Investors, brokers and hankers yesterday hailed the Bangladesh banks decision to withdraw restriction on loans io ihe share traders against the listed securities saying it would not only help remove the liquidity problem of the capital market but also ease the excess liquidity problem of the banks

According to the decision taken at a Board meeting of ihe Bangladesh Bank Tuesday the share investors will be al lowed to take 80 per cent of :be face value or 40 per cent of the market value of their shares and debentures as loans from the rommerciai banks

The borrowers will now

luvr to give blank share ir.ins ter terubcales to Ute lending banks as collateral The inter est rate will also be similar to that on other commercial lendnigs The amount of total loan for one investor will not however exceed Tk five lakh according to (he decision

Chairman ot the Dhaka Stock Exchange K burshid Alam, talkirfit io The Daltv Star saxi This is a good step If the decision is implemented property the MquidUv situation ot the share market will Im prove

He however said that be fore having the details of the central hank • circular which is yet to he issued it was diff I

cult to say anything more The xitome ol the decision would largely depend on how the commercial banks imple mented it he added

Leading global and regional fund managers at the Eu romoney international Invest merit contereixe in Dhaka re centlv identified low .liquidity as the numljer xte probirm of i tie country s share market

They said ihe liquidity problem of the market had been obstructing adequate Inflow of foreign portfolio invest merits as the market lacked local counterpart funds for foreign investments

Chairman M tire Securities

and Exchange Commission (SEC) Sultanuzzanian Khan said the decision was taken at the request of the SEC.

He said implementation of the decision 'would help increase the liquidity of the share market and make the market more vibrant.

The SEC Chairman also hoped the response of the banks ■ would be positive as lending to the share investors would be more viable for them than lending to many other sectors.

Prof Abu Ahmed of the Economics Department of Dhaka University said. "It's a good decision and should have been taken much earlier?

"The decision would help improve the liquidity situation of the share market and also Increase the participation of the small investors." said Prof Ahmed, who is also President of the Bangladesh Share Investors' Forum, representing the small equity investors.

Prof Abu Ahmed said an-. other good side of the decision is the integration of the banking sector and the capital market, which will make the market more vibrant.

"The banks had to purchase securities of the Bangladesh Bank and get only one to two per cent interest for th? excess liquidity problem. But now they well get more than 10 per cent interest by lending for share investments." Prof Ahmed said, adding it would help the banks utilise their idle hinds In a more profitable way.

He sAid the prices of securities may also rise after implementation of the decision as more funds would lie generated into the market. It may also make the market more competitive, he added.

Ah official of a commercial bank, talking to The Daily Star , last night, said. "It's- a positive step. Small Investors will find their access to the stock market increasingly after implementation of the decision.”

it would also help remove the excess liquidity problem of the banks and make them more market-oriented, the official said, speaking on condition of anonymity.

. He said the ceiling of five , lakh taka for one. share investor may discourage some of the banks to lend.

A Bangladesh Bank official, however, said the ceiling was kept because the stock market is too sensitive and large scale lending at this stage may cause problem to some of the banks.

"Let the banks and the share investors cope with the new situation. The minimum control will ultimately be withdrawn." the official said.