Banks to inject funds into stock market to restore confidence
Banks will start investing in the capital market by forming special funds soon in order to restore the confidence of investors, said lenders yesterday.
The lenders came up with the decision at a meeting with Finance Minister AHM Mustafa Kamal at the conference room of the National Economic Council.
On February 10, the central bank announced a package for banks, allowing them to set up funds worth Tk 200 crore each on the back of the financial support from the Bangladesh Bank.
The lenders will take the fund from the central bank through repurchase agreements against treasury bills and bonds owned by them. The banks will have to pay 5 per cent interest for the fund and the credit tenure will be until February 2025.
Nine banks have so far formed the special fund while another three will constitute it within this week, said a central bank official, who attended the meeting.
The lenders, which are yet to form the special fund, will start to do so from Wednesday in the interest of the capital market, Nazrul Islam Mazumder, chairman of the Bangladesh Association of Banks, told reporters after the meeting.
"A good number of investors in the capital market are panicked because of the coronavirus pandemic and the situation is not in our hand," the finance minister said.
He went on to hope that the adverse impact deriving from the COVID-19 pandemic would be temporary and people and the economy will get rid of the crisis within the shortest possible time.
Many people left the capital market by selling shares at lower prices, which brought a huge loss for them, he said.
"Under the circumstances, we sat in the meeting to tackle the situation. Banks are our primary source and they assured us that they would invest in the market so that none loses," the minister said.
All stakeholders have reached a consensus to make the market vibrant during the crisis, he said.
"We will take all required measures to stabilise the market. The central bank is giving support and commercial banks have also agreed to do their best for the market."
The market had started to turn around before the outbreak of the virus and the key index of the Dhaka Stock Exchange reached at nearly 5,000 points at one stage. But the market sharply fell when the virus started to spread.
"We do not have options to hold investors to the market using forces. Still, we have responsibility to protect them from loses," the minister said.
Md Ashadul Islam, senior secretary of the Financial Institutions Division, presided over the meeting. Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh, and SM Moniruzzaman, deputy governor of the central bank, were present.
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