The investment amount has decreased because of the high interest rates on loans and the single borrower limit
The Investment Corporation of Bangladesh (ICB) has reported a 52 percent decline in its new capital market investments in the last three years.
The company recently invested Tk2,130 crore in the stock market in the last financial year that ended on June 30, 2020 as compared to Tk4,437.5 crore in the financial year 2016-17.
Sources said the investment amount has decreased because of the high rates of interest on loans and the single borrower limit -- the highest amount of money a bank can lend to a single borrower.
During the three-year period, ICB's turnover in both the stock exchanges declined by 69 percent to Tk6,438 crore.
DSEX, the key index of the Dhaka Stock Exchange (DSE) dropped 29.47 percent to 3,989 points during the period.
"Since 2010, the ICB has been supporting the capital market through the Bangladesh fund and its own fund without considering its own interests. But in the last few years, indices of the stock exchanges have faced continuous fall," said Md Abul Hossain, managing director of ICB, in a dialogue programme recently organised by the Chittagong Stock Exchange.
"In this situation, the ICB took a loan of Tk11,000 crore from various banks and institutions at high interest rates to support the market. As a result, the cost of funds has increased and hence, we have to sell shares to repay the loan," he added.
He added that the ICB has thus far been repaying the huge interest on loan quarterly. Now, it needs to extend the tenure of those loans to be able to pay the interest.
Meanwhile, an official of the company said the ICB took out loans from state-owned banks at low interest. However, due to the circular of the central bank regarding the single borrower loan limit, the company had to repay the money quickly.
"The new monetary policy will help us get loans at low interest rates and overcome this situation," he added.
Meanwhile, the ICB has recently signed an agreement with the Financial Institutions Department for the FY2020-21.
As per the agreement, ICB's new investment target in the capital market will be Tk1,500 crore, which is 48 percent lower as compared to the previous financial year.
The ICB in the agreement paper stated that it would take initiatives to repay the high-interest loans by raising funds from alternative sources with the help of the government.
The company will also take initiatives to set up a capital market support fund with the help of the government to maintain the market's dynamism and boost investors' confidence.
The ICB reported a consolidated net profit of Tk102.34 crore in the January-March quarter of the FY2019-20.
Despite this profit, the company reported a net loss of Tk47.81 crore during the first three quarters of the last financial year. Its loss per share was Tk0.62.
The ICB was listed with the Dhaka Stock Exchange in 1977. Its paid up capital is Tk767.44 crore.
The closing price of the ICB's each share was Tk79.80 on Sunday at the DSE.