BB issues show-cause to Sonali Bank

The Bangladesh Bank has issued a show-cause notice to state-owned Sonali Bank for making excessive investment in the stock market breaching the law.

The bank has been asked to explain within three days why it will not be fined for violating Section 26(a) of the Bank Company Act.

The notice was sent to the bank’s managing director on Monday.

A high official of the central bank said Sonali Bank on November 2 invested Tk 500 crore in the Investment Corporation of Bangladesh though it had already invested more than Tk 1,000 crore in the organisation before.

As a result, the bank’s investment in the capital market had exceeded 26 per cent, he added.

The Bank Company Act limits a bank’s stock market investment to 25 per cent of its capital, including paid-up capital, share premium, statutory reserve, and retained earnings.

Sonali Bank’s stock market investment limit went above the regulatory limit in 2017 as well. Then the central bank instructed it to bring the excess investment down to the limit by June 2018.

Sonali Bank made the November 2 investment to boost and sustain the share market, said a press release.