Capital Market Stabilisation Fund (CMSF) has backtracked on its decision to disburse loans to market intermediaries in the absence of any legal framework but contemplates giving loans through a scheduled bank.
In March, it made the decision to provide cheap loans to boost liquidity in the capital market on instructions of the Bangladesh Securities and Exchange Commission (BSEC).
About 13 market intermediaries, including stock brokers, have so far applied for loans worth Tk 400 million from the Fund. The tenure of the loans was supposed to be 180 days with scope of renewal.
But the Fund’s lawyer has warned against violation of laws, as the Fund is only a custodian of undistributed dividends according to the Bangladesh Securities and Exchange Commission (Capital Market Stabilisation Fund) Rules, 2021.
The Fund is not the owner of the money coming from undistributed dividends from listed securities. It risks facing a legal suit if any market intermediary defaults on loan repayments.
Hence, the Stabilisation Fund should either strengthen its legal base before giving out loans or disburse loans through any bank.
Without being a limited company or any other entity registered with the Registrar of Joint Stock Companies and Firms (RJSC), the CMSF has no legal ground to conduct management of loan disbursement.
Against this backdrop, the Fund considers keeping a deposit in a bank at a minimum interest rate of 7-8 per cent. Then the bank will disburse loans from the money to market intermediaries, imposing 1 per cent service charge.
CMSF officials said Community Bank had already shown interest in the plan.
Presently, the Fund has assets worth Tk 5.6 billion, half of which can be distributed as per the rules.
It already paid Tk 2.25 billion to the state-run Investment Corporation of Bangladesh (ICB) in several phases. The Corporation has injected the money into the capital market.
The securities regulator had issued rules for the Stabilisation Fund through a gazette notification published in June 2021 to help revitalise the capital market.
The objective of the Fund is to support the stock market alongside settling investors’ claims of undistributed or unsettled dividends.
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