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Sunday, September 25, 2011

NBFIs given more time to adjust excess investments in Dhaka stock market

The central bank has extended the time for the non-banking financial institutions (NBFIs) to facilitate adjustment of their investment in stock market, up to a period of two more years, officials said Thursday.

Under the amended provisions, the NBFIs will have to adjust the excess amount of investment in shares by December 31, 2012, instead of earlier scheduled December 31, 2010.

"The central bank has extended the time-period considering the overall situation in the country's stock market," a senior official of the Bangladesh Bank (BB) told the FE.

He also said the BB did not go for any hard-line action, at the end of the previous deadline for adjustment of investment in the capital market by the NBFIs mainly due to the share market crash in December last. 

"We held meetings with at least 12 NBFIs separately in the month of August to know their overall performance including the liquidity position," the BB official said, adding that the central bank has also asked the NBFIs verbally at the meetings to adjust their excess amount of investment in the capital market by December 31 this year. 

"But we did not issue any circular in the connection," he said, adding that at least seven NBFIs are yet to adjust their excess amount of investment in the share market.

Under the Financial Institutions Act -1993, the NBFIs are now allowed to invest in shares up to 25 per cent of their total capital.

The central bank has recently issued a circular in this connection and asked themanaging directors and chief executives of all 30 NBFIs to follow the latestinstructions for adjustment of their excess amount of investment in shares within the extended deadline.

"However, the existing investment level cannot be increased during the extended adjustment period," the BB said in its circular.

The central bank has taken the measure against the backdrop of a persisting falling trend about institutional investments in the capital market as some NBFIs were under pressure to comply with the BB's provisions relating to investment in capital market.

The Bangladesh Leasing and Finance Companies Association (BLFCA) will seek clarification about investment in the capital market by their subsidiaries, brokerage houses and merchant banking wings.

"We need clarification about our subsidiaries whether all of them will be exempted or not -- in order to comply with the BB's provisions relating to investment in share market until December 31, 2012," the BLFCA acting Chairman Asad Khan told the FE. 

He also said the BLFCA expects the same line of instruction from the BB as was issued by it on September 19 last for the commercial banks.

On Monday last, the central bank extended the time-period by one year for adjustment of 'single borrower exposure limit' by the commercial banks for financing the operations of their subsidiaries, brokerage houses and merchant banks.

Under the amended provisions, the banks will have to adjust the excess amount of their loans over the single borrower exposure limits for their respective subsidiaries by December 31, 2012, instead of December 31 this year.

http://www.thefinancialexpress-bd.com/more.php?news_id=150472&date=2011-09-23

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