To increase capital market liquidity, a committee established by the Ministry of Finance has suggested setting up a Tk 100 billion fund. Simultaneously, it has suggested creating a special Tk 30 billion fund to lend money to small investors at a 4 percent subsidized interest rate.

The committee’s report also says institutional investor participation needs to be raised to 60 percent and investment should be encouraged through tax incentives, including making dividend income up to Tk 100,000 tax-free.

Other proposals include reducing capital gains tax to 5 percent, offering a 20 percent tax rebate on asset-backed securities, and extending tax exemptions for mutual funds.

The report calls for overall development of the capital market, while emphasising strengthening the Bangladesh Securities and Exchange Commission (BSEC), restructuring the state-owned Investment Corporation of Bangladesh (ICB), and improving governance at stock exchanges. These recommendations were recently submitted to the Ministry of Finance.

Committee member and Dhaka University economics professor M Sadikul Islam said, “We have submitted the report highlighting the steps needed for market development and strengthening the commission.”

The four-member committee was formed in March this year, headed by Anisuzzaman Chowdhury, special assistant to the chief adviser. Other members include BSEC Commissioner Farzana Lalarukh and an additional secretary from the Financial Institutions Division.

Former BSEC chairman Faruk Ahmed Siddiqi attributed the current weak state of the capital market to economic uncertainty and a lack of new investment over the past two years, saying that funds alone would not revive the market without a stable, elected government that can restore investor confidence.

The committee proposed that the Tk 100 billion fund be used solely for equity investments and be managed by the ICB. Investment decisions would be made by a professional portfolio management team, while a seven-member committee would oversee the fund. This oversight body would include representatives from the finance ministry and ICB, along with independent portfolio experts or financial analysts.

The committee also recommended increasing ICB’s paid-up capital through rights issues to strengthen its equity base. In addition, it proposed expanding the existing special fund for small investors by another Tk 20 billion, raising it from Tk 10 billion, to provide subsidised margin loans at 4 percent interest.

The report recommends increasing the number of institutional investors, including stock dealers, market makers, portfolio managers, asset managers, and fund managers. Institutional participation currently stands at around 20 percent; the committee proposes raising it to 30 percent within three years, 40 percent in six years, 50 percent in nine years, and 60 percent in 12 years.

It also suggests listing brokerage houses on stock exchanges and amending capital-raising regulations accordingly. Interest rates on national savings certificates and postal savings schemes should be rationalised and capped at the average yield of five-year treasury bills.

The committee further recommends increasing insurance companies’ participation in the capital market and strengthening nationwide financial literacy programmes through BSEC, the Bangladesh Institute of Capital Markets (BICM), and the Bangladesh Academy for Securities Markets (BASM).

The committee proposed completely scrapping the floor price mechanism and removing all trading restrictions from the first day of listing after IPOs. It also suggested limiting corporate borrowing to 250 percent of equity capital to encourage companies to raise funds from the capital market instead of relying on bank loans.

To ensure market stability and sustainable development, it proposed forming a regulatory coordination committee chaired by the finance minister or adviser, with representatives from Bangladesh Bank, BSEC, NBR, IDRA, and the Financial Reporting Council.

The committee recommended revising the corporate governance code to require at least 30 percent independent directors on the boards of ‘Z’ category companies. If such companies fail to upgrade their category within two years, one independent director should be appointed as chairman.

It also proposed forming an advisory committee to review policies, supervision, enforcement, market development, investor education, and human resource development at BSEC, along with establishing a five-member search committee for appointing the chairman and commissioners.

Finally, the report identified eight key reasons behind the market’s stagnation, including weak intermediaries, high bank interest rates, withdrawal of incentives, high returns on national savings certificates, inflation, lack of investor confidence, excessive bank-based financing, and limited fundraising through mutual funds and collective investment schemes.

The committee noted that in developed markets, 70–80 percent of investment typically comes from institutional investors, whereas in Bangladesh the figure remains stuck at around 20 percent.