Dhaka, Bangladesh (BBN) – The central bank of Bangladesh on Tuesday allowed the financial institutions to invest more funds in the stock market through relaxation of its provisions relating to capital market investment, officials said.

“The central bank has taken the latest measures to help bring back stability in the country’s stock market through increasing the volume of investment by institutional investors like the financial institutions,” a senior official of the Bangladesh Bank (BB), the country’s central bank told BBN in Dhaka.

Under the amended provisions, investment by the financial institutions, generally known as non-banking financial institutions (NBFIs) in their subsidiaries — brokerage houses and merchant banks — and other companies, in the form of long-term equity investment or venture capital, will not be considered as exposure to the capital market.

The BB issued a circular in this connection on the day and asked the chief executives and managing directors of all 31 NBFIs to follow the latest directives relating to investment in capital market.

The central banker also said the BB has extended the time-frame by one year for adjustment of ‘single borrower exposure limit’ by the NBFIs for financing the operations of their subsidiaries, brokerage houses and merchant banks, considering the overall stock market situation.

The NBFIs will have to adjust the excess amount of their loans over the single borrower exposure limits raging between 30 percent and 100 percent of the total capital for their respective subsidiaries by December 31, 2013, instead of December 31, 2012, according to the amended provisions.

BBN/SSR/AD-31Jan12-11:55 pm (BST)