To help ease liquidity crisis in the capital market, the securities regulator has written to the Bangladesh Bank for disbursement of Tk89 crore from its refinance scheme.

The amount will be distributed among 12 stock dealers and merchant banks as soft loans, according to Md Saifur Raman, executive director and also the spokesperson of the Bangladesh Securities and Exchange Commission (BSEC).

He is also heading the committee responsible for supervising the entire refinancing mechanism. 

The market intermediaries will avail the refinancing fund at an annual interest rate of 4 percent and they will enjoy the fund for capital market investments from their accounts till the end of 2022. 

According to the decision of the supervision committee, the granted amount for a market intermediary will not exceed 20 percent of its capital. 

Saifur Rahman said, "Around Tk14 crore is parked in a bank account and we have written to the central bank to provide Tk75 crore more so that the 12 market entities can be granted a total of around Tk89 crore."  

Earlier this year, the Investment Corporation of Bangladesh (ICB), the de facto state-owned market maker, had applied for a Tk900 crore fund from the central bank to support the falling stock market of the country. 

Prior to that, the ICB, as the redistributor, had returned almost the same amount to the Bangladesh Bank after a successful revolving of a refinancing scheme aimed at supporting affected small investors. At that time, market intermediaries used to apply for such funding to redistribute the loans among their clients who lost capital in stocks. 

In May 2019, the finance ministry approved the ICB application for the fund which was idle in Bangladesh Bank accounts. The second refinancing scheme with a size of Tk856 crore was granted so that the amount could come back to the stock market. Of that, the ICB itself received near Tk761 crore and the rest Tk95 crore was kept for market intermediaries. 

Unlike the previous scheme, this second scheme is not aimed at providing margin loans to the clients of brokerage firms and merchant banks. The intermediaries themselves will invest the money in the capital market to strengthen the market and their base as well. 

The government in 2011, after the market crash, initiated the refinancing scheme to help affected small investors regain strength in the stock market. 

At three phases, a total of Tk900 crore was disbursed among the investors through intermediaries and the scheme was scheduled to come to an end within December 31, 2019. 

But the government has extended the scheme in its second phase up to December 31, 2022.