Banks asked to make fresh investment in stock market

The Bangladesh Securities and Exchange Commission (BSEC) has requested several banks to inject fresh funds in the stocks for the sake of stock market development.

The letter was sent today to the top officials of 28 banks.

"You are aware that investor-base in Bangladesh capital market is mostly dominated by retail investors, whose size is around 80 per cent of total investors," the BSEC letter read.

It is expected that the institutional investors would dominate trading activities instead of the retail ones to improve the stability of the country' stock market, the commission said in the letter.

In this backdrop, Bangladesh Bank approved banks to from a Tk 200 crore special funds to invest in the stock market which will not be included in the calculation of capital market exposure limit.

"Moreover, banks are expected to act as institutional investors and come up with innovative ideas for the sake of their business and stock market development in Bangladesh."

In addition to the above, the bank company act allows a bank to have up to 25 per cent of its capital—which includes paid-up capital, share premium, statutory reserve and retained earnings—as its stock market exposure.

But it is observed that many banks' exposure limit generally remained below the limit.

Hence, the BSEC has requested for taking necessary steps so that banks make fresh investment within the scope to support the capital market.