Stock brokers and merchant banks yesterday urged the Bangladesh Bank to reset the banks' capital market exposure and extend the deadline for lowering the loan-deposit ratio with a view to propping up the stockmarket.

Liquidity is the main problem in the capital market and it started with the central bank's move to lower the banks' loan-deposit ratio, said Mostaque Ahmed Sadeque, president of the DSE Brokers Association, in a press briefing yesterday.

On January 30, the BB instructed banks to lower their loan-deposit ratio to within 83.5 percent by June 30 -- a move that sparked panic in the stockmarket.

Later in February, the central bank extended the deadline to lower the ratio to December 31.

Since January 30, DSEX, the benchmark index of the Dhaka Stock Exchange, lost 8.93 percent in value. On Wednesday, DSEX plummeted to its lowest level in five months at 5,572.06 points.

Many banks are now scrambling to boost their deposit base by offering higher interest rate of 10-11 percent, Ahmed said.

"When interest rates rise in the money market, the capital market is badly affected," he added.

While some banks have room to invest due to their loan-deposit ratios being in the safe zone, they have another constraint on them: the capital market exposure limit, said Mohammad Nasir Uddin Chowdhury, president of the Bangladesh Merchant Brokers Association.

Banks can invest up to 25 percent of their paid-up capital in the stockmarket.

"And those banks' exposure to the capital market is right on the line," he said, while urging the BB to redefine the formula for counting the capital market exposure limit.

At present, the most recent closing prices of stocks are used to calculate banks exposure.

Chowdhury urged the BB to use the price at which the banks bought the stocks and mutual funds to calculate the exposure.

The move would boost investor confidence, he added.

Meanwhile, Dhaka stocks yesterday gained slightly after hitting a five-month low the previous day: it gained 8.52 points, or 0.15 percent, to close at 5,580.59 points.

Turnover soared 10 percent from the previous day to Tk 388.21 crore, with 12.14 crore shares and mutual fund units changing hands on the DSE.

Of the traded issues, 139 advanced and 154 declined, while 43 securities remained unchanged on the premier bourse.

Al Arafah Bank dominated the turnover chart with its transaction of 73.98 lakh shares worth Tk 17.60 crore. It was also the day's best performer, posting a gain of 6.75 percent.

Social Islami Bank, Unique Hotel & Resorts and Square Pharmaceuticals rounded off the top five spots in the turnover chart. Among the gainers, Rangpur Foundry came in the second spot, followed by Popular Life Insurance, Stylecraft and Agrani Insurance.

Meghna Pet was the worst loser, shedding 5.98 percent, followed by ICB AMCL Second Mutual Fund, Eastern Insurance, ICB AMCL Third NRB Mutual Fund and Bay Leasing & Investment.

CSCX, the benchmark index of the Chittagong Stock Exchange, also gained yesterday: 3.95 points to finish at 10,414.66 points.

Of the traded issues, 91 advanced and 114 declined, while 29 securities remained unchanged.