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Bangladesh Bank yesterday issued guidelines for the rollout of green bonds to facilitate sustainable investment of banks and non-banks to tackle the adverse impacts of climate change.
Lenders will be able to raise funds by issuing green bonds in the market in order to implement different types of projects which will focus issues such as climate change mitigation and adaptation and energy and resource efficiency, according to a central bank notice.
The central bank has fixed eight sectors where banks and non-bank financial institution (NBFIs) would be allowed to provide finance by raising funds issuing green bonds.
The sectors include low-carbon electricity generation and transportation, heating and cooling, green establishment, and energy and resource efficiency in industry.
The central bank has also fixed 88 types of activities under the eight sectors.
The central bank has fixed eight sectors where banks and non-bank financial institution would be allowed to provide finance by raising funds issuing green bonds
Banks and NBFIs will be able to implement several types of environment-friendly infrastructural projects like roads and dams by using funds of the bonds, said Chowdhury Liakat Ali, director (current charge) of Sustainable Finance Department of BB.
Besides, the government agencies can also take lease of such projects by providing the required money to the bond-issuer lenders.
Individuals, corporate and government entities and other banks and NBFIs can purchase green bonds issued by lenders, Ali said.
The maturity period of the green bonds will not exceed 15 years.
Banks, which have non-performing loans of more than 10 per cent, will not be permitted to issue green bonds. This rule will not be applicable for state-owned banks.
Lenders have to maintain capital as per the guidelines set by Basel III to qualify for issuing the bonds.
If any lender has a record of having faced a provision shortfall in the past two years, they will not be eligible to issue the bonds.
On top of that, banks intending to issue the bonds have to maintain the cash reserve requirement (CRR) and statutory liquidity ratio (SLR) on a regular basis.
(TDS)
