Merchant banks yesterday urged the National Board of Revenue (NBR) to incorporate interest waiver and margin loan impairment costs into expenses for small investors.

“Fair treatment of impairment and waiver in tax will allow merchant banks to mitigate the impact of negative equity in client portfolio,” said Mohammad A Hafiz, president of Bangladesh Merchant Bankers Association (BMBA).

Merchant banks need loan rescheduling at 10 percent rate and capital support by way of a refinancing scheme of Tk 900 crore to implement the investors' incentive package, Hafiz said at a seminar, 'Solving the Merchant Banks' Fund Crisis' at Hotel Purbani International in the city.

“The refinancing scheme will perk up the trading activities of merchant banks,” he said.

Hafiz said that around Tk 5,500 crore of margin loans, as per BMBA estimates, is stuck due to the market downturn, and is on the verge of becoming bad loans.

“Some valued clients now have negative equity,” said Hafiz, laying bare the damages caused by the market downswing.

Due to the margin loan rescheduling and interest waiver, merchant banks will have to incur a loss of Tk 340.75 crore over the next three years, he added.

The small investors, who lost money to market downswings in 2011, will get a waiver of 50 percent of interest on their margin loans.

“The securities regulator should allow premium IPOs (initial public offerings) to be listed on the bourses to increase the supply of good shares to the market,” said Akter H Sannamat, managing director and chief executive officer of Union Capital.

The good companies will not be interested in listing otherwise, said Sannamat.

He also asked for a special IPO quota for institutional investors on the grounds that prices would be more stable if the institutional investors are allowed to fix them.

The Daily Star/Bangladesh/ 1st Aug 2012