Bangladesh’s securities regulator has introduced significant changes to margin lending regulations, a move that market participants say could expand investor access to financing and increase the number of margin-eligible stocks on the country’s stock exchanges.

The revised rules, officially published through a government gazette, relax several restrictions imposed under previous regulations and are already being viewed as a major policy shift aimed at supporting market activity.

Key Changes in the New Margin Loan Framework

Higher P/E Threshold Expands Eligibility

One of the most notable amendments increases the allowable Price-to-Earnings (P/E) ratio threshold for margin eligibility.

Under the revised framework, companies outside the life insurance sector can now qualify for margin financing with a P/E ratio of up to 40, compared with the previous limit of 30.

Market analysts believe this adjustment will significantly increase the number of listed companies whose shares can be used as collateral for margin loans.

New Rules for Life Insurance Stocks

A separate set of criteria has been introduced for life insurance companies.

To qualify for margin financing, life insurance stocks must now maintain a Price-to-Book (P/B) ratio of at least 3. Companies with a negative Net Asset Value (NAV) will not be eligible for margin-backed lending.

Restrictions Remain for High-Risk Companies

Despite the relaxation measures, several safeguards remain in place.

Margin financing will not be available for shares of companies classified under:

• Z Category
• N Category
• G Category

Companies reporting negative earnings per share (EPS) will also remain excluded from margin loan facilities.

Margin Call and Forced Sale Triggers

The updated rules retain capital protection mechanisms for brokerage firms and lenders.

Under the revised framework:

• A margin call will be triggered when an investor’s equity falls to 50% of the portfolio value.
• A forced sale may occur if investor equity declines to 25%.

Market Reacts Positively

The regulatory changes appeared to boost investor sentiment immediately after publication.

During trading following the announcement, a large majority of actively traded stocks recorded gains, pushing benchmark market indices higher. Market participants attributed the positive momentum to expectations that easier access to margin financing could improve liquidity and investor participation.

Brokerage officials described the reforms as more accommodative than many had anticipated, noting that several restrictions introduced under earlier regulations have now been eased or removed.

What It Means for Investors

The revised rules are expected to:

✔ Increase the number of margin-eligible stocks
✔ Improve market liquidity
✔ Expand financing options for investors
✔ Potentially boost trading activity

However, analysts caution that while margin lending can amplify gains, it also increases investment risk during market downturns.