The Bangladesh Bank (BB) has extended the timeframe by one more year to bring the commercial banks' overexposure limit on the capital market to the permissible level.
The central bank's Department of Off-Site Supervision (DOS) issued a circular to this effect on Monday.
With the latest directive, the banks, making excess investment in the capital market until August 2022, would get time until December 2023 to adjust it to the permissible level.
As per the Bank Companies Act 1991, the banks can invest up to 25 per cent of their equity in the listed securities on a solo basis and 50 per cent on a consolidated basis.
The circular is equally effective for the banks holding the shares -collective or individual - of other companies exceeding the permissible limit.
On August 4, the BB issued another circular - allowing the banks to calculate their exposure on the basis of cost prices of the stocks instead of market prices.
The banks requested the central bank to allow calculation of their exposure based on cost prices, so that they could invest more in the capital market.
Meanwhile, strongly opposing the central bank's latest extension, economists said it would not bring any positive outcome to the country's capital market.
When asked, Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur said instead of such extension, measures should be taken to bring the banks' excess investment in the share market under accountability.
"The central bank could have immediately brought to book those who have invested beyond the limit. It is not wise to promote wrongdoings."
He also suggested prudent steps to check such avenues in the future for the sake of the capital market.
