Only 23 banks out of 60 have formed special funds worth Tk 2,622 crore for investing in the capital market
The bourse just had a vintage year in 2020, with the good run continuing well into the new year, thanks in part to the new commission’s deft handling of Bangladesh’s capital market.
And yet, banks, which are not minting money for the pandemic, are hesitant about jumping into stock market investment.
When the bourse was having a dry spell in the first quarter of last year, the Bangladesh Bank had ordered banks to form a special fund to invest in the stock market and prop it up.
Only 23 banks out of 60 have formed special funds worth Tk 2,622 crore for investing in the capital market complying with a central bank directive on February 10 last year to shore up the volatile market.
However, the lenders invested only 35 per cent of the funds as of January 15, as per the central bank’s latest data.
The banks are Sonali, Janata, Rupali, United Commercial, Shahjalal Islami, City, Islami, Social Islami, Pubali, Exim, Dhaka, NCC, AB, Mercantile, Mutual Trust, Southeast, Uttara and NRBC.
“The funds will boost investor confidence,” said a high official of the BB seeking anonymity.
As per the BB directive, banks had to form a Tk 200-crore special fund each by taking low-interest loans from the central bank.
The fund would be valid until February 2025 and the banks would be allowed to take money under the scope until January 13 of that year.
A bank can create such funds from its own resources or with financing received from the BB through the repo or re-financing schemes, as per the BB guidelines on the fund.
The fund could be invested in equity shares, mutual funds, bonds or debentures, and special purpose funds, but maintaining the prescribed criteria.
But most of the banks have put in Tk 50 crore to Tk 100 crore each towards the end.
Rupali, UCB, Pubali and Janata bank have invested a good amount.
As of yesterday, Rupali invested Tk 106 crore, said a high official of the bank.
Mercantile formed a Tk 80 crore special fund for the stock market but invested only Tk 1.5 crore so far.
The bank has decided to increase its fund for the market, said its additional managing director Mati Ul Hasan.
“We have set up the fund and invested a good amount of the fund to the stock market in line with the BB directives,” said Jasmine Sultana, deputy chief executive officer of Sonali Investment.
All the banks should form the funds and invest in the stock market, said Abu Ahmed, a stock market analyst and former economics professor at the University of Dhaka.
The banks should also have formed the special fund earlier when investors faced a confidence crisis owing to the ailing situation of the market, he said, adding that the present situation of the market is much better than before.
Most of the banks are still emphasising on their credit business but they should come to the stock market as it is very lucrative now, Ahmed said, adding that officials should be trained on investing in the bourse.
Sayadur Rahman, president of the Bangladesh Merchant Bankers Association, expects the banks to come to the market gradually.
Already, they formed a good amount of funds despite various complexities including the ongoing pandemic.