Investors’ borrowed money to buy stocks are called margin loans and due to extreme fall in stock prices thousands of investors are in risk of financial ruin in Bangladesh
Dhaka Stock Exchange (DSE) director Rakibur Rahman requested the government to include indebted stock investors in the massive over Tk72 thousand crore incentive package Prime Minister Sheikh Hasina declared on Sunday.
In a statement Rahman, also a past president of the premier bourse, requested the government to bear a portion of interest liabilities of investors against their margin loans.
Investors' borrowed money to buy stocks are called margin loans and due to extreme fall in stock prices thousands of investors are in risk of financial ruin in Bangladesh.
Thousands of investors have already faced forced liquidation with literally nothing left as their own. As soon as an investor's equity hit zero, the lender calls for fresh capital injection and who fails to deposit fresh capital faces the forced selling.
Banks do it to secure their asset against risk of further losses.
"As 9 percent lending rate has already taken place, we expect margin loans will not be an exception. Of that 9 percent I would request the government to bear 5 percent and investors will pay the remaining 4 percent of interest," said Rakibur Rahman.
While taking to the Business Standard he said, "if interest burden is eased for a time being, it will help investors resilience in the adverse market condition."
Rahman also thanked the prime minister for the government initiative to support industries and Small and medium enterprises with concessional loans that will provide them with working capital to avert a ruin due to the coronavirus shock.
Stocks has been in a free fall in recent weeks until the securities regulator had imposed a creative floor pricing on individual scrips before the countrywide lockdown and weeks-long public holiday to fight coronavirus pandemic.