Will be lenient on banks’ capital market investment
The Bangladesh Bank on Monday asked the commercial banks to purchase shares and assured them that it would be soft on the banks which have invested more than their allowable limit.
The central bank’s governor, Atiur Rahman, issued the directive at an emergency meeting with commercial bankers held to discuss the massive slide in the share market.
The BB’s deputy governor, Nazrul Huda, told reporters after the meeting that they would be lenient to the banks which had provided more funds to their merchant banking wings than the allowable limit because of the current crisis in the capital market.
He said that they would also be lenient in asking the banks to provide information on the industrial loans which have been invested in the capital market.
He said that the central bank would consider whether more time for adjusting such loans could be given on a case-to-case basis.
Huda said that banks had formed subsidiary companies for the share business and some of them had exceeded the limit in giving loans to their subsidiaries.
He said that banks were asked to not to sell the shares in their possession.
Huda said that the central bank should not be blamed for the current crisis in the share market as it is the Securities and Exchange Commission which oversees the activities of the capital market.
Stock market analysts and investors have been demanding that the central bank allow the banks to invest more than the allowable limit of 10 per cent of their total liabilities because of the huge credit crunch in the stock market.
Huda said that it was not true that the central bank’s move to increase the cash reserve ratio of the banks was responsible for the liquidity crisis in the money market.
‘We don’t want to lock into a blame game, but some quarters are spreading wrong information about the central bank in the market,’ he said.
SEC chairman Ziaul Haque Khandkar at a press briefing at his office on the same day said the market was going through a ‘liquidity crunch’.
‘There is enough liquidity in the market and the Bangladesh Bank has injected three times more money into the market than the amount it withdrew as CRR [cash reserve ratio],’ Huda said.
The central bank has increased cash reserve requirement by 0.5 percentage point with effect from December 15 and it mopped up about Tk 2,000 crore from the market due to that.
Deputy governor Ziaul Hasan Siddique said the banks have Tk 914 crore excess reserve with the central bank, which means its completely idle money.
The chairman of the Association of Bankers, Bangladesh, K Mahmood Sattar, who is the chief executive officer and managing director of City Bank, also said that the central bank should not be blamed for the current crisis.
