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Capital market investment

BB prods banks on special funds

SIDDIQUE ISLAM | March 11, 2020 00:00:00

The central bank has advised more than a dozen of scheduled banks to expedite the ongoing process of creating their special funds for investment in the capital market.

In the latest move, Bangladesh Bank (BB) Governor Fazle Kabir and other high-ups communicated the advice to both public and private banks on Tuesday, according to officials.

Out of the six state-owned commercial banks (SoCBs), the chairmen and managing directors (MDs) and chief executive officers (CEOs) of four SoCBs received the advice.

In the moral suasion, the central bank high-ups asked the banks concerned to go for investment immediately avoiding procedural barriers, the officials said.

Sonali Bank Limited and Rupali Bank Limited have already set up their special funds in line with the BB's latest advice to revive the country's ailing capital market.

On February 10, the central bank allowed all scheduled banks to create a special fund of Tk 2.0 billion each with a five-year tenure only for investment in the capital market.

As per the latest arrangement, the banks may form the special fund with their own resources or with funds received from the BB through repo or re-financing mechanism.

Such investment will not be included in the banks' capital market exposures, both on solo and consolidated basis, until February 2025, according to the notification issued by the BB.

Talking to the FE, a senior Sonali Bank official said they have completed all formalities to create the special fund.

He also expected that the fund will have a positive impact on the capital market in the near future.

Besides, three private commercial banks (PCBs) -- the City Bank, United Commercial Bank (UCB) and Shahjalal Islami Bank -- have also set up the funds.

Six more PCBs are now making preparations to create the special funds within the next week, according to banking sector insiders.

The PCBs are National Credit and Commerce (NCC) Bank, Bank Asia, Mercantile Bank, NRB Bank and National Bank, they added.

The BB's latest move came against the backdrop of a free fall in share prices in recent days despite the government's various measures taken to prop up the market.

DSEX, the prime index of the Dhaka Stock Exchange, lost 178 points in three sessions from Wednesday to Sunday. And on Monday, the DSEX experienced the biggest single-day fall of 279 points, as almost 99.99 per cent of listed securities closed in the red.

"We've taken the measures to provide faster supports to the capital market to restore the confidence of general investors," a BB official explained the main objective of the latest moves.

He also said the central bank is now working to bring about sustainable development of the capital market.

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