12:00 AM, January 28, 2014 / LAST MODIFIED: 01:53 AM, March 08, 2015

BB spurs big companies to dip into stocks

BB spurs big companies to dip into stocks

Star Business Report

The central bank yesterday urged big corporate houses to consider stocks and debentures for their financing needs and not to rely on just banks, in a bid to develop the country's capital market.
The move will also free up the banking system's resources for small borrowers and help banks reduce risks involved with large concentrations of money in few businesses, Bangladesh Bank Governor Atiur Rahman said.
The country's big corporate houses generally shy away from the capital market as they do not want to give out their companies' shares to others.

Only three big groups—Square, ACI and Beximco—have so far raised funds from the stockmarket.
Large groups such as Meghna, Akij, Abul Khair, Partex and S Alam are still fully dependent on banks for finance, making some banks vulnerable to risks.
“We want banks to diversify their businesses and risks. No bank should concentrate hugely on a few large corporate houses,” said SK Sur Chowdhury, deputy governor of BB.
The central bank has recently taken steps to assess the risks to the banking sector from big exposure, while citing the case of over 20 banks which are now in trouble after the group of Chittagong-based conglomerates they financed incurred huge losses for trading commodities.
Chowdhury, however, acknowledged that banks “feel good” doing business with big corporate houses rather than giving the amount to hundreds of small businesses. “May be it reduces their operating and supervisory costs.”
Allah Malik Kazmi, a consultant of the central bank, said time has come for banks to diversify its lending to many businesses from a few big corporate groups to minimise risks.
“Failure of paying back a large loan can sink a bank, but there will be nothing if 10 small borrowers do not pay,” he added.


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