Bangladesh Bank wants daily reports on short-term loans and investments


Previously, banks shared this information with the central bank once a fortnight.

As banks invest money in short-term loans, Bangladesh Bank (BB) believes they could turn to various unproductive sectors including the stock market.

For this, they asked the banks to provide daily information on the use of funds apart from lending and placement (bank-to-bank deposits).

Previously, banks shared this information with the central bank once a fortnight.

They were also asked to receive separate reports on a daily basis on the money they (the banks) have invested by themselves, as well as that of their affiliates.

In this regard, the Executive Director and spokesperson of the Bank of Bangladesh, Sirajul Islam, said that the Bank of Bangladesh should be informed of the destination of a bank’s money.

Also Read – Bangladesh Bank Mops 8,675C In Excess Cash

“For this, information was sought on a daily basis for management. A letter was published in this regard last week, ”he added.

In this letter to the Managing Directors (DMs) of public-private banks, he was asked to submit daily the information on the daily transactions of the bank in the currency market before 5 p.m. according to schedule.

A table is also attached to the letter. There, the amount of the bank’s daily investment in the currency market and the actual investment at the end of the day should be mentioned.

In addition, the bank must mention in the table the number of loans it has granted to its associated brokerage house and investment banks, the number of loans or investments it has adjusted and, at the end of the account, the actual value of the loan or investment.

A source from the Bank of Bangladesh said they have made the decision to strictly monitor cash flow to the capital market as money is now cheaper than ever and interest rates in the banking system are low.

Banks can invest up to 25% of their regulatory capital in the stock market. The bank’s paid-up capital, unallocated profits in the reserve fund, premium income and yield income are the four components of regulatory capital.

However, at the end of June, banks’ average investment in the stock market was 14.5%.

Apart from this, each bank can invest up to Tk 200 crore by forming a fund, which exceeds the bank’s investment limits in the stock exchange.

Banks have so far invested Tk 1,782 crore in the stock market with this special facility.

In a letter sent to banks on July 25, the central bank asked them to strengthen their internal controls to ensure that stimulus loans are used in targeted sectors.

The Bangladesh Bank in a primary observation found that low cost stimulus loans diverted to unproductive sectors like the capital market can lead to failure in achieving goals.

To ensure the smooth flow of money in the market, the central bank has already started to mop up excess liquidity from the banking system through the Bangladesh Bank’s bond auctions.

In this way, the Bangladesh Bank has so far recovered Tk 8,675 crore from the planned banks.

Experts said that as a result of these measures there had been a pause in the resumption of transactions in the capital market in the past two days.


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