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The Bangladesh Bank (BB) has instructed the banks for sanctioning loan only against dematerialised (demat) shares instead of paper scrip of the listed companies to avoid financial risks, official sources said.
The central bank took the measure in line with the decision of a meeting, held on August 17, 2005 with the Securities and Exchange Commission (SEC) to protect the interest of investors.
Share certificates of 81 listed companies out of a total of 284 have already been transferred to the central depository system (CDS), run by the Central Depository Bangladesh Limited (CDBL). Dematerialisation means replacement of paper share certificates and records by electronic screen storage.
The BB has already issued a circular in this connection and asked the chief executives of all scheduled banks to follow the instructions for sanctioning such loans.
"We have asked the banks to sanction loans against only 'demat' shares of the listed companies to avoid financial risks," a BB senior official told the FE, adding that the new provisions will help the banks recover their loans.
Sources, however, said some banks are facing problems to recover their loans that have been sanctioned earlier against paper scrips of the listed companies.
The banks also face legal complexities for recovering loans from a section of borrowers, who became defaulters for not adjusting their loan portfolios as per the instruction of banks concerned.
"Shares of all listed companies must be converted into the demat forms from the existing paper securities in phases," a SEC senior official told the FE Wednesday, adding that both investors and banks will be benefited from the latest move of the central bank.
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