A number of top banks have called on the government to relax the rules concerning the special fund initiated by Bangladesh Bank in 2020, which was created to assist the country’s capital market. The appeal was raised during a meeting held on June 24, where the finance ministry met with senior executives from various banks to explore strategies to increase investment in the stock market. Under current regulations, banks can invest no more than 10 percent in closed-end mutual funds and 15 percent in open-end ones. Additionally, only funds that have paid at least a 5 percent cash dividend annually for the past three years are eligible for investments from this facility. These conditions were cited by bankers as barriers to full utilisation of the special fund, despite its extension until December 2026. The meeting was attended by representatives from several banks, including BRAC Bank, Eastern Bank, Pubali Bank, Mutual Trust Bank, Uttara Bank, Dutch-Bangla Bank, and Trust Bank. Additionally, officials from the Finance Ministry and Bangladesh Bank were present. and the Bangladesh Securities and Exchange Commission. They collectively called for relaxed criteria and more flexible provisions to encourage stronger capital market participation. A senior official from Pubali Bank noted that several mutual funds currently fail to meet the dividend requirement and carry unrealised losses, making them ineligible for investment. Observers emphasized that simply relaxing investment thresholds will not be enough; improving fund transparency and accountability is equally important. The special fund allows banks to inject up to BDT 2 billion into the equity market, which is beyond their usual exposure limit of 25 percent of paid-up capital. The original aim was to stabilize Bangladesh’s stock market during times of stress. Bank officials argued the existing rules are overly restrictive, reducing the fund’s effectiveness. They stressed that unless banks are assured of reasonable returns and a clearer operating framework, the additional liquidity will remain unused. There were also calls to consider reducing provisioning requirements tied to mutual fund investments. Discussions also included proposals to simplify fund eligibility standards and offer targeted incentives for banks investing through the special facility. Some participants suggested creating stronger oversight over fund managers and embedding accountability measures. If regulators adopt these recommendations, increased fund usage could improve liquidity and performance in the mutual fund space. That, in turn, could uplift overall investor sentiment, support market recovery, and signal a more supportive environment for long-term capital market growth. For now, banks and regulators have agreed to continue consultations on a revised framework. The aim is to strike a balance between risk management and creating a more dynamic ecosystem for capital investment by the deadline set in December.
