The Financial Express
Swasti Lankabangla Swasti Lankabangla

BB special funds for capital market: Lukewarm investment response from banks

| Updated: August 12, 2020 11:11:26

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The country's capital market has so far received poor response in terms of investment from the banks under a special initiative of the central bank to help stimulate the ailing stock market, officials said.

It has so far witnessed only Tk 2.54 billion in investment made from the special funds created by different banks, they said, following a circular issued by Bangladesh Bank (BB) in February last.

According to the circular, the scheduled banks were supposed to create a five-year special fund of Tk 2.0 billion each for investing in the capital market.

The BB had taken the initiative amid demand from the market intermediaries for a special investment fund of Tk 100 billion to support the market, which was going through liquidity shortage.

However, only 15 banks, including four state-owned ones, have so far made the investment from a fund worth Tk 16.50 billion they created in response to the BB's initiative, said an official at the BB.

"Fifteen banks have so far obtained the central bank's consent to invest in the capital market and their cumulative investment now stands at Tk 2.54 billion," he said. "We've not yet received investment proposals from other banks."

The officials at the Bangladesh Securities and Exchange Commission (BSEC) said the investment from the banks' special fund still remained insignificant as compared to the expectation.

"The total amount of the special fund is supposed to cross Tk 80 billion," said a BSEC official, adding that the amount of special fund and its investment still remained poor.

Earlier, the securities regulator sought information from the banks about creation of the special fund and its investment.

The BSEC official said that 41 banks, including 25 listed ones, have submitted the information to the securities regulator. "Many banks have said they are trying to create it."

President of Bangladesh Merchant Bankers Association (BMBA) Sayadur Rahman expected that the banks would come to the market gradually.

"The banks will invest in the capital market due to various reasons, including the fall of call money rate.

We are optimistic about the banks' investment in the market," he said.

According to the BB circular, a bank can create such fund from its own resources or with financing received from the BB through the repo or re-financing schemes.

The fund could be invested in equity shares, mutual funds, bonds or debentures, and special purpose funds, but maintaining the prescribed criteria.

And, the banks will not need to make any provision for a decrease in the market value of their investments.

Initially, many banks were not interested to create the special fund due to various reasons, including the fate of investments due to volatility in the capital market.

However, some banks have created the fund through taking their respective boards' approval.

Insiders said, many banks had adopted wait-and-see policy in forming the special fund due to the outbreak of coronavirus.


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