NRB Commercial Bank fined for breaching stock investment ceiling
Bangladesh Bank yesterday fined NRB Commercial Bank Tk 23.50 lakh for its aggressive investments in the capital market in breach of rules.
In July, the bank's stock market exposure stood at 27.33 per cent of its capital against the ceiling of 25 per cent.
The central bank asked it to pay the fine within the next three days. Missing the deadline would result in the amount being debited from the bank's current account maintained with the central bank.
As per the Banking Companies Act 1991, a bank's investment in the capital market is limited to 25 per cent of its capital, which includes paid-up capital, share premium, statutory reserve and retained earnings.
On August 25, the central bank issued a notice on NRB Commercial Bank asking it to explain why it would not take punitive measures as per the Act.
The bank confessed in a reply on August 29, saying it would not repeat the mistake in the days to come.
The bank also faces a Tk 50,000 fine per day until it adjusts its investment with the limit in line with the Act.
Contacted, Golam Awlia, managing director of NRB Commercial Bank, said the bank had unintentionally breached the rule.
"We decreased the investment in the share market soon after the central bank issued the letter," he said.
"We are a highly compliant bank and following the central bank's rules and regulations. Such a mistake will not reoccur."
Established in 2013, the bank raised Tk 120 crore through an initial public offering in February, becoming the first private lender to go public in 12 years.
BB officials say a good number of banks had recently breached the Act by investing a large amount of funds in the capital market. Against this backdrop, more banks will face the same penalty within a day or two.
The central bank now scrutinises the issue to rein in aggressive investments made by banks in the capital market. This will help protect the interest of depositors as well, they said.
The Dhaka bourse surged to a new height yesterday, with its key index crossing 7,000 points.
The DSEX, the benchmark index of the Dhaka Stock Exchange, jumped 71 points, or 1.02 per cent, to 7,052 -- the highest since its inception in 2013.