Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has allowed all scheduled banks to create a special fund worth BDT 2.0 billion each of five-year tenure, only for investment in the capital market.
Under the fresh policy, the banks may form the special fund with their own resources or with fund received from the Bangladesh Bank (BB) through repo or re-financing mechanism, according to an eight-page notification, issued by the BB on Sunday.
Such investment will not be included in the banks’ capital market exposures, both on solo and consolidated basis, until February 2025, it added.
Besides, the banks will be eligible for suspension of marking to market valuation for such investment during the tenure.
It means that the banks will not have to make any provision for decrease in market value of their investment.
The special fund will be allowed to invest in equity shares, mutual funds, bonds or debentures, and special purpose funds by maintaining the prescribed criteria.
Under the mechanism, the banks may lend money to share market intermediaries by charging maximum 7.0 per cent interest rate.
On the other hand, the banks will be eligible to get repo (repurchase agreement) facilities against treasury bills (T-bills) and treasury bonds at 5.0 per cent interest rate instead of the existing 6.0 per cent.
Talking to the BBN, a BB senior official said it’s a long-term comprehensive plan to support sustainable development of the country’s capital market.
He also said some criteria have been set for the fund to mitigate risk through diversifying investment portfolios.
The BB’s latest move came against the backdrop of a falling trend in the share market in the recent months despite the government’s various measures.