BSEC sets ceiling on stocks margin loan rate at 12pc

Staff Correspondent | Published at 10:56pm on January 13, 2021

The Bangladesh Securities and Exchange Commission on Wednesday set the upper ceiling on interest rate of margin loans provided by stockbrokers and merchant bankers to investors at 12 per cent with a charge of maximum 3 per cent spread over cost of funds.

The BSEC made the decision in a commission meeting presided over by its chairman Shibli Rubayat-Ul-Islam, a BSEC press release said.

It said that stockbrokers and merchant bankers can collect from the clients additional 3 per cent spread only along with cost of fund against the margin loan offer.

However, the total charge of interest rate against the margin loan offer must not cross 12 per cent by any means.

BSEC officials said that many brokerage houses and merchant bankers were found charging between 15 and 30 per cent interest rate against the margin loans that hurt investors hard.

The intermediaries used to charge interest whimsically as there were no rules regarding the issue before, they said.

The regulator at the meeting fined Chittagong Stock  Exchange brokerage house Skys Securities Limited and Dhaka Stock Exchange brokerage house Subvalley Securities Limited Tk 2 lakh each for violating margin rules.

Besides, the regulator also fined Ikbal Hossain, an authorised representative of Subvalley Securities, Tk 1 lakh for executing trading without sign in the order form.

The BSEC at the meeting also allowed IDLC Finance Limited to float non-convertible zero coupon bond worth Tk 500 crore.

The face value of each unit of the bond will be Tk 50 lakh and the bond will be fully redeemable in four years.

Only corporate bodies, corporate institutions and other eligible investors will be allowed to subscribe the bonds through private placement.

The non-bank financial institution will meet its current financial demand with the capital.

EC Securities Limited acts as the trustee for the bond while IDLC Finance Limited is the mandated lead arranger.