FE Report
The stock market coordination panel Monday urged the banks to increase their investment exposure to the secondary market.
The banks, which are considered as major institutional investors, exposure came down to below 2.5 per cent 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 per cent of their liabilities, as the revised company act is yet to be passed in the Parliament," he said 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 per cent 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.
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 Tk 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 into stock market.
In response, the bankers said under the present situation, provisioning is the main hurdle to increase the banks' investment. They also demanded to put provisioning on hold for the interest of the market right now.
Shirajul Islam Mullah, chairman of Prime Bank said limiting the banks' exposure by the central bank to the market was wrong in 2010. "However, concerted efforts are needed to put the market on right track," he said.
The stock market coordination panel Monday urged the banks to increase their investment exposure to the secondary market.
The banks, which are considered as major institutional investors, exposure came down to below 2.5 per cent 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 per cent of their liabilities, as the revised company act is yet to be passed in the Parliament," he said 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 per cent 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.
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 Tk 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 into stock market.
In response, the bankers said under the present situation, provisioning is the main hurdle to increase the banks' investment. They also demanded to put provisioning on hold for the interest of the market right now.
Shirajul Islam Mullah, chairman of Prime Bank said limiting the banks' exposure by the central bank to the market was wrong in 2010. "However, concerted efforts are needed to put the market on right track," he said.
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