Central bank officials argue that the proposed interest rate for Tk10,000 crore in soft loans is abnormally low and it should be at least 5 percent, while merchant bankers want it to be 3.5 percent
The government is working on both short term and long term policies for stabilising and developing the capital market, though nothing is final yet, merchant bankers said on Monday.
During a detailed dialogue with the finance ministry-formed committee for capital market affairs, merchant bankers presented their views on the market situation and suggestions to overcome it.
While briefing reporters after the long meeting, Md Sayadur Rahman, president of the Bangladesh Merchant Bankers Association (BMBA) said they informed the committee about the liquidity crisis in the capital market and that a soft loan scheme to market intermediaries would immediately help to resolve it.
"Many other points were discussed at the meeting to develop the capital market for the long-term," he added.
The meeting was a part of the committee's ongoing interaction with stakeholders, Sayadur said while declining to disclose further points discussed at the meeting.
The coordination committee
Following a dialogue between Finance Minister AHM Mustafa Kamal and all the stakeholders on September 16 last year, the ministry formed a coordination committee on the last week of December to handle capital market affairs.
Maksura Noor, an additional secretary of the Financial Institutions Division, is heading the committee, while a Deputy Secretary of the same division Dr Nahid Hossain is working as the member secretary.
One executive director from the Bangladesh Securities and Exchange Commission (BSEC) and one Executive Director of the Bangladesh Bank are also members of the committee along with the managing director of the Investment Corporation of Bangladesh.
The committee members did not appear at the press briefing after the meeting, though one of them told The Business Standard later that the committee is hearing from all stakeholders to determine priorities for the capital market and ways to implement the necessary steps.
The committee has noted what the merchant bankers said and will place those in their own meeting next.
Updates on fund injection
Market intermediaries have sought a Tk10,000 crore fund as soft loans for six years at an annual interest rate of 3 percent.
Sources present at the meeting later told The Business Standard that central bank officials had argued that the proposed rate is abnormally low and it should be at least 5 percent, while the merchant bankers are negotiating it to be 3.5 percent.
The discussion hints that the sought soft loan scheme will not be at a time and initially a fraction of that might come out in reality.
He also said that, the central bank is likely to disburse the support fund in phases, although nothing is concrete yet.
On the other hand, a finance ministry report submitted to Finance Minister Mustafa Kamal last week suggested that for long term capital market stabilisation, better regulation of pension and provident funds – and channelling those into the capital market along with insurance funds – will help the market.
The ministry is likely to name the proposed long-term fund as the capital market stabilisation fund.
The stock market has lost over one-fourth of its market capitalisation in the last one year, while the major indices were in continuous fall.
Later, in recent weeks, the government stepped in to give a hand as demanded by market people.
That helped the market close green for the fourth consecutive session till Monday.