Dhaka, Bangladesh (BBN) – The stock market coordination panel has urged the commercial banks to increase their investment exposure to the stock market.

The banks, which are considered as major institutional investors, exposure came down to below 2.5 percent of their total deposits, said Rakibur Rahman, spokesman and coordinator of the panel.

“The banks can raise their exposure limit at least up to 5.0 per cent of their liabilities, as the revised company act is yet to be passed in the Parliament,” he said while speaking at a meeting with the Association of Bankers, Bangladesh (ABB).

As per an amendment in the company act, banks will be allowed to invest in the stock market equivalent to 25 percent of their regulatory capital, which includes paid-up capital, retain earnings, statutory reserve and share premium.

The average investment in stocks of all 47 scheduled banks came down to 3.7 per cent in February, from 5.0 per cent of the previous month, according to the central bank statistics.

Under the existing act, banks are not allowed to invest more than 10 per cent of their total liabilities in the capital market.

Mr. Rahman said the institutional investors have no record for incurring losses in the stock market, as they can go for long term investment.
In 2009, when the market was booming, the banks’ 70 per cent or BDT 210 billion profit came from stock market investment, said Rahman, also the president of Dhaka Stock Exchange.

Kazi Aram Uddin Ahmed, convener of the stock market coordination committee, said this is high time for the banks to go for investment in the market, as the share prices has come down to an attractive level.

“Stock market will be active if institutional investor become active,” said Ahmed, also president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), urging the banks to invest in the stock market.

BBN/SSR/AD-26Mar13-2:12 pm (BST)