The central bank on Wednesday introduced a new computation methodology to find the rate of green financing by banks and non-bank financial institutions. The new methodology will help reduce the overall volume of green financing in the country.
According to new methodology, banks and non-bank financial institutions will have to calculate their lending on green projects as a ratio of term loan.
Previously, they used to consider working capital and others along with term loans while calculating the percentage of green funding.
Officials at the Bangladesh Bank told the FE that this new computation has been made in order to rationalise as many fail to achieve the target when the working capital and other loans become bigger.
In 2016, Bangladesh Bank ordered all banks and nonbank financial institutions to maintain 5.0 per cent green funding of their total loans. There are some 55 green products. Such projects are funded by refinancing schemes while some are funded by banks' own coffers.
Khondker Morshed Millat, general manager at the sustainable finance department of Bangladesh Bank said, "We have rationalised it and banks will achieve the target [easily]."
But Syed Mahbubur Rahman, CEO and Managing Director at the Mutual Trust Bank, told the FE this new computation will bring down the volume of green financing.