ICB secures state guarantee for Tk3,000cr loan to back capital market
The Investment Corporation of Bangladesh (ICB), a state-owned entity primarily responsible for stock investments, has secured a state guarantee for a Tk3,000-crore loan aimed at boosting its financial base and investments in the capital market.
The ICB has been struggling as its financial base weakened day by day due to poor investment choices in the stocks of weak companies and lower capital gains amid a downward trend. The government's support, in the form of a loan guarantee, is intended to revitalise the institution and stimulate market activity.
The Financial Institutions Division of the Ministry of Finance sent a letter to the ICB on Tuesday regarding the state guarantee for the loan from the Bangladesh Bank.
The letter instructs the ICB to submit the necessary documents to complete the paperwork for securing the guarantee and obtaining the loan.
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Professor Abu Ahmed, chairman of the ICB, told TBS yesterday that the fresh funds will help ICB support the capital market and improve its weak financial condition.
"We are now working on preparing the documents to be submitted to the central bank. After that, the central bank will provide the loan."
Prof Abu Ahmed, chairman, Investment Corporation of Bangladesh
The letter stated that a meeting involving the Financial Institutions Division, Bangladesh Securities and Exchange Commission (BSEC), the central bank, and the ICB was held on 17 October.
During the meeting, it was recommended that necessary steps be taken to obtain the consent of the Finance Division for providing a state guarantee for the Tk3,000-crore loan to the ICB from the Bangladesh Bank.
Subsequently, a summary was presented to Finance Adviser Salehuddin Ahmed, who approved the matter.
"We are now working on preparing the documents to be submitted to the central bank. After that, the central bank will provide the loan," the ICB chairman said.
Prof Ahmed said over the past 15 years, the ICB has been drained of its resources. "The institution's funds have been looted, leaving nothing behind. Investments were made in weak entities, which severely weakened the ICB."
He observed that securing the fund was crucial for supporting the capital market, and he went through various rounds of discussions at the ministry and the Secretariat to obtain the approval.
When asked how the fund would benefit the capital market, the ICB chairman explained, "The ICB holds a large amount in term deposits, which currently have an interest rate of 12 percent. Every year, we have to pay around Tk900 crore in interest.
"A portion of the term deposits will be repaid, and the remainder will be invested in the capital market. By repaying some of these term deposits, the interest payment burden will be reduced, thereby increasing ICB's financial strength."
According to the annual report for FY23, the ICB had Tk8,877 crore in term deposits from the general public, banks, non-bank financial institutions (NBFIs), and other institutions.
A recent jump in interest rates has pushed the repayment pressure on the institution.
Banks and NBFIs account for Tk5,322 crore of the term deposits, while Tk3,546 crore is from other institutions.
According to its financial statements, in FY24, the ICB witnessed a significant fall in its profit owing to lower capital gain from the listed companies.
In that year, its profit declined by 61% to Tk43.51 and paid a 2.5% cash, and 2.5% stock dividend for its shareholders.
The profit fall did not end there as it incurred a loss of Tk267 crore in the first nine months of FY24. The company is yet to reveal annual financials for FY24 which ended on 30 June.
