The Bangladesh Securities and Exchange Commission (BSEC) on June 29 sent a letter to the chief executives of 30 listed banks seeking information on the structure of the fund and the state of investment in the capital market.
The letter, signed by BSEC Deputy Director Mohammad Nazrul Islam, said the government and Bangladesh Bank had taken important steps to ensure sustainable development of the country’s capital market and improve liquidity at the time of the Kavid-19 epidemic. Bangladesh Bank has issued a circular giving each bank the opportunity to invest Tk 200 crore through a special fund to resolve the liquidity crisis in the capital market.
In this context, the commission wanted to know about the formation of special funds of banks and investment in the capital market. Banks have been asked to inform the commission within seven days of receiving the letter.
BSEC officials say banks have been given the opportunity to invest from the highest levels of government. In this situation of Kavid-19, if banks come forward to invest in the capital market, it will play a helpful role in boosting confidence among investors. For this reason, letters have been sent to the banks asking them to know about the formation of funds and investment in the capital market. Banks can also inform us if there is any problem in investing in the capital market by setting up a special fund. The commission expects effective role of banks in resolving the liquidity crisis in the capital market.
Confirming the letter, a CEO of a Bank, said, floor price and the Corona situation slow the desire of banks investment intention by the bank management.
He said there was no possibility of the country’s capital market turning around if foreigners did not return.
Meanwhile, Bangladesh Bank officials say they are not aware of the BSEC sending letters to the banks. So far, 13 banks have sought approval from the central bank to set up a fund to invest in the capital market. These banks have so far set up a fund of Tk 1,650 crore. 10 percent of this fund has been invested in the capital market.
The country’s capital market has been declining since the last week of January 2019. Although the rise of the index has been seen from time to time, the overall index has gradually moved downwards. The continuation of the year can be seen in the fall of the index this year as well. At one point, ordinary investors took to the streets to protest the fall in prices.
The government has taken several steps to stem the tide in the capital market. One of these was to increase the liquidity flow in the capital market through banks. A circular in this regard was issued by Bangladesh Bank on 10 February this year. Through this, each of the scheduled banks was given an opportunity to invest in the capital market by forming a maximum fund of Tk 200 crore.
Although fundraising is optional, market participants are of the opinion that all banks may come forward to invest in stabilizing the capital market. This had a positive effect on the market after the issuance of the circular on the formation of special funds. DSE’s turnover at that time exceeded Tk 1,000 crore due to increased investor participation. But four months have passed since the issuance of the circular of Bangladesh Bank but so far only 13 banks have applied to the central bank for formation of funds.
But there are 60 scheduled banks in the country. Concerns among investors about the bank’s investment have also had a negative impact on the capital market. Fear of the coronavirus on him intensified the fall in prices in the capital market. In this situation, BSEC fixed the minimum price of the shares of all the listed companies to prevent the fall in the capital market.
As a result, the capital market gets stuck at a certain point. After being closed for 65 days due to the effect of Kavid-19, trading in the capital market started from May 31, but there is no life in the market due to the floor price. The nominal transaction is on two stock exchanges of the country.
Most of the listed banks have subsidiaries operating in the capital market, such as brokerage houses and merchant banks, they said. If the bank’s investment in the capital market increases through these subsidiaries, the confidence of the general investors will increase. Therefore, the regulatory body BSEC is giving importance to increase the investment of banks in the capital market.