Bangladesh Bank (BB) issued a circular on Tuesday extending, till the end of 2026, the tenure of a Tk 200 crore fund that each bank was individually allowed to create in order to make investments in the stock market.

 Back in February 2020, Bangladesh Bank allowed banks to form the special funds, some of them by taking low-interest loans from the central bank.

 The funds were initially meant to remain valid till February 2025.

 The central bank said it extended the tenure amid the prevailing volatile situation in the country's capital market.

 It also said it had availed opinions of various stakeholders related to the capital market, investor banks, as well as considered its own review, in the interest of attaining stability for the overall financial sector.

 The banking regulator also asked banks that have already formed the special funds and invested in the stock market to gradually reduce their investments within the extended period.

 For the reduction, a specific action plan, approved by the board of directors of the respective investor bank, must be submitted to Bangladesh Bank within 30 days of the issuance of the circular.

 Upon the tenure's expiration on December 31, any remaining investment will be considered part of the capital market investment fund in accordance with Section 26K of the Bank Companies Act, 1991.

 In November last year, the Bangladesh Securities and Exchange Commission (BSEC) had sought a five-year extension of the funds.

 Moreover, the BSEC wanted the fund amount to be increased to Tk 300 crore.

 BSEC Chairman Khondoker Rashed Maqsood had placed the demand in a meeting with BB Governor Ahsan H Mansur at the central bank.