Brokers can now use 75% of interest income from clients

Brokers can now use 75% of interest income from clients’ funds But 25% of the interest income must go to the Investors’ Protection Fund, says a July 3 gazette Stock-brokers and dealers can now use 75 percent of the interest income from the funds of their clients, according to the amended Securities and Exchange Rules, 2020. But there is a condition — the brokers have to deposit 25 percent of the interest income every six months from the consolidated customers' account (CCA) into the Investors' Protection Fund of the respective exchanges. The interest should be deposited within 30 days after the end of each period, according to the gazette published on July 3. Such deposits in the protection fund shall be reported to the respective stock exchanges with intimation to the commission, incorporating details of the calculation and supporting documents within 10 days of such deposit being made. Previously, brokers were supposed to divide interest income among their clients.Then the stockbrokers demanded permission to use the fund as the process of calculating the interest payment is complex. Before 2021, the stockbrokers could use the interest income from the CCA without sharing it with the clients. Domestic banks can now use foreign currency deposits held in offshore banking units as collateral for lending to resident companies, firms, and individuals. In a notice issued Thursday, Bangladesh Bank said that offshore banking units, or OBUs, may accept foreign currency deposits from non-resident Bangladeshi nationals, persons of Bangladeshi origin, foreign nationals, overseas companies and institutions, and foreign investors. From now on, banks can offer loans in local currency against these deposits. In doing so, commercial lenders must verify a legitimate link between the account holder and the borrower. This could include, for example, non-resident Bangladeshis and their relatives or beneficiaries, or foreign investors and their Bangladeshi ventures. According to the circular, non-resident Bangladeshis may also get loans by pledging their foreign currency deposits. Banks may use these deposits to provide short-term working capital loans in local currency Taka and will not be allowed to charge any fees for the use of such collateral. However, they may maintain a margin, if required, to cover potential exchange rate risks. In the event of a default, banks may liquidate the collateral, provided they follow due procedure, according to the notification. The central bank also said that balances held in private foreign currency accounts and non-resident foreign currency deposit accounts are eligible for use as collateral. However, funds kept in international banking accounts maintained with OBUs cannot be used for this purpose.

Industry insiders said foreign-owned firms often struggle to secure collateral locally when seeking credit from Bangladeshi banks. The new policy will support these companies to avail Taka loans against the collateral of foreign currency deposits maintained in Bangladesh by their shareholders or parent companies. They said this will encourage foreign investment in Bangladesh.