Capital market investors can now buy and sell government securities through the Dhaka Stock Exchange in a development that is expected to make the country's bond market active.
The decision came at the quarterly coordination meeting of regulators -- Bangladesh Bank, Bangladesh Securities and Exchange Commission, Insurance Development and Regulatory Authority, Registrar of Joint Stock Companies and Firms, Microcredit Regulatory Authority, Department of Cooperatives and Bangladesh Telecommunication Regulatory Commission held Sunday.
The meeting held at the BB decided that the central bank's Market Infrastructure Module will be linked with the DSE so that investors can buy and sell government securities through the stock market, according to a BB official.
As per a regulation set by the National Board of Revenue, investors will have to count 0.05 percent tax if they settle any transaction of government securities through the trading platform.
“Such tax may discourage investors to settle transactions through the DSE,” the official said.
So, the BB and the BSEC will jointly request the NBR to withdraw the tax for the sake of making the secondary bond market vibrant, he said.
The overall investment in the secondary bond market now stands at about Tk 140,000 crore, which is poor considering the volume of the country's private sector.
The higher interest rate on national savings certificates made the secondary bond market unappealing, as the government was forced to squeeze its auction for its securities due to a large investment in the savings tools.
The government is now borrowing through the savings tools that carry interest rates of 11.04 percent to 11.76 percent. It can also take loans from banks at 2.95 percent to 8.07 percent interest.
Banks, non-bank financial institutions, government and non-government organisations and corporate entities are allowed to invest in the secondary bond market through a bank.
The BSEC earlier requested the central bank to allow banks to show their investment in the corporate bonds as liquidity coverage ratio of BASEL III.
The central bank informed the BSEC at the meeting that the issue has been accepted positively and it would take a decision at the earliest.