Tk5,000cr refinancing scheme formed for green transition of industries
The term loan facility under the scheme can be availed for purchasing environment-friendly capital machinery from local or foreign sources
The Bangladesh Bank has formed a Tk5,000-crore refinancing scheme, named Green Transition Fund, as part of its effort to help manufacturing and export-oriented industries go green with energy-efficient and environment-friendly capital machinery.
"Customers will be able to avail 70% of costs of letters of credit against their required [machinery] imports as loans under the scheme, while they have to bear the remaining 30% on their own," the Sustainable Finance Department of the central bank said in a circular on Wednesday.
Issuing a letter, the Bangladesh Bank also informed managing directors of all the scheduled banks operating in the country about the new scheme, which is subject to remain available for five to ten years.
The term loan facility under the scheme can be availed for purchasing capital machinery from local sources, it added and noted that an individual will be allowed to borrow up to Tk200 crore at the highest 5% interest.
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Loan defaults and those having two export bills partially or non-repatriated, however, are not eligible for the loans.
"The Bangladesh bank earlier formed a $200 million such fund in 2016 and Є200 million euros in 2020. The latest fund has been created in local currency as the London Interbank Offered Rate is higher now," a central bank senior official told The Business Standard.
He hopes that the Bangladesh Bank initiative will help increase industrial production and the country's export.
All the government scheduled banks, and private and foreign banks having less than 10% defaulted loans are eligible to get funds at 1% interest from the refinancing scheme. Interested lenders are urged to sign an agreement with the Bangladesh Bank.
In the case of lending customers, banks have to follow the Bank Companies Act 1991, which prohibits lenders from lending more than 25% of their capital.
Banks also have to send the customers' credit-seeking documents, Credit Information Bureau Reports, approvals of the board of directors and energy audit reports to the central bank to apply for the refinance.
The Bangladesh Bank will collect instalments with interest or profit on a tri-monthly basis from the banks. However, if a bank fails to repay on time, the payable amount will be deducted from its central bank account.
Moreover, if any loan is not utilised properly the bank concerned will be charged an additional 3% additional interest for one-time.
The circular mentions a list of green and environment-friendly capital machinery which includes machinery for water use efficiency in wet processing, water conservation and management, waste management, resource efficiency and recycling, renewable energy, energy efficiency, heat and temperature management, air ventilation and circulation efficiency and work environment improvement initiatives.
According to the sources of the central bank, the government has so far announced a stimulus package of Tk1.03 lakh crore to support the working capital of the Covid-hit industries, under which entrepreneurs got loans at 4.50% interest.
A total of Tk45,528 crore has been disbursed so far from the package.
