The securities regulator has requested 28 banks to form a special fund of Tk 2.0 billion each and invest it in the stock market.
Investments from the funds will not be considered the banks' capital-market exposure, according to a letter signed by BSEC executive director Mohammad Rezaul Karim and sent to the banks on Wednesday.
The Banking Companies Act 1991 (amended) allows a bank's stock market exposure up to 25 per cent of its capital -- paid-up capital, share premium, statutory reserve and retained earnings.
Currently, many banks' exposure to the market remained much below the limit, said the BSEC (Bangladesh Securities and Exchange Commission).
"We are requesting you [banks] to take necessary initiatives so that your bank makes fresh investment within your existing scope to support the capital market and be a motivation for others," the letter reads.
It pointed out that the country's stock market is highly dominated by retail investors who are not professional ones; they buy stocks whimsically and get them involved in panic sales to often make the market volatile.
By contrast, it added, the banks are professional investors and help keep the market stable.
It's a great pleasure for the regulator to facilitate mobilising primary capital through listing the banks and issuing rights shares, and to strengthen the bank's additional Tier-I and Tier-II capital base through approving applications for issuing bonds, the regulator said in its letter.
The 28 banks are yet to form the fund worth Tk. 2.0 billion each.
There are 33 banks that have already formed such funds by giving Tk. 2.0 billion each, under a directive of the central bank, only for capital market.
Bangladesh Bank in February, 2020 allowed the banks to form the funds for a period of five years for investment in the capital market.
jasimharoon@yahoo.com