Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has assured the country's top business leaders about providing support for bringing stability back to the share market. But it rejected the demand to re-impose the lending rate cap.
The assurance came at a meeting with the trade bodies leaders was held at the central bank on Monday with Bangladesh Bank (BB+ Governor Atiur Rahman in the chair.
"We'll provide technical support to bring back stability in the country's capital market," Executive Director of the BB Jahangir Alam told reporters after the meeting.
"There is no scope to re-impose lending cap at this moment," Mr. Alam said, adding that the central bank is monitoring the interest rate movements closely.
He also said the central bank has extended the time-frame for adjustment of 'single borrower exposure limit' for brokerage houses and merchant banks which are the subsidiaries of commercial banks, for a maximum period of six months.
The central bank chief said that the commercial banks would be free to make their own business decisions about use of funds in excess of the amount to be required for making adjustments of losses in the capital market.
"There can be no question of coercing them to investment in the capital market at the directive of the central bank," he stated.
He strongly refuted the allegation made by certain quarters about the BB as having restricted the banks to invest in the stock market at a time when the prices there getting higher in the later part of 2010.
"It is curious that those now blaming the BB for inaction were themselves actively lobbying to pressurize the central bank to prolong the compliance timelines for banks," the central bank chief noted.
However, President of the Federation of the Bangladesh Chamber of Commerce & Industry (FBCCI) AK Azad told the reporters after the meeting that the central bank had agreed to bring back the institutional investors, who had earned hefty profits from trading in shares, back to the stock market.
"The BB will monitor the issue closely," the FBCCI chief told the reporters replying to a query.
President of the Bangladesh Association of Publicly Listed Companies (BAPLC) Salman F Rahman suggested for increasing the supply of shares to avoid any possible bubble in the capital market in the future.
"If the supply side is not ensured there could be another bubble in the capital market," Mr. Rahman said, adding that at least 60 companies are in the pipeline to get listed on the bourses.
He also advocated for establishing a separate trading board for small-cap companies.
BBN/SI/AD-31May11-2:38 pm (BST)