The central bank has asked some 20 banks to boost their investments in stocks to help revamp the country's ailing capital market.
The banks have the scope for investing more in listed securities in line with the existing rules and regulations, officials said.
"The banks' exposure to the share market is still below 15 per cent instead of the permissible limit of 25 per cent of their total eligible capital components in the capital market," a senior official of the Bangladesh Bank (BB) told the FE on Tuesday.
The central bank's latest step came after the free fall in the share markets for a prolonged period.
"We've taken the measure as part of our continuous support for the development of the capital market in Bangladesh," another BB official said.
He also said it is a "moral persuasion" not directive but the central bank will closely monitor the overall development.
Under the exiting provisions, the market value of total investment of a banking company in the capital market on a consolidated basis cannot exceed 50 per cent of the sum of its consolidated paid-up capital, balance in share-premium account, statutory reserves and retained earnings as stated in the latest audited financial statements.
The banks, however, are now allowed to invest the maximum 25 per cent of their total capital in the share market on "solo basis" in line with the Banking Companies (Amended) Act 2013.
According to the Banking Companies Act 1991 (Amended 2013), total capital constitutes four components: paid-up capital, balance in share premium account, statutory reserves, and retained earnings-as stated in the latest audited financial statements.
While calculating total investment in bourses, different components such as corporate bonds, mutual fund units and other securities need to be taken into account.
Meanwhile, the prime index of the major bourse soared 2.24 per cent on Tuesday, the highest single-day gain in six months, which halted the recent sharp fall in stock prices.
DSEX, the prime index of the Dhaka Stock Exchange (DSE), gained 111 points and settled at 5,077, after shedding 164 points in the past two trading days.
It was the biggest single-day gain in more than six months since January 8, when DSEX soared 115 points.
Market analysts said the recent large-scale sell-offs were halted by regulatory intervention coupled with bargain-hunting share purchase after stock prices fell to a record low in a bearish market.
The investors became active in the market for taking fresh position in sector-specific stocks considering favourable price level, said a stockbroker.
DSEX has lost a total of 455 points or 8.48 per cent in 15 trading sessions since parliament passed the budget for fiscal year 2019-20 on June 30.
The recent sharp fall in index prompted the Bangladesh Securities and Exchange Commission (BSEC) to form a committee to detect the reasons behind the recent 'unusual' market situation.
The securities regulator's panel sat with top 20 brokers on Monday, and directed them to submit information regarding the free fall.
The BSEC also sought six months' trading data of their top 50 clients within three working days.
In another development, the prime bourse requested the all stock brokers on Tuesday to ensure legal authorisation in placing any sale order in order to reduce sale pressure, particularly forced sale, said a leading broker.
"All stock brokers are requested to ensure due authorisation from their clients, like - sale orders and CDBL pay-in form etc, before placing any sale order into the system," according to the DSE disclosure on Tuesday.
The International Leasing Securities Ltd said the investors showed their appetite on shares of major sectors, which helped the index to gain 111 points, the highest single-day gain in more than six months.
The Bangladesh Bank asked banks to invest in the stock market, if they have not fully utilised current investment limit, commented the EBL Securities Ltd on the positive market situation.
However, an analyst said it is early to say whether the 'unusual' gain is sustainable or not, as most of the investors have lack of confidence amid prevailing liquidity crisis.
Turnover, another important indicator of the market, meanwhile, fell to Tk 3.17 billion, which was 32 per cent lower than the previous day's turnover of Tk 4.64 billion.
"Even though the market has recovered most of the loss of the previous two sessions, the investors mostly remained on sidelines amid uncertainty about the economy, as indicated by the 32 per cent decrease in turnover," said the UCB Capital Ltd.
Prices of 93 per cent traded issues rose, as out of the 351 issues traded, 327 closed higher, 15 ended lower, and nine issues remained unchanged on the DSE trading floor.
Despite the market surge, a group of small investors, under the banner of 'Bangladesh Pujibazar Biniogkari Oikya Parishad,' staged demonstration in front of the DSE building on Tuesday.
The retail investors termed the day's sudden rise 'unusual' and 'artificial', which will not sustain.
The aggrieved investors alleged that the capital market regulator has failed to address manipulations and wrongdoings in the market.
They demanded immediate resignation of M Khairul Hossain, Chairman of the BSEC, for his failure to bring back normalcy in the market.
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