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The banks have been allowed to adjust their overexposure to the capital market by the end of December 2023.
The financial institutions division (FID) on Tuesday issued a circular giving consent to a proposal earlier made by the central bank.
The FID said the banks had been given an extended time taking into account the market’s stability and a reduction in investors’ losses.
The banks having overexposure will not be allowed to increase their investments from what was calculated up to August 31, 2022.
As per the Bank Companies Act 1991, banks can invest in the listed securities up to 25 per cent of their equity on a solo basis and 50 per cent on a consolidated basis.
The central bank issued a circular on August 4, 2022 allowing the banks to calculate their exposure on the basis of the cost prices of stocks instead of market prices.
An insider said many banks’ exposures increased considering cost prices in exposure calculation following the decline in market prices.
The banks requested the central bank to allow calculation of their exposure based on cost prices so they could invest more in the capital market.
(FE)
