IIDFC allowed to issue Tk 2b zero coupon bonds
Tuesday, 23 December 2008
Siddique Islam
The central bank has given permission to another non-banking financial institution (NBFI) permission to float zero-coupon bonds worth Tk 2.0 billion aiming to raise their flow of funds for investment.
"We've given permission on issuance of the zero-coupon bonds to the Industrial and Infrastructure Development Finance Company Limited (IIDFC) to facilitate their investment activities," a senior official of the Bangladesh Bank (BB) told the FE Monday.
He also said individuals and corporate entities are now key buyers of such bonds under private placements. "The individuals and corporate entities will get income tax exemption on earning from the product," he added.
The IIDFC, a leading NBFI, earlier submitted an application to the central bank of Bangladesh seeking permission to issue zero-coupon bonds worth Tk 4.0 billion.
"We'll give permission to issue the zero-coupon bonds for rest of the amount after revaluation of utilisation performance of the NBFI,'" the BB official said while replying to a query.
On the other hand, the BRAC, a leading NGO, has also applied to the central bank for floating asset-backed zero-coupon bonds amounting to Tk 5.0 billion.
"We're still reviewing the application of BRAC seeking permission to float asset-backed securities," another BB official said, adding that the central bank is very much positive relating to the floatation of such bonds.
"But the financial institutions seeking to issue bonds must fulfil our requirements," the official noted.
The central bank earlier gave permissions to the Uttara Finance and Investment Limited for floating zero-coupon bond worth Tk 2.0 billion while the United Leasing Company Limited has already obtained permission from the central bank to issue such bond worth Tk 500 million.
On October 22 last, the central bank governor advised the chief executive officers and managing directors of the NBFIs to introduce new products like zero coupon bond and debenture to increase the flow of fund without depending on banks
Meanwhile, the IIDFC has already started preparation to file an application to the Securities and Exchange Commission (SEC) seeking permission to issue such bonds.
"We'll file an application to the SEC within this week seeking permission to issue zero-coupon bond worth Tk 2.0 billion," Managing Director of the IIDFC Asaduzzaman Khan told the FE.
Under the existing provisions, the SEC will give final approval to the financial institutions to float such securities after the issuance of no-objection certificate by the central bank.
He also said the fresh fund will be used to expand the overall business activities.
Currently, there are six zero-coupon bonds and one asset-backed zero-coupon bond, issued by five NBFIs.
The NBFIs are Industrial Promotion and Development Company of Bangladesh Limited (IPDC), IDLC Finance Limited, United Leasing Company Limited, Industrial and Infrastructure Development Finance Company Limited (IIFCL) and Delta Brac Housing Finance Corporation Limited.
Earlier, the central bank introduced guidelines on mortgage-backed securities (MBS) market in Bangladesh aiming to bring dynamism in the country's bond market.
"The overall bond and securitisation market in Bangladesh have not yet flourished significantly. Specially, the concept of 'mortgage-backed securities market' is quite new," the central bank said in its guideline, issued earlier.
The central bank has given permission to another non-banking financial institution (NBFI) permission to float zero-coupon bonds worth Tk 2.0 billion aiming to raise their flow of funds for investment.
"We've given permission on issuance of the zero-coupon bonds to the Industrial and Infrastructure Development Finance Company Limited (IIDFC) to facilitate their investment activities," a senior official of the Bangladesh Bank (BB) told the FE Monday.
He also said individuals and corporate entities are now key buyers of such bonds under private placements. "The individuals and corporate entities will get income tax exemption on earning from the product," he added.
The IIDFC, a leading NBFI, earlier submitted an application to the central bank of Bangladesh seeking permission to issue zero-coupon bonds worth Tk 4.0 billion.
"We'll give permission to issue the zero-coupon bonds for rest of the amount after revaluation of utilisation performance of the NBFI,'" the BB official said while replying to a query.
On the other hand, the BRAC, a leading NGO, has also applied to the central bank for floating asset-backed zero-coupon bonds amounting to Tk 5.0 billion.
"We're still reviewing the application of BRAC seeking permission to float asset-backed securities," another BB official said, adding that the central bank is very much positive relating to the floatation of such bonds.
"But the financial institutions seeking to issue bonds must fulfil our requirements," the official noted.
The central bank earlier gave permissions to the Uttara Finance and Investment Limited for floating zero-coupon bond worth Tk 2.0 billion while the United Leasing Company Limited has already obtained permission from the central bank to issue such bond worth Tk 500 million.
On October 22 last, the central bank governor advised the chief executive officers and managing directors of the NBFIs to introduce new products like zero coupon bond and debenture to increase the flow of fund without depending on banks
Meanwhile, the IIDFC has already started preparation to file an application to the Securities and Exchange Commission (SEC) seeking permission to issue such bonds.
"We'll file an application to the SEC within this week seeking permission to issue zero-coupon bond worth Tk 2.0 billion," Managing Director of the IIDFC Asaduzzaman Khan told the FE.
Under the existing provisions, the SEC will give final approval to the financial institutions to float such securities after the issuance of no-objection certificate by the central bank.
He also said the fresh fund will be used to expand the overall business activities.
Currently, there are six zero-coupon bonds and one asset-backed zero-coupon bond, issued by five NBFIs.
The NBFIs are Industrial Promotion and Development Company of Bangladesh Limited (IPDC), IDLC Finance Limited, United Leasing Company Limited, Industrial and Infrastructure Development Finance Company Limited (IIFCL) and Delta Brac Housing Finance Corporation Limited.
Earlier, the central bank introduced guidelines on mortgage-backed securities (MBS) market in Bangladesh aiming to bring dynamism in the country's bond market.
"The overall bond and securitisation market in Bangladesh have not yet flourished significantly. Specially, the concept of 'mortgage-backed securities market' is quite new," the central bank said in its guideline, issued earlier.