Victory for ICB as BB relaxes rules for its bond
Banks' investment in a Tk 2,000 crore bond floated by the Investment Corporation of Bangladesh will not be counted as their capital market exposure, paving the way for the state-owned firm to form the fund at the earliest.
The development comes after the Bangladesh Bank on Wednesday gave the nod to the ICB, which will invest most of the amount in the capital market.
“Now I hope ICB can form the fund within 15 days,” said Mojib Uddin Ahmed, chairman of the ICB, which got the approval for the instrument from the Bangladesh Securities and Exchange Commission (BSEC) on July 18.
A letter has already been sent to the finance ministry; the ministry will complete their paperwork, after which the issue manager will get down to forming the fund, he said.
The ICB has been in a tight corner over the past few months as its liquidity is not solid enough. To address the situation, the ICB board had planned to issue a bond.
The bond, whose tenure would be seven years including a two-year grace period, will be fully redeemable and subordinated. A subordinated bond is a debt that ranks after other debts if a company falls into liquidation or bankruptcy.
The interest rate will be 9 percent and in case of late redemption an extra 2 percent interest would be paid.
The bond is non-convertible and non-listed. The per unit value of the bond is Tk 1 crore, which will be sold by way of private placement to individuals (at a minimum subscription of one unit) and institutions (at a minimum subscription of five units).
Banks, financial institutions and institutional investors can invest in the bond.
To facilitate financial institutions' investment in the bond, the ICB has urged the central bank to ease the restrictions on single party exposure and capital market exposure.
The single party exposure rule means a bank cannot lend or deposit more than 15 percent of its total paid-up capital to an institution alone, while the capital market exposure rule necessitates that banks do not invest more than 25 percent of their capital in the stock market.
Meanwhile, the stock market continues to slide as the broad index, DSEX, retraced its steps by 48 points yesterday to close at 5,342.9.
Turnover stood at Tk 530 crore, up 2.2 percent from that of the previous day.
Comments