BB relaxes terms for rescheduling margin loans on case-to-case basis

Siddique Islam The central bank may relax the conditions for rescheduling margin loans on case-to-case basis aiming to help stabilise the current volatile situation in the country's stock market, a top official said Wednesday. The commercial banks have so far invested nearly Tk 90 billion in the form of loans to, and paid-up capital of, their subsidiary securities' companies -- brokerage houses and merchant banks -- for investment in the country's share markets. The banks have disbursed Tk 56 billion as loans to their 33 brokerage houses and merchant banks until now, while Tk 32 billion has been invested in the form of paid-up capital to form their securities' companies as the subsidiaries, according to the central bank statistics. "Furthermore, the scheduled banks have invested additional funds in their own portfolios, in line with the existing rules and regulations," another BB official said, adding that the brokerage houses and merchant banks are now allowed to provide margin loans to their clients for purchasing shares. Total investment in shares by all 47 commercial banks were more than Tk 106 billion as on June 30 this year, the BB data showed. After the stock market crash, the market value of such investments by banks has significantly fallen in the recent months. The benchmark index of Dhaka Stock Exchange (DSE), the country's prime bourse, generally known as DGEN, came down to 5258.46 point Wednesday from its highest 8918.51 point on December 05 last, the DSE data showed. Meanwhile, Executive Director of Bangladesh Bank (BB) Jahangir Alam told the FE on Wednesday that the central bank would consider the matter about rescheduling of outstanding margin loans, positively if any bank applies, seeking relaxation of the conditions about down-payment for the purpose. He also recalled that the central bank had earlier relaxed rules allowing loan rescheduling without down-payment for export-oriented sectors affected by the global financial meltdown in 2009 to facilitate their businesses. "We'll provide all-out support in line with the existing rules and regulations to help bring stability to the stock market," the BB Executive Director said without elaborating. To reschedule normally the term loans for the first-time, borrowers have to pay minimum 15 per cent of unpaid amount of instalment dues or 10 per cent of total dues, whichever is lower, according to the existing provisions. It is at the level of minimum 30 per cent for unpaid amount of instalment dues or 20 per cent of total dues, whichever is lower, for second-time rescheduling. For the third-time rescheduling, it is 50 per cent and 30 per cent respectively. Besides, the commercial banks can waive the interest accruals on margin loans through the bank-client relationship, another BB official said, adding that the central bank has no restriction on waiving interests on margin loans by any bank.