The government has decided to provide a sovereign guarantee of Tk. 3 thousand crore to the state investment institution Investment Corporation of Bangladesh (ICB). A meeting regarding this was held in the Financial Institutions Department of the Ministry of Finance on Thursday. According to the decision of the meeting, the government will give this guarantee to ICB. However, it will take about one month to get the sovereign guarantee of Tk. 3000 crore from ICB.
A senior official of the Financial Institutions Department confirmed the matter to a trade daily, “We had a meeting today (Thursday) where ICB asked for a fund to strengthen the capital market.” In the meeting today (Thursday) we try to present it in the form of a resolution to the Finance Advisor.
He said, “Finally, the Finance Advisor will take a final decision on this matter and give instructions to the Ministry of Finance to give a guarantee.” After getting this guarantee, ICB can take a loan of the same amount from Bangladesh Bank or any other lender bank or financial institution.
According to the information, there was a discussion of providing a sovereign guarantee of Tk. 3000 crore to ICB a few months ago. Later it is limited to discussion. That discussion ended after the political change on August 5. ICB loan availability becomes uncertain. But after the interim government took over, it was recently decided to give a sovereign guarantee of Tk. 3000 crore to ICB. As a result, ICB is going to get a sovereign guarantee of Tk. 3000 crore within a month or more. After getting this guarantee, ICB can take a loan of equivalent amount from Bangladesh Bank or any other lender bank or financial institution.
It is known that for the past few years, ICB has been seeking a loan of 5 thousand crore Taka from the government to meet the liquidity crisis in investing in the stock market. However, it was not possible for the government, which was in financial crisis, to give direct loans. Then on August 5, when Sheikh Hasina’s government fled from power in the student coup, ICB’s dream of becoming the guarantor was dashed. But Nobel laureate Dr. The interim government led by Muhammad Yunus after taking charge has brought this issue forward again and has agreed to become a sovereign guarantor of 3000 crore taka to solve it. This will further increase the capacity of ICB to make large investments in the capital market.
A senior FID official said that a decision has been taken regarding ICB’s loan application. Government cannot give loans directly to ICB. But there is a policy decision to guarantee.
Attempts were made to contact ICB Chairman Professor Abu Ahmed to find out about this, but it was not possible.
However, a senior official of ICB said, “We are very positive and optimistic about getting funding from the government for the capital market.” We are working on the essentials.
He said, “Since the main objective of ICB is to support the capital market, a part of the funds will be provided to the capital market. Besides, part of the fund will also be used to repay high-interest term deposits taken by ICB over the years to support the capital market.
ICB’s profits are falling
After the floor price system was introduced in July 2022, nearly two years after its removal in January, the market capitalization fell by around Tk. 1 lakh crore. Floor price is the minimum price at which a stock can be sold. And the shares cannot fall below the fixed floor price. As part of measures to curb market volatility, the BSEC on April 24 ordered that the share price of any listed company cannot fall by more than 3 percent in a day.
ICB posted a loss of Tk. 267 crore in the first nine months of FY 2023-24 due to volatile markets. Its capital gains fell by 59 percent to Tk. 105 crore. Besides, interest payments on deposits and loans increased by 9.61 percent to Tk. 675 crore.
The investment bank’s profit fell by 46 percent to Tk. 77 crore in the 2022-23 financial year. Also, ICB failed to refund its depositors due to its inability to sell shares within the floor price limit.
Understanding term deposits
According to the annual report for the financial year 2022-23, ICB has fixed deposits of Tk. 8,877 crore from the general public, banks, non-bank financial institutions and other institutions. The recent jump in interest rates has increased the debt repayment pressure on the institution.
Time deposits of banks and non-bank financial institutions in ICB are Tk. 5 thousand 322 crore and time deposits of other institutions are Tk. 3 thousand 546 crore.
Sonali Bank, General Insurance Corporation, Agrani Bank and Janata Bank have term deposits of Tk. 3,563 crore. According to the annual report, the investment bank paid interest of Tk. 663 crore on term deposits.
ICB funds are stuck
According to officials of the organization, ICB has an investment of about 1 thousand crore Taka. Most of these are in weak banks and non-bank financial institutions. 154 crores of the organization is stuck in Padma Bank alone.
ICB did not get these funds back despite the maturity of the deposit. It sought the help of the central bank to get the money. But non-bank financial institutions could not return the deposits. As a result, most of the funds had to be renewed.
