The Bangladesh Bank (BB) has extended the tenure of banks' special capital market fund by another 22 months to December next year to help stabilise the country's reeling stock market.
The Department of Off-site Supervision of the central bank in a circular on Tuesday stated that the decision of extension was made based on views from various stock-market-related stakeholders and banks that invested in the special fund, as well as the banking regulator's own evaluation.
The decision was made for the overall stability of the stock market and the country's financial sector, it said.
Within the extended tenure, the circular stated, a specific action plan approved by the board of directors of the respective investor bank must be submitted to the BB within 30 days of the issuance of the circular to gradually reduce the investment balance in the special fund.
The implementation of the action plan must be ensured in a timely and proper manner.
Upon the expiration of the tenure on December 31, 2026, any remaining investments in the fund will be considered part of the capital market investment fund, both on a solo and consolidated basis, in accordance with Section 26 (Ka) of the Bank Companies Act 1991.
The government formed the special fund on February 10, 2020, amid a stock market downturn with a contribution of Tk 2.0 billion from each bank. Banks can borrow from the fund and invest in securities on the bourses.
The fund was formed to help stabilise the stock market by enhancing liquidity flow.
Until December 2024, some 38 banks contributed Tk 60.96 billion to the fund. Besides, the banks borrowed Tk 36.74 billion from the fund and invested in stocks. Since then, a large amount of money remained idle.
Earlier in November last year, the Bangladesh Securities and Exchange Commission (BSEC) sought a five-year extension of the special fund that any bank can use to take loans from the banking regulator to invest in the capital market.
Moreover, the capital market regulator urged the central bank to increase the loan amount to Tk 3.0 billion.
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