BSEC raises margin loan ceiling to woo investors

The capital market regulator has increased the margin loan facility to encourage investors to buy stocks at a time when the indices are in a free fall over the last several days. 

According to the new decision issued by the Bangladesh Securities and Exchange Commission (BSEC) on Sunday, an investor can avail Tk 100 loan against his equity investment of Tk 100.

Earlier, an investor used to get Tk 80 as loan against his Tk 100 equity.

BSEC Chairman Prof Shibli Rubaiyat Ul Islam signed the new order that has been sent to merchant banks and broker houses.

The directive says the decision will take effect from Monday (May 23) and will remain in effect until further notice.

In the last week, the country’s stock market went through a sharply downtrend and the investors bled a lot, as the benchmark index of the Dhaka Stock Exchange, DSEX, was down over 307 points, or 4.68 percent, to 6,258. 

Among other DSE indices, the shariah-based DSES decreased about 49 points or 3.43 percent, and the blue-chip DS-30 declined by 90 points or 3.75 percent.

During the week, the market capitalisation of DSE stood at Tk 5,09,872 crore, which is Tk 21,140 crore or 3.98 percent less than the last working day of the previous week.

Now, the BSEC has revised the guidelines issued on and before November 15, 2021, taking into account the interests of investors in the current global situation. 

Under the new guidelines, stock exchange trecholders will be able to extend the maximum margin loan facility for their authorised clients to 1: 1 basis.

This means that under the Margin Rules, 1999, the client will get a 100 percentage of the margin loan for any individual stock up to 40 points with a price-to-earnings (P/E) ratio.

Meanwhile, in addition to increasing margin loan facilities, the commission has decided to allow cash withdrawals from brokerage houses for the benefit of small investors.

In this case, investors will be allowed to withdraw cash up to Tk 5 lakh from the integrated customer account.