BB, DSE spur banks to form stocks fund soon
The Bangladesh Bank on Tuesday advised banks to expedite the stock market special fund formation process to revive the market that has been in a fresh round of turmoil since late February.
The board of directors of Dhaka Stock Exchange on Tuesday also urged the banks to invest in the market.
The key index of the DSE, DSEX, lost 602 points in the last 13 sessions with just three positive sessions.
BB executive director and spokesperson Md Serajul Islam told that the central bank gave the advice in line with its policy that was formulated on February 10 to allow each bank to form a Tk 200 crore special fund for the stock market investment.
Under the policy facility for stocks, each bank is allowed to form the special fund either by borrowing money at 5 per cent interest from the central bank or with their own fund.
The special fund, which would not be added to the banks’ capital market exposure, can also be used to lend to the merchant banks and brokerage houses.
A BB circular said that the fund would be valid till February 2025 and the banks would be allowed to take the money under the scope till January 13, 2025.
Serajul said that the banks which had already completed the formation of special fund were advised to commence their investments in the capital market.
Besides, the banks which are in the special fund formation process have been advised to expedite the process, he added.
To this end, a number of senior officials of the central bank talked to several banks and gave the advice, BB sources said.
The BB officials instructed the state-owned banks not to go through lengthy process and complete the process on urgent basis as the country’s capital market faced turmoil on the first two trading sessions of the week.
NCC Bank, Bank Asia and Mercantile Bank informed the BB that the banks would complete the special fund formation process by next week.
Besides, National Bank, Islami Bank, NRB Bank mentioned that proposals on special fund formation would be placed before their boards for approval.
Three banks — UCB, Shahjalal Islami Bank and Sonali Bank — has already informed the BB that they formed the special fund.
Meanwhile, the DSE board on Tuesday held a meeting with the managing directors of the listed banks at its office at Nikunja in Dhaka following a significant fall in the core index of the DSE on Monday.
DSE managing director Kazi Sanaul Hoq said that the board urged the banks to extend support to the market, and advised them to inform the bourse if they faced any inconvenience during their investments, which could be solved at a coordinated meeting with the BB and the BSEC.
He said that the market had been struggling for months, but it rebounded strongly after the prime minister’s direction. The market again saw a significant fall due to the global coronavirus outbreak.
The meeting was called to know the banks’ investment position considering the overall situation.
Sanaul said that the bourse appealed the banks to invest in the market in accordance with the directions given by the PM and the Bangladesh Bank and the response of the banks was positive.
DSE officials said that the board raised the question why the banks were not obeying the PM direction.
Earlier on January 16, a meeting of policymakers in presence of prime minister Sheikh Hasina at the Prime Minister’s Office suggested 6-point proposals including an increase of investment of banks and non-bank financial institutions in the stock market.
