Bangladesh Bank to set up $200 m Green Transformation Fund

Bangladesh Bank on Thursday introduced a refinance scheme namely Green Transformation Fund amounting to US$ 200 million for the export oriented industries of the textile and leather sectors to set up environment friendly infrastructures. The BB issued a circular to all authorized dealer branches of scheduled banks saying that the loan from the GTF would be offered in US dollars and provided to AD branches for on-lending and re-financing to eligible borrowers. The GTF is intended to facilitate access to financing in foreign exchange by all manufacturer-exporters in export oriented textiles and textile products, and leather manufacturing sectors to import capital machinery and accessories for implementing environment-friendly initiatives. The refinance fund will be provided 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 in the export oriented textiles and leather industries. The banks will be allowed to use the refinance fund if they have an acceptable level of non-performing loans of not more than 10 per cent, the circular said. No banks will become eligible for the fund with shortfall in loan and investment provision, capital and liquidity. The AD branches will have qualified and experienced management, and adequate organisational and institutional capacity for comprehensive risk management. The AD branches will have appropriate capacity for carrying out loan appraisal (including environmental and social assessment) with adequate and functional internal audits and controls. Under the refinance fund, interest rate will be charged to the AD branches against the financing at the rate of six-month LIBOR plus 2.25 per cent. The AD branches will determine their own loan interest rates to the borrowers covering their cost of borrowing from the fund and operational expenses, plus a reasonable risk-adjusted spread and profit margin (typically expected to be in the range of 1.00 – 2.50 per cent above the cost of borrowing), the circular said. The above interest rate will be reviewed and adjusted every six months depending on market conditions. The tenor of loan will be from 5 to 10 years with 1 year grace period. Interest accrued for the grace period will be repaid in equal quarterly repayment without compounding. -

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