Ministry issues state guarantee for Tk3000cr loans to ICB
ICB sought the loan for investing in capital market alongside strengthening its own financial health through repaying some high-cost debts
The Ministry of Finance has extended a Tk3,000 crore state guarantee to the Investment Corporation of Bangladesh (ICB) to bolster the ailing state-owned investment firm.
The ministry today wrote to the Bangladesh Bank governor communicating the state guarantee to the ICB the guarantee was issued on Tuesday.
In case ICB fails to repay the principal or interest, the government will pay it back, the ministry wrote to the central bank governor.
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The guarantee has been issued for 18 months, officials said.
The ICB sought the loan for investing in the capital market alongside strengthening its own financial health through repaying some high-cost debts.
The ICB, having huge funds stuck in poorly performing stocks and deposits with lenders, is struggling to repay many government and private banks despite maturity of the borrowing arrangements.
The ICB was in need of at least Tk5,000 crore to manage the overdue deposits repayment, according to its officials.
"We are expecting the government-guaranteed loan from the central bank soon," ICB Managing Director Md Abul Hossain told TBS.
"We will try to invest half of the amount in investment-grade stocks to support the weakened stock market. However, it may reduce to a third of the loan to come, depending on repayment pressure and our board's plan," he added.
The managing director said the upcoming loan would help improve ICB's financial health. However, for more equity capital it would need to issue new shares.
If it disburses stock dividends instead of cash dividends, equity capital will increase without boosting funds. On the other hand, if it goes for the right share offering, both the purposes of boosting equity and funds will be served.
The present state of the stock market, on the other hand, is not favourable for the right share offering as the existing shareholders will need a fresh capital injection, according to Abul.
The ICB is the largest stock market investor in Bangladesh. However, a historic lack of well-governed investment practices dragged the state-owned firm's health down over the years, while the sorry state of the stock market added to the problem in recent years.
