Poor response from clients hits capital market refinancing scheme

Mohammad Mufazzal | Published: December 07, 2015 00:00:00 | Updated: February 01, 2018 00:00:00

Many borrowers are reluctant to receive funds under the capital market refinancing scheme mainly due to poor response from clients of institutional investors who got affected during the 2010-11 stock market debacle, officials said.
Due to poor response from affected-investors, Tk 2.65 billion out of Tk 9.0 billion still remain undisbursed as of December 3, 2015.
"Many affected-investors don't communicate with their lenders such as merchant banks and brokerage firms. That's why a portion of the funds is yet to be disbursed," said Mohammad Saifur Rahman, an executive director of the securities regulator.
Mr Rahman was, however, optimistic about full utilisation of the funds, saying that a large portion of the funds has already been disbursed.
"We have also achieved success in managing the refinancing scheme as many merchant banks and brokerage firms have utilised the funds and also refunded Tk 2.37 billion," he said.
He said affected-investors still have scopes to avail of the refinancing scheme facility as the tenure of the funds has not expired yet.
Earlier, the tenure of the scheme was extended up to December 31, 2016.
The central bank disbursed Tk 9.0 billion by three instalments under the refinancing scheme.
The government took up the scheme aiming to prop up the capital market and mitigate the sufferings of investors affected during the 2010-11 stock market debacle.
According to the supervisory committee of the refinancing scheme, 45 merchant banks and brokerage firms have so far received Tk 6.35 billion against the portfolios of 24,988 affected-investors.
Of the major borrowers, Investment Corporation of Bangladesh (ICB) received Tk 566.7 million, ICB Capital Management Tk 844.8 million, BRAC EPL Investments Tk 657.6 million, Janata Capital and Investment Tk 407.8 million, NBL Securities Tk 265.4 million and IIDFC Securities Tk 201.5 million.
ICB Capital Management also received Tk 741.8 million in the second phase. Â
Before disbursing the funds, the Bangladesh Securities and Exchange Commission (BSEC) identified some 954,000 investors as per the guidelines set for the capital market refinancing scheme.
The government approved the guidelines for the scheme by setting interest rate at 9 per cent on loans to the affected-investors who invested up to Tk 1.0 million during the period between January 2009 and November 2011.
After getting the funds at 5.0 per cent interest rate from the central bank, the ICB will lend it to merchant banks and stockbrokers at 7.0 per cent, according to the guidelines. And the merchant banks and stockbrokers will disburse the funds to the retail investors at 9 per cent interest rate.
According to the scheme supervisory committee, five more merchant banks and brokerage firms have accepted sanction letters for receiving Tk 281.8 million against the portfolios of 706 affected-investors. Â
In late August, 2013 the state-run ICB received Tk 3.0 billion as first instalment of the refinancing scheme from the central bank.
Later, the rest of Tk 6.0 billion was disbursed by two more instalments.
After the disbursement of the first instalment, aspirant borrowers-merchant banks and brokerage firms-were not able to receive funds due to tough conditions including corporate guarantee of borrowers.
Later, some conditions were relaxed and merchant banks and brokerage firms started applying for receiving funds.
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