DBA places reform proposals before BB to deepen capital market

The DSE Brokers Association of Bangladesh (DBA) has urged Bangladesh Bank to support a series of policy reforms, including the introduction of T+1 settlement in the stock market, greater participation of large corporates in the capital market, and higher bank investment limits in mutual funds, as part of efforts to strengthen the country's financial sector and revive investor confidence.

The proposals were placed before the Bangladesh Bank Governor during a meeting with a DBA delegation led by its President, Saiful Islam, on Wednesday.

The brokerage body said a stronger and more diversified financial system requires closer integration between the banking sector and the capital market, which remains heavily dependent on banks for long-term financing.

One of the key recommendations was encouraging large corporate borrowers to raise funds through bonds and equity issuance alongside bank loans. DBA said such a shift would help reduce concentration risk in the banking sector while deepening the country's capital market.

The association also proposed introducing a T+1 settlement cycle in the stock market, saying faster settlement would improve market efficiency, lower transaction risks and allow investors to reinvest funds more quickly.

To boost institutional participation and liquidity, DBA called for raising banks' investment limits in open-end mutual funds. Market insiders say the move could help channel fresh funds into the mutual fund sector, which has struggled to attract institutional investors in recent years.

The brokers' body further recommended expanding non-competitive bidding opportunities in government securities to retail investors, brokers and non-primary dealer banks to broaden participation in the debt market.

On the banking front, DBA advocated market-based restructuring of troubled banks through private investment, mergers and consolidation rather than repeated recapitalisation with public funds.

It also proposed including bond default information in the Credit Information Bureau (CIB) database, arguing that such a measure would strengthen transparency, improve risk assessment and discourage wilful defaults.

The association highlighted the need for greater policy coordination between Bangladesh Bank and the National Board of Revenue (NBR), particularly regarding taxation on retained earnings and stock dividends, which it said may hinder capital accumulation by banks and financial institutions.

Another proposal was the development of a domestic integrated digital payment platform, dubbed BUPI, aimed at reducing reliance on foreign payment gateways, lowering transaction costs and promoting financial inclusion.

According to a DBA statement, the governor assured the delegation that the proposals would receive due consideration and stressed the importance of coordinated efforts among regulators and market participants to ensure sustainable development of the financial sector.

The meeting comes as policymakers intensify reform efforts to restore confidence in the banking system and capital market amid ongoing economic and financial sector challenges. 

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