According to the circular, issued by the Department of Offsite Supervision (DOS), banks will get the liquidity support through special repo (repurchase agreement) facility at the rate of six (6) percent interest for a 28-day period, which may be extended in rotation up to maximum six months
Bangladesh Bank (BB) has announced a fresh liquidity support for banks to raise their respective portfolios in the capital market up to the regulatory limit directly or through subsidiaries, says a BB circular issued on Sunday.
According to the circular, issued by the Department of Offsite Supervision (DOS), banks will get the liquidity support through special repo (repurchase agreement) facility at the rate of six (6) percent interest for a 28-day period, which may be extended in rotation up to maximum six months.
Banks will need to apply to the BB within three months from the date (September 22, 2019) of issuance of the circular to avail this special liquidity facility.
Banks will also require to open new beneficiary owner (BO) account separately to utilise the BB's fresh liquidity facility, the circular adds.
By this liquidity support, a bank would not be allowed to surpass regulatory limit of stock market exposure.
It says that banks can follow either the exposure limit of 25% of respective capital or 50% of aggregated capital base of parent and subsidiaries as per their convenience.
Under the Banking Companies Act 1991, which was amended in 2013, a bank's capital includes paid-up capital, share premium, statutory reserve and retained earnings.
The BB's special liquidity facility for banks appeared to be an incentive to boost trading at the capital market that is going through a huge fall in prices for the past few months.
Operators say investors' panic sale for the last few weeks added woes to the capital market.
On September 16 last, Finance Minister AHM Mustafa Kamal said that his government, under the directive of Prime Minister Sheikh Hasina, was striving to rejuvenate the crumbling capital market by providing various incentives and policy supports.
His statement came after he held an emergency meeting with capital market stakeholders at the planning ministry.
The finance minister also told the media that coordinated steps from the World Bank and the regulatory authorities were underway to remove persistent hurdles and challenges in the capital market by establishing good governance.
He said initiatives were also underway to bring good companies' shares into the market.
Last week alone, the country's premier bourse, Dhaka Stock Exchange (DSE), plunged below 5,000-point mark. The broad index of DSE lost 20.68 points to stand at 4,986 points, which was six-week low.
The DSEX lost 229 points in last 14 trading days or since reopening after Eid-ul-Azha celebrations.
The market has lost Tk15,063 crore in capitalization, the DSE data shows.
The market, however, experienced a moderate rise of 64 points in the index.