High Court seeks explanation over legality of BSEC's revised margin loan rules
The rule followed a writ petition filed by several investors who argued that the new restrictions are overly stringent and have created panic in an already fragile stock market
The High Court has issued a rule asking the government and the Bangladesh Securities and Exchange Commission (BSEC) to explain within seven days why the newly revised Margin Loan Rules, 2025 should not be declared illegal.
A bench comprising Justice Fahmida Quader and Justice Asif Hasan passed the order today (12 November) after concluding hearings earlier this week. The court, however, did not stay the enforcement of the rules, which remain in effect.
The rule followed a writ petition filed by several investors who argued that the new restrictions are overly stringent and have created panic in an already fragile stock market.
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The BSEC implemented the Margin Loan Rules, 2025, through a gazette on 6 November, imposing tighter limits on margin lending, a move that has unsettled investors and triggered widespread selloffs on the Dhaka Stock Exchange (DSE).
Under the revised framework, investors with less than Tk5 lakh in investment are barred from taking margin loans. Existing borrowers below that threshold must raise their portfolio value within a year or face forced liquidation. The loan ceiling for investors with portfolios under Tk10 lakh has been capped at 50% of their equity, a limit that also applies to larger portfolios.
Additionally, loans against life insurance shares cannot exceed the 50% ratio, and if the market's price–earnings ratio surpasses 20, the limit automatically drops to 25%. The rules also introduce mandatory margin calls when portfolio values fall to 75% and require sales at a 50% drop, while mandating quarterly interest payments in cash or through share sales.
Market analysts say the new rules have dealt the hardest blow to small investors, effectively pushing those with less than Tk5 lakh out of margin trading and limiting their ability to expand portfolios. Existing borrowers face the risk of automatic sell-offs if unable to raise capital, which could intensify selling pressure and further depress share prices.
They also warn that the restrictions could shrink liquidity and trading volumes, while the abrupt enforcement has unsettled retail investor confidence at a time of heightened volatility.
However, regulators argue that the decision was made to restore financial discipline and contain speculative excesses that have long plagued the capital market. By tightening access to margin loans, BSEC aims to reduce reckless borrowing, prevent market manipulation, and protect retail investors from overexposure during downturns.
Officials and market observers also note that the reforms align Bangladesh's margin lending framework with global norms, which impose strict limits on leverage to ensure market stability. In the long run, such measures are expected to curb systemic risk, strengthen brokerage compliance, and promote more fundamentals-driven trading.
