Seven banks form Tk1400cr special fund for stock market

The banks concerned are expected to invest their funds in the capital market from next week

Seven state-owned and private commercial banks have formed special fund of Tk200 crore each to prop up the wobbly stock market, a top Bangladesh Bank (BB) official has told.

The seven banks, out of 60, formed their funds in compliance with an instruction from the BB, served last month to all banks in the country.

The banks concerned were expected to invest their funds in the capital market from next week, sources said.

The banks are Sonali Bank, Janata Bank, Rupali Bank, United Commercial Bank, Shahjalal Islami Bank, The City Bank and Islami Bank Bangladesh informed the Bangladesh Bank(BB) this week about their fund creation, said a high official of the central bank.

He said the banks set up special fund worth Tk200crore each, taking the combined size of the special funds meant for the capital market to Tk1,400 crore.

Confirming the special fund formation, Sonali Investment Ltd Deputy Chief Executive Officer Jasmine Sultana said, ‘We have set up the fund recently for investment in stocks in line with the BB directives.’

Apart from the seven banks, several other banks, including Bank Asia, Mercantile Bank and NCC Bank were undergoing the process to set up the special funds soon, sources in the banking sector said.

Bangladesh Bank spokesperson and Executive Director Serajul Islam said the BB had asked banks to set up the fund in line with the BB policy to shore up the ailing stock market.

He hoped the market would revive soon with the injection of fresh liquidity through the banks’ special funds.

On February 10, BB allowed scheduled banks to form their special fund worth Tk200 crore each to invest in the stock market in an attempt to boost the sagging capital market.

The fund could be formed by banks’ own sources or through collecting liquidity from the central bank through repo of Treasury bills or bonds.

Brokerage houses, merchant banks, and stock market subsidiaries of banks and financial institutions would get access to the fund through the scheduled banks, the BB circular elaborated.

Scheduled banks can borrow from the BB at a 5% interest rate while brokerage houses, merchant banks, and stock market subsidiaries of banks and financial institutions can borrow from the scheduled banks at 7%.

The fund will remain valid untill February 9, 2025.