Despite BB instruction, banks are shy of capital market investment

Though the investment volume of banks in the capital market has increased, many are still far away from their investment limit, reports UNB.

Despite the policy relaxation and enforcement of Bangladesh Bank (BB), 36 out of 61 scheduled banks of the country have invested in the stock market.

Md Serajul Islam, executive director and BB spokesperson told UNB that the central bank set a target for banks to invest in the capital markets.

Though the BB set a limit on investment in the share market, the banks are ignoring it as the compliance is not obligatory by law, he said.

The latest data found that 36 banks constituted special funds worth Tk 57.20 billion (5720 crore) so far to invest in the capital markets far below the permitted limit of Tk 72 billion (7200 crore).

Of the fund, Tk 14.0 billion (1400 crore) has been invested in 'sukuk bond', a bond that conforms to Islamic strictures on the prohibition of charging or paying interest.

The central bank relaxed policy for scheduled banks to invest in the share markets on August 31, 2021, after the finance ministry's instructions in this regard.

The banks have now a ready fund of Tk 22.30 billion (2230 crore) for investing in share markets any time.

Banks have certain limits on investing in the capital market. A bank can invest up to 25 per cent of its regulatory capital in the capital market. But to increase the liquidity flow in the capital market, Bangladesh Bank suggests an additional investment of up to Tk 2.0 billion (200 crore) for a bank out of this fund.

But the banks did not go up to the approved size to invest in the capital market. Banks can still add more Tk 14.8 billion (1,480 crore) to the special funds if they wish, the BB sources said.

Prof Shibli Rubayat-Ul-Islam, Chairman, Bangladesh Securities and Exchange Commission (BSEC) told this correspondent that the capital market would be strengthened if the banks' stock market investment limit was fully utilised.

He also urged the banks to help build a stable and investment-friendly capital market.

However, the Chief Executive Officer of a 4th generation bank told UNB that banks needed to secure the interest of depositors first before investing money anywhere.

Wishing not to be named he said there were any shares, but for lack of good shares they could not invest money in the capital market.

He suggested increasing the number of good and credible companies in the market to attract investment from the banks.