund sought from the central bank as the ICB has been suffering a fund crisis.
Earlier, the BB said it will consider the plea of the state-run ICB for a loan of Tk 50 billion only if the government gives sovereign guarantee for the fund.
The central bank said this in a letter sent to the ICB on June 13, responding to the latter's application seeking fund support.
The corporation on May 21 this year sought a fund worth Tk 50 billion from the central bank so it could help stabilise the equity market and repay loans it had taken at high rates of interest to support the market.
Recently, the ICB submitted an application to the finance ministry for getting a sovereign guarantee, which includes the action plan for utilising the proposed fund and strategy of repaying the money.
The state-run investment bank has been passing through a tough time with a heavy burden of expensive loans received earlier from different state-run and private commercial banks and other sources.
ICB officials said that around half of the fund would be injected in the capital market while the remaining 50 per cent would be utilised to repay loans.
After the 2010 stock market debacle, the organisation collected funds at high interest rates and invested a substantial amount in the market to facilitate its stability.
The corporation's interest expense grew at a much faster pace every year between FY10 and FY23, compared to the growth of interest income.
As a result, the interest expenditure ballooned to nearly double the operating income by the end of FY23.
For example, the ICB paid Tk 8.14 billion in interest in FY23 against the funds that it had borrowed, while it earned only Tk 2.24 billion against the money lent.
The deficit between income and expenditure led to the corporation incurring a loss for the first time for Q1, FY24.
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