Policy guideline on bond fund on the cards

Investment of pension gratuity provident funds in bonds to be mandatory

Syful Islam | Published: July 14, 2017 14:59:40 | Updated: October 25, 2017 05:20:23


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The government is likely to make it mandatory for the pension, gratuity and provident funds (PFs) to invest a certain portion of their money in fixed income securities, officials said.

A policy guideline on 'Fixed Income (Bond) Fund in Securities Market of Bangladesh' was under preparation that might include the provision, as part of an effort to develop a bond market in the country, they added.

Sources said officials from Bangladesh Securities and Exchange Commission (BSEC), Bangladesh Bank (BB) and Investment Corporation of Bangladesh (ICB) at a recent meeting put forward the proposal for investing the funds in the fixed income securities.

It was also proposed that a minimum portion of the life insurance and general insurance funds could be invested in bonds to help develop the bond market, which the government has been trying for long.

Sources said officials involved in preparation of the policy suggested keeping the interest rates of national savings schemes lower than the bonds to attract people in the bond market.

The BSEC officials considered essential to develop a bond market for ensuring stability in the stock markets and opening a new avenue to collect funds for investing in different industrial sectors.

They said experts have opined in favour of developing a bond market in the country following the stock market debacle in 2010-11, recommending alternative investment options for small investors.

After the debacle, the BSEC prepared the 'Bangladesh Securities and Exchange Commission (Private Placement of Debt Securities) Rules, 2012' as an initial part of establishing a bond market.

Presently, the financial and manufacturing sector companies are issuing bonds and debentures of different terms and coupon rates for collecting long term capital.

According to a senior BSEC official, there were various types of barriers in developing a bond market in Bangladesh. These include lack of demand for bonds, excessive dependency on equity securities, limited supply of bonds in primary and secondary markets and no scope of selling those in the market.

If the barriers can be removed, the bond market will be able to help strengthen and stabilise the country's stock markets, he added.

A senior official at the Ministry of Finance told the FE that a committee, led by executive director of BSEC Mahbubul Alam, was working on preparing the draft of the proposed policy guidelines on the fixed income (Bond) fund.

The committee held one meeting so far and sought two months more time to prepare the draft.

syful-islam@outlook.com

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