The Bangladesh Bank has submitted to the finance ministry a set of proposals, including formation of a Tk 10,000-crore refinancing fund in line with some stockbrokers’ demand to stabilise the ailing capital market.
As per the BB proposal, the fund would be managed by the central bank directly and the banks, merchant banks and brokerage houses would get fund from the BB at the interest rates between 3 per cent and 5 per cent.
In October last year, the stockbrokers, especially the banks’ subsidiary brokerage houses, submitted a proposal to the finance ministry, seeking Tk 10,000 crore in fund at 3 per cent interest rate, to be injected into the capital market.
The cry for the fund has strengthened in recent days amid prolonged downward trend on the country’s capital market, which drew attention of the government’s high-ups.
The central bank made the recommendations to revive the market following the direct intervention of the government.
The proposals are now under the finance ministry’s consideration, said a BB official.
The BB proposed that the ministry form a Tk 10,000-crore refinance fund as the existing rules and regulations do not allow it to issue credit directly to the banks, merchant banks and brokerage houses.
The central bank would issue circular in this regard once the proposal to form the refinance fund is approved.
The investors upon fulfilment of BB’s criteria would be entitled to get the fund from brokerage houses or merchant banks at the interest rates between 7 per cent and 9 per cent.
The finance ministry would decide whether the fund would be created with the government’s own fund or with the central bank’s fund.
Twenty-five stockbrokers in their demand wanted the fund for a period of six years at a flat interest rate of 3 per cent with two years’ grace period.
But, the BB’s rules and regulations do not allow it to issue any fund at below 5 per cent interest, the current bank rate.
The country’s stock market has been in the doldrums for the last 12 months and on January 14 the key index of the Dhaka Stock Exchange, DSEX, hit a 56-month low amid the government’s inaction.
But the government and the BB moved to stabilise the market after the record fall.
On January 16, senior government officials in presence of prime minister Sheikh Hasina held a meeting at the Prime Minister’s Office and discussed measures, including injection of funds, to stabilise the capital market.
Officials of the Bangladesh Securities and Exchange Commission and the finance ministry held the meeting with principal secretary to the PMO Ahmad Kaikaus.
A press release issued by the BSEC said that a meeting of ‘policymakers’ at the PMO ‘directed’ the authorities concerned to implement a 6-point proposals as short-term measures to develop the capital market.
Earlier on September 22 last year, the BB offered repurchase agreement (REPO) facility to the banks at the rate of 6 per cent interest for investments in the capital market.
The facility drew a very little attention as only City Bank took Tk 50 crore under the scope despite the fact that the banks had a scope for borrowing around Tk 3,000 crore from the BB under the facility.
In 2019, the central bank provided banks a couple of policy facilities regarding the capital market, but no improvement in the market situation was observed.
The central bank has excluded banks’ investments into the non-listed securities from their capital market exposure to offer banks more space to invest into the capital market.
Weak governance on the capital market, falling export, import and private sector investments, and dismal state of the banking sector have remained major concerns for investors.
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