The central bank focuses growth of the capital market to ensure a much-needed transition in long-term financing away from the banking system.
Bangladesh Bank (BB) Governor Fazle Kabir spoke of the shift while rolling out Thursday a new monetary policy for the 2022-23 fiscal.
Releasing the monetary policy statement (MPS) that aims to curb inflation without hampering the country's economic growth, he said investors now can transact government securities such as treasury bills and bonds through their BO accounts.
"This may be considered a significant step towards creating a vibrant bond market and increasing the market capital to a large extent," he adds.
To increase the liquidity flow to the share market, he said, the central bank with the assistance of the ministry of finance enhanced the size of small investors' assistance fund to Tk 10.09 billion from Tk 1.53 billion.
Of the fund, an amount of Tk 2.80 billion has already been released, the outgoing BB governor told reporters.
At the same time, accounting treatment for investment is up to Tk 2.0 billion for each bank on the capital market, which helps increase liquidity flow to the market.
To improve the liquidity condition of the capital market, the BB recently specified the criteria for NBFIs' shares, debentures, corporate bonds, mutual-fund units, loans and fees to be considered stock-market investment, according to the MPS.
It says the government has already decided to introduce universal pension scheme for the next fiscal year (FY'24), which is expected to improve the liquidity condition of the market.
"Further improvement in liquidity on the share market will highly depend on expanding investors' base, promoting corporate bonds and enhancing the surveillance activities of the regulator for preserving investors' interests and confidence," it adds.
Economists are critical of long-term, voluminous funding for industries and enterprises from the banking system as it is blamed for NPL buildup and, in cases, forgeries that throw banks into crisis and necessitate bailout.
They think a well-governed capital market is the proper source for such funding in a win-win situation for both investors and borrowers.
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