March 19, 2024, 9:48 am


SAMI

Published:
2020-03-17 22:36:47 BdST

Banks to invest in stock market from tomorrow


FT ONLINE 

The banks, particularly private commercial banks (PCBs), have agreed to invest in the share market from Wednesday by creating special funds for revival of the ailing capital market.

The decision came at a meeting of the chairmen and managing directors of all the banks - both public and private ones-with Finance Minister AHM Mustafa Kamal at the NEC auditorium in the capital on Monday.

Several issues including liquidity situation on the country's banking system, possible impacts and remedy of the coronavirus outbreak especially on the capital market came up at the meeting for discussion.

At the meeting, the Bangladesh Bank (BB) high-ups said that there is no liquidity pressure on the market right now as the excess liquidity in the country's banking system stood nearly at Tk 1.05 trillion.

Banks' excess liquidity had crossed the Tk 1.0 trillion-mark again in December, fuelled by lower private credit growth, showing a sign that the investment situation has cooled.

Surplus cash surged by nearly 19 per cent to Tk 1,056.46 billion as of December 31, 2019 from Tk 889.50 billion three months before, according to the central bank's latest statistics. The amount was Tk 1,119.10 billion as of March 30, 2017.

In that liquidity situation, the banks have assured the meeting that they will invest in the share market with formation of special funds to help bring stability through restoring the confidence of investors in the market.

The bankers gave assurance when stocks witnessed yet another steep fall on Monday as worried investors continued their sell-off amid growing concern over the impacts of the coronavirus outbreak.

The DSEX, the prime index of the Dhaka Stock Exchange (DSE), plunged 196.75 points, or 4.95 per cent, to close at 3,772, lowest in six and a half years since October 21, 2013.

The DSE key index lost 986 points, wiping out market capitalisation of Tk 608 billion in 18 trading days as panic gripped investors.

"The banks have assured that they will invest in the capital market to overcome the ongoing situation," the finance minister told reporters after the meeting.

He also said investment in the capital market will have to be increased for bringing the market at a desired stable level.

"We're working to keep the country's ongoing economic activities running, considering the coronavirus outbreak," Mr Kamal said while replying to a query.

"All the banks have agreed to start buying shares by creating special funds from Wednesday," said Nazrul Islam Mazumder, chairman of the Bangladesh Association of Banks (BAB).

The banks will invest such funds in the capital market gradually, the BAB chief added. "We've discussed the formation of special fund only for investment in the capital market at the meeting," Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh (ABB), told reporters.

The ABB has welcomed the BB's latest move, saying that it's market-friendly that will also help bring stability in the market.

"We expect that three more banks would create their special funds this week," a BB senior official said.

These banks are National Credit and Commerce (NCC) Bank, Bank Asia and Mercantile Bank. Nine banks have already created their special funds in line with the BB's advice, he added.

On February 10, the central bank allowed all scheduled banks to create a special fund of Tk 2.0 billion each with the five-year tenure only for investment in the capital market.

As per the latest arrangements, the banks may form the special fund with their own resources or with funds received from the BB through repo or re-financing mechanism.

Such investment will not be included in the banks' capital market exposures, both on solo and consolidated basis, until February 2025, according to a notification issued by the BB.

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