Stock brokers seek extension of bank liquidity scheme

The DSE Brokers Association of Bangladesh (DBA) has urged the Bangladesh Bank to extend the tenure of its special liquidity support scheme for commercial banks by five years and raise the funding limit for each bank to Tk 300 crore from Tk 200 crore.

DBA President Saiful Islam submitted a formal letter containing the proposals to the Bangladesh Bank governor on Tuesday.

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In February 2020, the central bank allowed banks to form special funds, with some banks taking low-cost loans from the central bank for the purpose. The funds were initially set to remain in place until February 2025.

Following requests from market stakeholders, the banking regulator extended the tenure until November 30, 2026 last year, while instructing banks to gradually reduce their investments from the funds during the extended period.

However, stock market stakeholders fear that returning the funds to Bangladesh Bank after the deadline could further strain liquidity in the market. The DBA has therefore sought another five-year extension.

The association said the measures are crucial to addressing the ongoing liquidity crunch in the capital market, boosting institutional participation and restoring investor confidence, according to a press release issued yesterday.

The special fund facility, introduced to strengthen institutional investment and market stability, currently allows each scheduled bank to form a fund of up to Tk 200 crore for investment in the stock market.

The DBA said the facility should not be withdrawn amid current liquidity pressures and broader global uncertainties stemming from geopolitical tensions in the Middle East.

Expanding the fund’s size and extending its tenure would deepen the market, increase institutional liquidity and create a foundation for sustainable growth in the country’s capital market, it said.

The association said it was hopeful that Bangladesh Bank would consider its proposals in light of current economic and market conditions.

It also said it remains committed to working with the central bank and other market regulators to support the government’s financial sector development goals.