Brokers seek five-year extension of capital market fund

The brokerage association says extending the facility and increasing the ceiling would help address liquidity shortages, strengthen investor confidence and support market stability.

The DSE Brokers Association of Bangladesh (DBA) has urged Bangladesh Bank to extend banks’ special fund for capital market investment by five years until the end of November 2031 and raise the fund size from Tk200 crore to Tk300 crore.

The association made the proposal in a letter to Bangladesh Bank Governor Md Mostaqur Rahman, signed by its president Saiful Islam.

Introduced in 2020 during the Covid-19 pandemic to boost capital market liquidity, the facility allowed each bank to create a Tk200 crore special fund with a five-year tenure. Bangladesh Bank later extended the facility, with its current tenure set to expire on 31 December 2026.

With the expiry approaching, the DBA sought an extension and an increase in the fund size, citing the market’s liquidity shortage amid the current situation and Middle East tensions.

The association said the facility had supported institutional participation, market liquidity and stability, and investor confidence.

“The proposed enhancement and extension would provide continued institutional support, improve market liquidity and depth, strengthen investor confidence, and contribute to the sustainable development of Bangladesh’s capital market,” it said.

Under Bangladesh Bank’s 2020 circular, banks and their subsidiaries could invest through the fund only in stocks that had paid at least a 10% stock or cash dividend, or both, in each of the previous three consecutive years and had at least 30% sponsor/director shareholding.

Following the extension, banks were required to submit a board-approved action plan to Bangladesh Bank within 30 days of the circular’s issuance, outlining how they would gradually reduce their investment exposure under the special fund.

The central bank made timely implementation of the plan mandatory. Once the current tenure ends on 31 December 2026, remaining investments under the fund will be treated as part of the banks’ capital market investment portfolios, on both solo and consolidated bases, in accordance with Section 26K of the Bank Companies Act 1991, according to the circular.

Source: The Business Standard