New guidelines issued by the central bank limits bank lending to buy stocks to less than 05 percent of total loans, with those over the new limit required to reduce exposure by March 31, 2012.
The regulator has also imposed limits on issue of guarantees to buy shares, saying they cannot exceed fifty percent of the value of initial public offerings.
The move came after criticism that small investors were being unfairly denied a chance to invest in IPOs with a spate of recent IPOs being heavily oversubscribed by big investors using bank guarantees.
The sharp rise in stock prices has also raised fears of a stock market bubblehttp://www.lbo.lk/fullstory.php?nid=592802421