Govt lends Tk 10b to troubled ICB to invest in stocks

The Investment Corporation of Bangladesh (ICB) gets a Tk10-billion in interest-bearing government loan to invest in stocks to resuscitate bearish bourses of the country, sources say.

It's seen as a significant move as the decision comes just days after reports surfaced regarding the Finance Ministry's hesitation to funnel further funds for loan repayments, marking a policy turn to save the state-run investment agency.

For financing, the Financial Institutions Division (FID) of the finance ministry on November 20 issued a sanction order.

The FID has given a set of conditions to ensure discipline and transparent utilisation of the lent money.

The loan carries 5.0-percent interest, significantly lower than the 12+percent rates charged on commercial loans currently choking the entity.

Repayment time is 10 years in 6-month installments with a one-year grace period.

The accrued interest amount during the grace period has to be paid with the first installment.

As per the conditions binding the credit, the allocated funds must be spent on the approved purpose.

The loan agreement takes effect from the date of disbursement of the allocated funds.

According to the order, the allocated funds will be reconciled with the audited accounts of the ICB. The investment corporation has to submit an audited report by a chartered accountant firm to the FID within the next 3 months.

The state entity has to go by all government financial rules and regulations during the spending of the money.

"The ICB must pay to the FID if there are any previous dues with the division," the order reads.

This intervention comes at a moment of existential peril for the ICB. As reported earlier this month, the corporation suffered a record loss of Tk 12.13 billion in the fiscal year (FY) 2024-25, an official document shows.

Contacted, a senior officer of the FID said the root of the crisis "lies in a vicious debt trap".

He points out that the corporation has been borrowing at high commercial rates (up to 12-13 per cent) to invest in a bearish stock market where returns have been negative.

Currently, most of ICB's total income is consumed exclusively by interest payments on its existing debts. "They are essentially borrowing to pay off borrowings," the official says.

A high official of the finance division informs that this approval was fast-tracked following a closed-door meeting with the ICB officials.

Prof Abu Ahmed, Chairman of the Investment Corporation of Bangladesh, told the FE that they sought Tk 20 billion from the government to mitigate its liquidity crisis and ensure stability on the stock market.

However, the government provided Tk 10 billion as loans. "We have already started injecting the fund into the market, particularly in fundamentally strong stocks, from the fund," says the academic-turned ICB chairman.

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