Bangladesh Bank (BB) has asked the scheduled banks to submit information on daily basis regarding the formation of the special fund earlier announced to support the country's ailing capital market.
The BB delivered its instruction on Thursday after a decision taken in last week by the central bank and the securities regulator to accelerate the formation of the bank's special fund worth Tk 2.0 billion each.
"We have asked the scheduled banks to submit their information regarding formation of special fund on daily basis as part the BB's continuous move to support the capital market," a senior BB official told the FE.
He said a total of 12 private and state-owned commercial banks so far have taken their boards' approval to form the special fund.
"The progress of forming the fund was hampered by the outbreak of COVID-19. We have accelerated our move after reopening offices," the BB official said.
The central bank issued a circular on February 10 last, allowing all the scheduled banks to create a Tk 2.0 billion special fund each for a period of five years for investment in the capital market.
The BB circular came in the wake of merchant bankers' request for a Tk 100 billion fund from the government to support the cash-hungry capital market.
According to the circular, a bank can create such a special fund with its own resources or with any fund received from the BB through the repo or re-financing mechanism.
The BB official said Janata Bank and The City Bank have already received Tk 800 million and Tk 500 million respectively from the central bank through repo.
"They will fulfill the stipulated target of fund gradually," said the BB official, adding that Premier Bank and Exim Bank are also working to fulfill the target.
Of the state-owned commercial banks (SCBs), the Rupali Bank earlier formed a Tk 850 million (85 crore) fund with their own resources in line with the BB circular.
Sonali Bank, the largest state-owned commercial bank formed a Tk 2.0 billion fund with its own resources.
Of other private commercial banks (PCBs), United Commercial Bank, Shahjalal Islami Bank, and Islami Bank Bangladesh earlier informed the central bank about formation of special fund for the capital market.
The circular said the special fund will be allowed to be invested in equity shares, mutual funds, bonds or debentures, and special purpose funds maintaining the prescribed criteria.
And the banks will not need to make any provision for a decrease in market value of their investments, the circular said.
After issuance of the BB's circular, the fund proposal for investment in the capital market did not see much progress, as most of the PCBs were not able to make any concrete decision in this regard.
Some of the PCBs had said they were continuing investing in the market in line with their exposure to the capital market.
Later, some banks moved to form the special fund examining the BB's circular and their investment scopes.
After a 66-day break, different offices and the capital market reopened on May 31 and the central bank and the securities regulator held a meeting on Monday to strengthen their coordination for further development of the money market and capital market.
At that meeting, the BB governor assured the securities regulator of their support in accelerating the formation of special fund for the capital market.