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The Bangladesh Bank has given more emphasis on bond market development for long-term financing to rein in banks’ rising defaulted loans, said its governor Abdur Rouf Talukder on Monday.
He made the comment at the opening session of ‘World Investors Week-2022’ at the Bangladesh Securities and Exchange Commission office in the capital Dhaka.
The programme will continue until October 13.
Abdur Rouf said, ‘Our stock market is equity based, the debt or bond market is yet to be developed.’
Non-performing loans are one of the major problems of the banking sector, he said.
The NPL is rising due mainly to long-term financing by banks from their short-term deposits as it created maturity mismatch, he said.
Businesses in neighbouring countries raise capital through the capital market for business purposes while everybody takes loans from banks in Bangladesh, he said.
Businesses became defaulters after missing loan repayment for a quarter that put pressure on banks, he said.
So, the bond market must be developed for long-term financing, the governor said.
‘Banks used to issue bond for strengthening capital base and subscribers of bonds were the other banks. But I have made it mandatory to sell 50 per cent of the issued bonds to other investors instead of banks.’
Government treasury bonds would also be traded on the stock market soon, Abdur Rouf said.
The government has also reduced interest in national savings certificates and set ceiling of Tk 50 lakh for an individual buyer, which would help the stock market to flourish, he added.
Sheikh Mohammad Salim Ullah, secretary of Financial Institutions Division of the finance ministry, also put an emphasis on the bond market development.
‘The size of bond market in developed countries is huge, but it is minimal in our country,’ he said.
He also said that the prevailing problems on the path of capital market development must be identified and be solved.
BSEC chairman Shibli Rubayat-Ul-Islam said that the commission formed capital market stabilisation fund to bring stability on the market amid increasing liquidity flow.
BSEC commissioner Sheikh Shamsuddin Ahmed, Bangladesh Merchant Bankers Association president Sayedur Rahman, DSE Brokers Association president Richard D’ Rozario were also present at the event.
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