The central bank has brought around half-a-dozen commercial banks under its close monitoring after it detected anomalies in their recent share market activities.
As part of the move, the Bangladesh Bank (BB) has already sought explanation from the banks on activities along with exceeding their share market exposure limit, according to the market insiders.
They also said the banks are now taking preparations to reply to the BB's queries within the stipulated timeframe.
Both public and private commercial banks are included in the central bank's close monitoring list, according to the insiders.
"Yes, the BB has sought some information on the share market activities from our bank," a senior executive of a leading private commercial bank (PCB) told the FE Wednesday preferring anonymity.
The private banker also said his bank will reply to the BB in time.
A senior BB official, however, told the FE that the central bank has already intensified its monitoring of banks' overall activities including exposure to share market with a view to avoiding recurrence of an unwanted situation in future.
But the official said he has no idea as to whether the central bank has sought explanation from specific banks in this regard.
Earlier on September 11 last, the central bank intensified its monitoring and supervision on banks' investment in the capital market through revising reporting format.
Under the revised provisions, the banks are now allowed to submit their reports on fresh investment in the capital market to the BB on a weekly basis, mentioning daily transactions separately.
Earlier, the banks were eligible to submit such weekly reports to the central bank on gross transactions basis without mentioning daily transactions individually.
The BB's latest move comes against the backdrop of a sharp rise in the prime index of the Dhaka Stock Exchange (DSE) in recent days.
DSEX gained nearly 354 points or 6.08 per cent in just one month as it was 5,819.27 points on August 20 and reached at 6,172.91 points on Wednesday, the DSE data showed.
The market rose sharply on the back of large-cap shares, especially heavyweight banking sector which led to the rise in daily turnover and the list of gainers in recent weeks, according to the market operators.
They also said the increase in excess liquidity in the banking sector opened up fresh opportunity for banks to invest more in the stock market through lending to merchant banks.
The overall excess liquidity rose to Tk 1.06 trillion in the last week of June from below Tk 1.0 trillion in May. It was Tk 1.23 trillion in the last week of December 2016, according to the central bank statistics.
However, excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, rose to around Tk 46 billion during the period under review from Tk 42 billion.
The banks are now allowed to invest of 25 per cent of their total capital in line with the Banking Companies (Amended) Act 2013.
According to the Banking Companies Act 1991 (Amended in 2013), total capital comprises four components: paid-up capital, balance in share premium account, statutory reserve, and retained earnings, as stated in the latest audited financial statements.
While calculating total investment in the capital market different components, including all types of shares, debentures, corporate bonds, mutual fund units, and other securities, will be considered, it added.
On the other hand, the Department of Financial Institutions and Markets of the central bank is now taking preparations to intensify its monitoring and supervision on the non-banking financial institutions' investment in the share market shortly.
Under the latest moves, a stock market monitoring section will be set up at the Department of BB shortly.
"We've already received official approval to set up the section in our department," a senior official said, adding that the section will come into operation shortly.
The NBFIs are also allowed to invest 25 per cent of their total capital in line with the existing Financial Institutions Act 1993.