• Tuesday, Oct 27, 2020
  • Last Update : 02:47 am

Missing green financing target to affect banks, NBFI ratings

  • Published at 10:43 pm September 9th, 2020
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The circular also mentioned that the banks and NBFIs will have to disburse 5% of their term loans, excluding employee loans, for green financing

Failure of the banks and non-bank financial institutions to meet the green financing targets would affect their capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (Camels) ratings.

A Bangladesh Bank (BB) circular issued on Wednesday stated that the regulator would consider green financing of the banks and NBFIs when the Camels rating of the entities would be prepared.

The circular also mentioned that the banks and NBFIs will have to disburse 5% of their term loans, excluding employee loans, for green financing.

Previously, the banks were supposed to invest at least 5% of their total funded loans to environment friendly initiatives.

The limit would lower the volume of required investments but compliance with the target was made mandatory, otherwise the Camels rating of the entities would deteriorate, said a senior BB official.

Drop in Camels rating would ultimately create multidimensional problems for the financial institutions, and it would act as an indirect penalty.

The central bank came up with the instruction as the disbursement of credit by the banks and NBFIs in the April-June quarter this year dropped by 16.83%, or Tk513.38 crore against that in the previous quarter.

In Wednesday's circular, the BB also asked all the scheduled banks to set up separate helpdesks in their headquarters to extend support, suggestions, and expedite green financing activities.

The banks were also instructed to run the help desk as per the framework of the central bank's Sustainable Finance Unit.

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