Finance minister Abul Maal Abdul Muhith on Sunday said that the proposed amendment to the bank company act would allow a bank to invest maximum 40 per cent of its paid-up capital in the
share market for three years only.
‘By the end of the three years the bank will have to reduce its stock market investment to 25 per cent,’ he said after a review meeting of a donor-funded project with the capital market regulators at his office in the evening.
Asian Development Bank is financing the project aiming at strengthening the share market that collapsed in 2011 making thousands of investors penniless.
The share market had maintained a bullish trend throughout 2009 and 2010 because of an over exposure by many banks in violation of rules. Bangladesh Bank was forced to rein in the over exposure of the banks to the market.
Since then the investment limit for the banks in the share market has become a hot issue.
A bank now can invest up to 10 per cent of its liabilities.
International Monetary Fund was insisting the government to keep it to 25 per cent for releasing the second instalment of a loan.
But a parliamentary standing committee suggested the ministry of finance that it should allow investment up to 40 per cent for the betterment of the share market which is passing through a dull period after the collapse.
Muhith said that they had consulted with the IMF about their position.
He said the IMF had given consent to such proposal.
He hoped that the second instalment of the extended credit facility would be available in the next month.
Muhith admitted that there were a lot of volatilities in the share market during the last fours years.
‘Despite the volatilities the market became a good source for the industrialists for collecting equity,’ he said.
He claimed that there was no lack of confidence among the real investors in the market.
‘Only fake investors were suffering from lack of confidence,’ he said
Muhith hoped that the ADB would disburse project loan timely as the implementation of the $300 million Capital Market Development Programme-II project was right on track.
The Manila-based lender has already disbursed $130 million.
The ADB has attached conditions including amendment of the Bank Company Act 2012, introduction of guidelines to reduce bank’s equity risk-exposure, enactment of a law on financial reporting for releasing the second tranche of the loan deal.