Brokerage houses, merchant banks, and stock market subsidiaries of banks and financial institutions will get access to the fund through the scheduled banks
Bangladesh Bank on Monday allowed scheduled banks to form a special fund of Tk200 crore with a 5-7% interest rate for banks to borrow from, to invest in the stock market in an attempt to boost the sagging capital market.
The central bank issued a circular to the managing directors and chief executive officers (CEO) of all scheduled banks in the country in this regard on Monday.
The fund would be formed by banks’ own sources or would be collected from the central bank through repo of Treasury bill or bond, as per the circular.
Brokerage houses, merchant banks, and stock market subsidiaries of banks and financial institutions will get access to the fund through the scheduled banks, it added.
Scheduled banks can borrow from the fund at a 5% interest rate while brokerage houses, merchant banks, and stock market subsidiaries of banks and financial institutions can borrow at 7%.
The fund would be valid till February 9, 2025. Fresh investments made by the banks under the facility would not be calculated as their solo or consolidated basis capital market exposure.
As per the circular, the banks cannot buy shares of its own company. The banks would buy a minimum 2% share of other financial institutions.
To keep the fresh investments out of exposure, Bangladesh Bank (BB) also waived the relevant clause of the Bank Company Act, 1991, for five years.
As per BB data, scheduled banks hold government treasury bills and bonds worth Tk1,95,155.49 crore as of January this year.
Bangladesh Merchant Bankers’ Association (BMBA) President Sayedur Rahman told Dhaka Tribune that the initiative is a long-term support for the county’s ailing stock market. “We believe that this fund will play a supportive role in the market for a long time. It is also good news for general investors.”
“If the banks comply with the Bangladesh Bank circular, then it would create a fund worth around Tk12,600 crore to invest in the stock market,” Sayed, also EBL Securities CEO, said.
Earlier, stockbrokers, especially the subsidiary brokerage houses of banks, had submitted a proposal to the finance ministry seeking Tk10,000 crore to inject into the capital market.