Bank investment limit in stocks to be reset

The government has approved on principle a proposal to stop illegal banking and reset the ceiling for the banks to invest in the share market.Monday’s Cabinet meeting, chaired by Prime Minister Sheikh Hasina, took the decision to make necessary change in laws for this purpose.
Cabinet Secretary Muhammad Musharraf Hossain Bhuyian, speaking to journalists after the meeting, said the draft of the Bank Company (Amendment) Act 2013 will be tabled at the Cabinet after scrutiny by the Ministry of Law.
Referring to the Section 26 (A) of the draft, the Secretary said that no bank will be able to buy shares of a company amounting to more than ten percent of the company’s paid-up capital and more than five percent of the company’s total market borrowings.
But there will no amendment regarding Sharia banking or in the regulations for Islamic banks.
“This amended law intends to control the presence of the banks in the stock market. This will bring down the market risks of the banks and protect the interest of the small investors in the stock market,” the Secretary said.
A Bangladesh Bank official told that when this amended law comes into effect, it will prevent banks from investing more than 25 percent of its own paid-up capital, retail earnings and share premium put together in stock markets.
If any bank has crossed this ceiling at the moment, they will have to bring it down within three years.
At the moment, banks in Bangladesh can invest up to 10 percent of its paid-up capital in stock markets.
Any violation of the amended regulation will invite a fine of Tk 2 million from Bangladesh Bank for any individual or institution. Failure to pay the fine will invite an additional fine of TK 50,000 per day beyond the time limit to pay fine.

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