Govt set to cut interest rate by 1.5pc

Dhaka,  Sun,  24 September 2017
Published : 21 Aug 2017, 21:21:03
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Stock refinancing scheme for affected investors

Govt set to cut interest rate by 1.5pc

In April last, the BSEC urged the government to reduce the interest rate from 7.5 per cent to 6.0 per cent. The regulator also urged the government to extend the tenure of the refinancing scheme by two more years
Rezaul Karim


The government is set to reduce the rate of interest from existing 7.5 per cent to 6.0 per cent on the loans disbursed under the capital market refinancing scheme, officials said.

It has taken the move to ensure full utilisation of undisbursed loan funds, they said, adding that the government is going to cut the interest rate by 1.5 per cent for the third time.

In June 2016, the government reduced the interest rate by 1.5 per cent. At present, the interest rate is 7.5 per cent which was 9.0 per cent according to the main policy of the scheme.

Over Tk 2.57 billion of Tk 9.0-billion capital market refinancing funds remains unutilised due to poor response from the investors who got affected during the 2010-11 stock market crash.

Despite repeated attempts, the fund supervision committee and Investment Corporation of Bangladesh (ICB) could not disburse over Tk 2.57 billion of the affected-small investors' assistance fund, an ICB official said.

"We have sought opinions from the finance division on reduction of the interest rate from existing 7.5 per cent to 6.0 per cent. The division has given green signal to the issue," a high official of the Bank and Financial Institutions Division (BFID) told the FE.

The BFID will now send the proposal to the finance minister, seeking approval for issuing government order (GO) shortly, he added.

The tenure of the refinancing scheme is likely to be extended by one or two more years as the tenure will end on December 31, 2017.

In April last, the Bangladesh Securities and Exchange Commission (BSEC) urged the government to reduce the interest rate from 7.5 per cent to 6.0 per cent.

The regulator also urged the government to extend the tenure of the refinancing scheme by two more years.

According the new initiative, the government will take interest at a rate of 4.0 per cent on loans. Also, ICB will take 1.0 per cent as services charge while merchant banks and stockbrokers will take 1.0 per cent as commission or charge.

As per the existing guidelines, ICB gets funds at an interest rate of 5.0 per cent from the central bank. ICB gets 1.0 per cent as charge while merchant banks and stockbrokers get 1.50 per cent, a senior official of the BFID said.

The government formed the Tk 9.0-billion fund in July 2013 to prop up the capital market, and mitigate the sufferings of investors who were affected during the 2010-11 stock market crash. Later, ICB was appointed as the fund manager.

Before disbursing the funds, BSEC identified some 954,000 investors, who are entitled to get such facility, in line with the guidelines set for the capital market refinancing scheme.

The affected investors who invested up to Tk 1.0 million during the period between January 2009 and November 2011 were eligible for getting loan under the scheme.

In August 2013, the state-run ICB received Tk 3.0 billion as the first instalment of the refinancing scheme from the central bank. Later, Tk 6.0 billion was disbursed by two more instalments.

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