The government has extended the repayment tenure of the Tk3,000 crore Bangladesh Bank loan to the Investment Corporation of Bangladesh (ICB) by three years, giving the state-owned investment institution more time to repay the emergency funding provided to ease liquidity pressure and support the stock market.
The Ministry of Finance informed Bangladesh Bank and ICB of the decision after the original 18-month term expired in May, ICB Chairman Abu Ahmed told TIMES of Bangladesh on Wednesday.
“We sought the extension of the soft loan initially given for 18 months. Because repaying the loan now would require selling our shareholdings at the beginning of the recovery stage,” he said, adding that ICB does not have the financial capacity to repay the loan from its own resources.
Bangladesh Bank provided the Tk3,000 crore loan to ICB in November 2024 to help the corporation overcome liquidity pressures and strengthen its investment capacity amid prolonged weakness in the capital market. The government provided a sovereign guarantee for the facility.
According to Abu Ahmed, Tk2,000 crore of the loan was used to repay high-cost deposits and settle obligations, while the remaining Tk1,000 crore was invested in the stock market.
“The Tk1,000 crore invested in undervalued stocks generated a 25 per cent return in a year,” he said.
The loan initially carried interest at Bangladesh Bank’s 10 per cent policy rate. The central bank later reduced the rate to 4 per cent following ICB’s request, significantly lowering its borrowing cost.
ICB also received another Tk1,000 crore soft loan for equity investment.
The ICB chairman said the entire Tk2,000 crore equity investment had been made in A-category listed shares with strong fundamentals at attractive prices.
However, previous investments in overvalued equities, often linked to corrupt market practices, continue to affect ICB’s balance sheet and profitability.
“The present reporting regime is forcing ICB to ensure provisions against unrealised portfolio losses, resulting in gigantic losses eroding net asset value,” he said.
“The corrupt investment practices that resulted in up to 90 per cent capital erosion after the market slides are no more in the ICB,” Abu Ahmed said.
However, he said ICB needed more than Tk10,000 crore in concessional funds to get rid of high-cost funds and play its role as a market stabiliser.
The extension will allow ICB to retain its market investments instead of selling shares to meet repayment obligations, providing relief as the stock market continues to face weak investor confidence and subdued trading activity.
