Stock Market
1:1 margin loan ratio comes into effect
The new margin loan ratio which has come into effect this month will allow merchant banks and brokerage houses to issue margin loans to their clients at 1:1.
Previously merchant banks and brokerage houses were allowed to give margin loans at 1:1.5. As per the new margin loan ratio, investors will get up to the same amount they have on their own portfolios.
The Bangladesh Securities and Exchange Commission on September 30 last year set a guideline in a bid to manage risk of investment by reducing investors’ too much dependency on margin loans.
In 2009-2010, banks through their subsidiaries like merchant banks disbursed huge amount of margin loans which bubbled the capital market.
After the market crash in 2010-2011, the probe committee in its reports stated excessive margin loans as one of the major problems for the market.
According to the guideline set by the BSEC, the margin loan ratio will decline further in July this year to 1:0.5.
The margin loan ratio for investors declined to 1:1.5 in July last year from 1:2.
The BSEC in January 2011 withdrew itself from regulating margin loan disbursement, saying that it would not set the margin loan ratio but would monitor loan disbursements by the merchant banks and the bourses as per the ratios set by them.
-With New Age input
