BSEC revokes margin loans based on index

The Bangladesh Securities and Exchange Commission (BSEC) has allowed brokers to extend credit facilities to their clients based on PE ratio, revoking its earlier directive on providing margin loans based on the benchmark index.

Considering the interest, the brokers of the stock exchange are allowed to extend the maximum limit of credit facilities to their clients for any individual stock having a price-earnings ratio up to 40, said a BSEC directive on Monday.

That means an investor will get 80 paisa against the investment of Tk 1 up to the level of the PE ratio. The new directive will go into effect from today.

On August 14, the BSEC directed the brokers of the stock exchange to extend the maximum limit of credit facilities to their clients at a maximum ratio of 1:0.80 if the DSE benchmark index, DSEX, remains below 8,000 points, while the margin loan ratio will be 1:0.05 if the DSEX remains above 8,000 points, according to the directive.

In April, the regulator increased the margin credit limit from 1: 0.50 to 1: 0.80 to the DSEX 7,000 points.

On September 21 last year, the BSEC first framed new margin loan norms in coordination with the index. Previously, the margin ratio was 1: 0.50.

The brokerage houses and merchant banks were allowed to lend margin loans to their clients at a maximum rate of 1: 1 when the DSEX index remained below 4,000.