The government has approved a Tk 30 billion loan guarantee for ICB

The government has agreed to act as the guarantor for a Tk 30 billion loan to the state-owned Investment Corporation of Bangladesh (ICB) to address the ongoing liquidity crisis and stimulate investment in the capital market.

Once the ICB receives the state guarantee letter, it will apply for the loan from Bangladesh Bank. If the ICB is unable to repay the loan, the government will be responsible for covering the outstanding amount under the guarantee.

ICB Chairman Prof Abu Ahmed stated that the loan application process would begin once the guarantee letter is received. Ahmed, who assumed the role of chairman on August 29, told bdnews24.com, “After much effort, we have managed to convince the authorities that this funding will help the ICB move forward. The finance advisor has supported us in this regard. If we secure the loan, liquidity in the capital market will also improve.”

He also noted that the ICB had previously misallocated funds by investing in weak entities but assured that the ICB would now move away from those investments.

The ICB had submitted a draft plan for utilizing the central bank loan to the Ministry of Finance. On Wednesday, the ministry’s Financial Institutions Division requested a detailed report based on that plan.

Regarding the use of the loan, Ahmed explained that the ICB has high-interest deposits that require about Tk 9 billion in annual interest payments. The plan is to reduce the burden of these high-interest deposits by not retaining part of them and to gradually invest the remaining funds in the capital market.

After the student-led mass uprising ousted the Awami League government on August 5, the capital market saw an initial rise in trading and indices. However, the momentum faltered after a few weeks, and by August 14, the share market began to decline steadily, with the key index losing up to 100 points in a single day.

The Bangladesh Securities and Exchange Commission (BSEC) later formed a probe panel to investigate the situation. The ICB explained that it had sought the interim administration’s assistance due to a liquidity crunch in the market, which had also hindered its investment capacity.

On October 17, a meeting led by the finance advisor, including the Bangladesh Bank governor, the financial institutions secretary, and the BSEC chairman, reviewed the loan application. The central bank agreed to approve the loan.

On October 30, Salehuddin Ahmed, the finance and commerce advisor to the interim government, met with BSEC officials to discuss measures to stabilize the market, including prioritizing liquidity support for the ICB. Earlier, on November 4, the government reduced the capital gains tax to 15 percent to counter the capital market slump and encourage investor participation.

Since then, trading activity has been increasing, reflected in a rise in the index. Over the past three days, the Dhaka Stock Exchange’s index has gained 95 points.