Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has extended temporary liquidity support to the scheduled banks for boosting their investment in the country’s ailing share market.

Under the new policy, the banks will be eligible to invest such liquidity only in their own portfolios or the portfolios of their subsidiaries as loan, according to a notification, issued by the Bangladesh Bank (BB) on Sunday.

The banks, interested to avail such temporary liquidity support from the central bank, will have to open separate beneficiary owners (BO) accounts afresh in this connection.

The banks will be eligible to enjoy such liquidity support with their treasury bills (T-bills) and bonds using repo (repurchase agreement) mechanism.

The BB’s latest policy support came against the backdrop of a falling trend in the share market in the recent months despite the government’s various measures.

The DSEX, the core index of the Dhaka Stock Exchange (DSE), has lost a cumulative 462 points in the past three months, and the market capitalisation shed about BDT 220 billion during the period.

The key index of the prime bourse tumbled to a fresh 33-month low on September 18, as the government’s recent measures failed to boost investors’ confidence.

Talking to the BBN, a BB senior official said the banks may avail such opportunity to increase their investment in the share market.

Senior bankers also welcomed the latest move, saying it is a good initiative of the central bank for supporting the capital market.

“But the banks’ fresh investment in the share market will depend on their exposure in the market and their risk appetite,” Syed Mahbubur Rahman, Chairman of the Association of Bankers, Bangladesh (ABB), said while explaining possible outcome of the move.

He also said the stock market regulator and the market operators should play their due roles to bring dynamism in the market on long-term basis.

Another official of the BB said the banks will have to comply with the provision of their exposure limit in the share market, if they are interested to enjoy the liquidity support.

Most of the banks, however, still have scopes to invest more in the share market in line with the existing rules and regulations, according to the central banker.

He also said the banks’ exposure in the share market is still below 15 per cent instead of the permissible limit of 25 per cent of their total eligible capital components in the market.

In July, the central bank advised around 20 commercial banks to boost their investment in stocks for revamping the ailing capital market.