Accounts opening eased to boost NRBs’ stock investment

Infographic: TBS

The central bank has made it easier for non-resident Bangladeshis (NRBs) to open bank accounts in local currency in a move to boost their investments in the country's capital market.

In a circular on Sunday, the Bangladesh Bank said that now NRBs will have to provide only six documents for opening a non-resident investor's taka account (NITA).

The documents include the account holder's passport copy, photograph, the proof of address, the reliable source of income, as well as the passport or national identity card copy and photograph of the nominee.

Earlier, commercial banks used to ask for different sets of documents for opening such accounts, which discouraged applicants.

However, for the opening of NITAs by non-resident foreign nationals or institutions, banks shall fix and distribute a unified set of documents to their branches at home and abroad, complying with the existing rules and regulations.

Seeking anonymity, a senior central bank official said, the Bangladesh Bank has been working for the last few months to ease the NRB investors' taka account opening process.

An official involved in the policymaking of the central bank said that the remittances coming through NITAs are invested in the stock market.

"We have given the new directive to banks to open NITAs mainly in response to demands from the Bangladesh Securities and Exchange Commission (BSEC)," he said.  

"They told us that because banks are hesitant about the necessary documents for opening an account, they ask for various unnecessary documents. As a result, expatriate Bangladeshi investors are discouraged from investing in the stock market as they have to face the trouble of opening an account. They wanted a uniform directive to overcome these problems," the official added.

The BSEC expects that the new guidelines will help increase the investment of expatriate Bangladeshis, the official said, adding that now the outflow is more than the amount of inflow in the country's portfolio investment.

"The commission told us that many new companies intend to launch initial public offerings (IPOs). If many new state-owned enterprises are listed, investment opportunities will increase. In this regard, they have asked for policy support from the central bank, and we have responded," he added.

Investment falls by $1 billion in 3 years  

Investments in the stock market by NRBs and foreigners through NITAs have been declining for the last five years. In the last three years alone, investment in the sector has fallen by $1 billion.

According to central bank data, portfolio investment by NRBs was $2.47 billion as per market price at the end of June 2019. At the end of June last year, it stood at $1.51 billion.

However, the industry insiders say that the investment has fallen by more than $1 billion in three years. It is difficult to assess how much the actual investment has decreased or increased by calculating it according to the market price.

Explaining the reason, they said the Dhaka Stock Exchange (DSE) Index was 5,422 in June 2019, while the index was 6,377 at the end of June 2022.

Usually, if the share price is relatively high in the market, the value of the index is high. A low index means a low share price. In that regard, they added, the share price was relatively low at the time of valuation in 2019; thus, the amount was kept low in the investment calculation.

The market price, on the other hand, was shown higher because the share price is higher during the same period in 2022. They argued that if these factors are taken into account, the drop in investment is expected to be more than $1 billion.

According to central bank data, expatriate Bangladeshis and foreigners have been interested in withdrawing investments rather than making new ones through taka accounts over the last five years.

For example, in the 2019-20 financial year, shares were purchased from these accounts for an amount equivalent to $333 million. In contrast, the equivalent of $478 million was withdrawn by selling shares. That is, the net investment in NITAs from the stock market decreased by $132 million in that financial year.

Analysing the month-wise data of the last two years, it has been found that net investment has declined in 20 out of the last 24 months. Although the investment rose in 4 months, it was still very small.

Sector insiders also hope that the falling value of the taka, which has fallen by about 25% against the dollar in the past few months, will help spur new investment. According to them, expatriates are now getting more taka by sending dollars than before. As a result, there is an opportunity to buy more shares by spending less amount of dollars. Therefore, investment may increase. They also stated that if the value of money is not fixed, investors may reduce their investment due to uncertainty.