Banks, FIs get green financing target

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The rate is 5% of annual credit exposure of any bank that started operation before 2013.

It is, however, 3% for nine new banks and 4% for non-banking financial institutions.

Bangladesh Bank yesterday imposed the target with immediate effect to promote financing environment-friendly projects.

The rate will be 5% for all the banks and FIs from January 2016.

This is for the first time the central bank imposes a target for green financing after bringing in the new global credit practice and formulating guidelines during last few years.

Bangladesh Bank had earlier made agriculture credit target-bound with offering incentives to both the lenders and borrowers. It has also made refinance arrangements for few other areas like SMEs and women entrepreneurs.

A refinance arrangement of Tk2bn has been made in August 2009 for green financing to support the banks as well as encouraging prospective borrowers with the low cost fund for the green projects – ones having low carbon emission and energy consumption.

The banks are entitled to get the fund at bank rate (5%) for financing green projects at a maximum interest rate of 12% per annum. The annual interest rate on industrial credit remains at around 13%.

The bankers have been assured they would earn credit in CAMELS rating subject to their performance in the green financing.

On the other hand, the poor performers would have to face the central bank measures – not made clear yet.

“The target is to bring the banks under obligation,” said a senior executive of Bangladesh Bank.

Only 47 green products are as of now eligible for the finance.

These are biomass-based large Biogas plant, poultry and dairy-based large Biogas plant, 1MW or above solar PV plant, solar cooker assembly plant, solar water heater assembly plant, solar air heater and cooling assembly plant, solar-driven cold storage, Bioenergy-driven power generation plant, power switch assembly plant for power saving, hybrid cook stove assembly plant, LED bulb or tube light assembly plant, power generation from municipal waste, compost generation from municipal waste, recyclable non-oven polypropylene yarn and baggage manufacturing and palm oil production plant etc.

Bangladesh Bank had issued the policy guidelines for green banking in February 2011.

All the 47 banks have their own green banking policy approved by their respective board of directors and have Green Banking Unit (GBU).

They also have their own Green Office Guide for conducting in-house green activities.

Bangladesh Bank is currently providing loans for commercial banks between 5% and 12% interest rate for direct refinancing and credit wholesale to the entrepreneurs.


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