Margin Loans Explained: How They Work and the Risks Every Investor Should Know
A margin loan lets you buy more shares than your own money allows. That sounds attractive when prices are rising. But borrowed money works in both directions: it makes losses bigger and faster, too. This guide explains how margin works on the Dhaka Stock Exchange, what the current rules say, and the risks you should understand before you borrow a single taka.
What is a margin loan?
A margin loan is credit given by your stockbroker or merchant bank so you can buy listed shares. The shares you own, and the shares you buy with the loan, are held as security for that loan.
In Bangladesh, margin accounts are governed by the Bangladesh Securities and Exchange Commission (BSEC) (Margin) Rules, 2025. A revised version of these rules was gazetted in August 2026. You need a margin agreement with your broker, and you keep a separate margin account alongside your regular cash account.
How buying power is calculated
Your buying power is your own equity plus the loan your broker is allowed to give you. Your equity is the market value of your portfolio minus what you owe.
Under the revised rules, the maximum ratio is 1:1. That means if you have Tk 3 lakh of your own equity, you can borrow up to Tk 3 lakh more, giving total buying power of Tk 6 lakh. This is the ceiling, not a target. Your broker can offer less, depending on its own policy and your profile.
The loan can only be used to buy marginable shares. You can try the numbers yourself with Mika’s margin simulator on our margin loan page (also available in Bangla).
The current BSEC margin rules
According to reports on the revised rules gazetted in August 2026, the key points are:
- Maximum ratio: 1:1 of the investor’s equity.
- Minimum investment: you need at least Tk 3 lakh invested in the secondary market to qualify, down from Tk 5 lakh under the earlier rules.
- Which shares qualify: A and B category shares with a P/E ratio of up to 40, based on the latest four quarters of earnings. Life insurers face a price-to-book cap of 3 instead.
- Which shares never qualify: G, N and Z category shares, and securities on the SME board, ATB and OTC market.
- Margin call: triggered when your equity falls below 50% of the loan amount. You then have three working days to add money.
- Forced sale: if your equity falls below 25% of the loan, the lender may sell your shares without notice.
- Concentration: a lender’s exposure to any single security is capped at 20% of its total margin portfolio.
Rules can change, and the regulator has amended them more than once in recent years. Always confirm the latest position with your broker before you sign a margin agreement.
Interest on margin
A margin loan is not free money. You pay interest on the amount you borrow for as long as it is outstanding, whether your shares go up or down. Interest is charged to your account and reduces your equity over time.
This matters more than many investors expect. If your shares go nowhere for a year, you still owe a year of interest. Before borrowing, ask your broker for the exact rate and how it is charged, and work out whether your expected return can realistically beat it.
Equity ratio, margin call and forced sale: a worked example
The equity ratio here compares your own equity with the loan. When it falls, the broker steps in. Let’s see how quickly that can happen.
Investor A has Tk 1,00,000 and borrows Tk 1,00,000 (1:1). Portfolio: Tk 2,00,000.
Investor B has Tk 1,00,000 and borrows Tk 50,000 (1:0.5). Portfolio: Tk 1,50,000.
Investor C has Tk 1,00,000 and does not borrow.
| Market fall | A: equity left (1:1) | B: equity left (1:0.5) | C: no margin |
|---|---|---|---|
| 10% | Tk 80,000 (−20%) | Tk 85,000 (−15%) | Tk 90,000 (−10%) |
| 20% | Tk 60,000 (−40%) | Tk 70,000 (−30%) | Tk 80,000 (−20%) |
| 25% | Tk 50,000 (−50%) | Tk 62,500 (−37.5%) | Tk 75,000 (−25%) |
| 30% | Tk 40,000 (−60%) | Tk 55,000 (−45%) | Tk 70,000 (−30%) |
These figures ignore interest and charges, which would make the leveraged results worse.
Look at Investor A. A 25% fall in share prices halves her money. At that point her equity (Tk 50,000) equals 50% of her loan, so a margin call arrives. At a 30% fall she has lost 60% of her own capital. If prices fall about 37.5% from her purchase price, her equity drops to 25% of the loan and the broker can sell her shares without warning, locking in a loss of three-quarters of her money.
Investor B, with lower leverage, still loses 45% on a 30% fall. Investor C loses 30%, which is painful, but he keeps all his shares and can wait for a recovery. That choice to wait is exactly what margin can take away from you.
The lesson of 2010-11
Bangladesh has already lived through what happens when margin gets out of hand. Before the 2010-11 crash, lenders gave margin loans aggressively. The regulator first allowed 1:1 lending and later 1:1.5, and some lenders went as far as 1:2 or 1:3. Much of the 2010 rally was fuelled by borrowed money.
When prices collapsed, leveraged investors were hit hardest. Selling pressure deepened the fall, and in many accounts the value of shares dropped below the loan itself. This is called negative equity: the investor’s own money is gone, and there is still debt left over.
The damage lasted for years. Negative equity in the market exceeded Tk 81 billion by December 2020. As of May 2026, brokers and merchant banks still carried about Tk 78 billion in negative-equity loan principal, according to The Financial Express. Many investors from that era never recovered their capital.
Rules of thumb for using margin safely
If you decide margin is right for you, these habits reduce the risk:
- Borrow small. The legal limit is 1:1, but you do not have to use it. A much lower ratio gives you far more room before a margin call.
- Stick to fundamentally strong, marginable shares. Choose companies with real earnings, reasonable valuations and regular trading, not rumour-driven stocks.
- Keep a cash buffer. Hold cash outside the market so you can meet a margin call without being forced to sell at the bottom.
- Never use margin for IPO speculation or for chasing short-term price spikes.
- Spread your risk. Do not put your whole margin position in one share or one sector.
- Count the interest. Include it in every calculation of expected return.
- Watch your equity ratio regularly, especially in volatile markets, and reduce the loan early rather than late.
Who should never use margin
- New investors still learning how the market works.
- Anyone investing money they will need for family expenses, education, medical needs or emergencies.
- Anyone without spare cash to meet a margin call within three working days.
- People who cannot watch their account regularly.
- Anyone who would feel pressured to “win back” losses quickly.
If any of these describes you, a plain cash account is the better choice. Growing your savings slowly is far better than losing them quickly.
Mika Securities has been a DSE member (TREC No. 215) since 2005 and a CDBL depository participant, with 26 offices across the country. Our aim is for clients to understand risk before taking it. If you are new, you can open a BO account online and start with a cash account. You can also talk to our team about whether margin suits you at all.
Frequently asked questions
Can I lose more than the money I invested?
Yes. If prices fall sharply, especially when the market moves too fast for shares to be sold in time, your shares can end up worth less than your loan. You would still owe the remaining debt plus interest. This is what happened to many investors in 2010-11.
How do I know if a share is marginable?
Under the revised rules, A and B category shares with a P/E of up to 40 can qualify, while G, N, Z, SME, ATB and OTC securities cannot. The list changes as prices and earnings change, so check with your broker before buying.
What happens if I ignore a margin call?
If you do not add money within three working days, your broker may sell your shares to bring your equity back to the required level. If equity falls below 25% of the loan, shares can be sold without any notice at all.
Do I need margin to invest in shares?
No. Most long-term investors do well with a cash account alone. Margin is an optional tool for experienced investors who understand the risks and can afford them.
This article is for general education only and is not investment advice. Investment carries risk; past performance does not guarantee future returns. Figures cited are from public sources as of October 2026.