Bangladesh Bank alleviated provisioning for mutual funds
13 March 2015, Nirapad News: The Bangladesh Bank (BB) has alleviated the provisioning for mutual funds in a bid to help stabilize the price of the funds on the stock market.
Most of mutual funds had been in freefall in the recent trading sessions, sending a cautionary signal to the investors about making fresh investment. There are around three dozens of mutual funds, both open and closed end, listed with the stock market. Recent trade data showed that majority of the funds closed lower in every session.
Against this backdrop, the central bank lowered the rate of provisioning for the mutual funds to help stabilize their price and offer investors a comfortable breathing space.
“Considering the recent market situation and price fall in mutual funds, Bangladesh Bank brought changes to their provisioning,” a Bangladesh Bank circular, issued on Thursday to all banks, said.
According to the circular, there will be no need of provisioning for the mutual funds if their average closing price fall to or go below 85.0 percent of their market value or net asset value on current market price.
The rate of provisioning will be calculated by deducting the market price from average closing price of the mutual funds if their market prices remain at or go beyond 85.0 percent of their net asset value on current market price.
In case of the closing price, which is below 85.0 percent of their net asset value on current market price, the rate of provisioning will be calculated by deducting their net asset value on market price from the average closing price.