Brokerages have until 30 Jun to adjust margin loans

Stockbrokers and merchant banks now have until 30 June to adjust the margin loan rate at 12%.

Bangladesh Securities and Exchange Commission (BSEC) said it would not enforce compliance on stockbrokers and merchant banks until then.

But no directive would be issued in this regard, said a BSEC official. 

Top stockbrokers and merchant banks held a meeting in this regard on the BSEC premises on Wednesday. BSEC Commissioner Dr Shaikh Shamsuddin Ahmed chaired the meeting.

On 13 January, the commission set 12% as the maximum interest rate on margin loans. It was supposed to be adjusted within February. 

As per the decision, stockbrokers and merchant banks that work as portfolio managers would be able to charge customers a maximum of an additional 3% spread along with the cost of funds against the loan.

But the margin loan interest rate would not be more than 12%.

Previously, there was no fixed interest rate on margin loans. Stockbrokers and merchant banks used to charge interest as they wished, causing it to rise to 14-18%.

As a result, investors were dissatisfied. Recently, a group of investors demanded that the interest rate be reduced.

The loans that investors take out from brokerage houses and merchant banks to invest in the stock market are known as margin loans.

Besides their own funds, brokerage houses and merchant banks provide margin loans to stock market investors by taking out loans from various banks or financial institutions.

As per the provision of margin loans, at present, investors will qualify for a margin loan amounting to a maximum of 50% (1:0.5) of their investment.