Merchant banks' loan margin now 1:1.5
Wednesday, 19 November 2008
FE Report
The Securities and Exchange Commission (SEC) raised Tuesday the loan margin ratio for merchant banks to 1:1.5 from the existing 1:1 in order to enhance fund flow into the sluggish market.
The commission also approved the initial public offering (IPO) application of Prime Finance First Mutual Fund and the rights share issuance of three companies.
The merchant banks now will be able to provide loans to their clients as per that ratio with effect from November 18 until further order.
"The SEC raised the loan margin ratio for the merchant banks in order to enhance the loan providing capacity of the banks to their clients and improve the fund flow into the market as well," Farhad Ahmed, executive director of the SEC, told reporters after a meeting of the commission held Tuesday.
"The commission is actively considering relaxation of loan exposure limit for merchant banks. But it will take time as it should be done through a legal process," he added.
In response to a question, Farhad said there is no confusion about the raising loan margin ratio as the decision has been taken after discussion with all stakeholders.
"However, it is better not to take or provide loans against the overpriced securities or worst performing issues, because both investors and banks will not be benefited unless they get good return after investing in such securities," he added.
As per the loan margin ratio 1:1.5, a client will be able to take loan one and a half times the total cash deposit with any merchant bank.
Earlier on November 11, the SEC, after a meeting with merchant bankers, announced its plan of increasing the loan margin ratio for stabilising the stock market following the recent slump in the market.
The SEC Tuesday approved the IPO application of Prime Finance First Mutual Fund to raise fund from the capital market.
The total shares of the mutual fund are worth Tk 200 million, of which Tk 40 million shares have been allocated for sponsors, Tk 60 million shares set aside for private placement and Tk 100 million shares for the public through the IPO. The face value of a share is Tk 100.
Prime Finance and Investment Limited, a non-bank financial institution, is the sponsor of the mutual fund and the Investment Corporation of Bangladesh acts as trustee and custodian to the fund.
The commission also gave consent to rights share issuance applications of the Social Investment Bank Limited (SIBL), National Polymer, and Eastern Bank Limited (EBL).
The SIBL will issue 12,508,587 rights shares worth Tk 1,250,858,700, with the face value of Tk 100 each, at a ratio of 1:1 (one rights share against each existing share).
National Polymer will issue 536,000 rights shares worth Tk 187.6 million (18.76 crore) at a ratio of 2:1 (two rights shares against every existing share) at an issue price of Tk 350 per share, including a premium of Tk 250 each and the face value of Tk 100 each.
The EBL will issue 6,934,500 rights shares worth Tk 693.45 million (69.345 crore) at a ratio of 1:2 (one rights share against every two existing shares) with the face value of Tk 100 each.
The Securities and Exchange Commission (SEC) raised Tuesday the loan margin ratio for merchant banks to 1:1.5 from the existing 1:1 in order to enhance fund flow into the sluggish market.
The commission also approved the initial public offering (IPO) application of Prime Finance First Mutual Fund and the rights share issuance of three companies.
The merchant banks now will be able to provide loans to their clients as per that ratio with effect from November 18 until further order.
"The SEC raised the loan margin ratio for the merchant banks in order to enhance the loan providing capacity of the banks to their clients and improve the fund flow into the market as well," Farhad Ahmed, executive director of the SEC, told reporters after a meeting of the commission held Tuesday.
"The commission is actively considering relaxation of loan exposure limit for merchant banks. But it will take time as it should be done through a legal process," he added.
In response to a question, Farhad said there is no confusion about the raising loan margin ratio as the decision has been taken after discussion with all stakeholders.
"However, it is better not to take or provide loans against the overpriced securities or worst performing issues, because both investors and banks will not be benefited unless they get good return after investing in such securities," he added.
As per the loan margin ratio 1:1.5, a client will be able to take loan one and a half times the total cash deposit with any merchant bank.
Earlier on November 11, the SEC, after a meeting with merchant bankers, announced its plan of increasing the loan margin ratio for stabilising the stock market following the recent slump in the market.
The SEC Tuesday approved the IPO application of Prime Finance First Mutual Fund to raise fund from the capital market.
The total shares of the mutual fund are worth Tk 200 million, of which Tk 40 million shares have been allocated for sponsors, Tk 60 million shares set aside for private placement and Tk 100 million shares for the public through the IPO. The face value of a share is Tk 100.
Prime Finance and Investment Limited, a non-bank financial institution, is the sponsor of the mutual fund and the Investment Corporation of Bangladesh acts as trustee and custodian to the fund.
The commission also gave consent to rights share issuance applications of the Social Investment Bank Limited (SIBL), National Polymer, and Eastern Bank Limited (EBL).
The SIBL will issue 12,508,587 rights shares worth Tk 1,250,858,700, with the face value of Tk 100 each, at a ratio of 1:1 (one rights share against each existing share).
National Polymer will issue 536,000 rights shares worth Tk 187.6 million (18.76 crore) at a ratio of 2:1 (two rights shares against every existing share) at an issue price of Tk 350 per share, including a premium of Tk 250 each and the face value of Tk 100 each.
The EBL will issue 6,934,500 rights shares worth Tk 693.45 million (69.345 crore) at a ratio of 1:2 (one rights share against every two existing shares) with the face value of Tk 100 each.