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Sun. Jul 14th, 2024

New era | The banks’ green financing dips

By Vaseline May26,2024

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A file photo shows the headquarters of the Bangladesh Bank in the capital Dhaka. Banks’ green financing declined in the January-March period of 2024 compared to that in the October-December period of 2023, due to a severe liquidity crisis in the country’s banking sector. | New Age photo

Banks’ green financing declined in the January-March period of 2024 compared to that in the October-December period of 2023, due to a severe liquidity crisis in the country’s banking sector.

According to a quarterly overview report by Bangladesh Bank on the sustainable financing of banks and non-banking financial institutions, the amount of banks’ investments in green projects has fallen to Tk 5,967 crore at the end of March 2024, from Tk 6,408 crore at the end of December 2023. .

However, green financing by the NBFIs increased to Tk 1,271 crore at the end of March 2024, compared to Tk 996 crore at the end of December 2023 and Tk 751 crore at the end of September 2023.

Green financing accounted for 11.82 percent and 27.9 percent of the total loan disbursements by banks and NBFIs, respectively.

Forty-three out of 61 banks and eight out of 34 NBFIs were exposed to green finance in the reporting quarter, while in the previous quarter, 54 banks and 16 NBFIs were exposed to green finance.

Banks’ sustainable funding fell to Tk 85,337 crore at the March quarter-end, from Tk 87,826 crore in December 2023, Tk 32,296 crore in September 2023 and Tk 39,987 crore in December 2022.

NBFIs’ sustainable financing increased slightly to Tk 3,359 crore at end-March from that of Tk 2,876 crore at end-December 2023.

Banks’ overall sustainable financing fell in the period under review as the banking sector faced an acute liquidity shortage, forcing banks to reduce lending activities, bankers said.

They said that sustainable financing increased significantly in the December 2023 period as banks sought to secure a favorable sustainable rating, which is announced every year by the central bank.

Sustainable financing by banks stood at 32.22 percent and that of NBFIs stood at 24.6 percent of their total loan disbursements in the March quarter.

Banks financed the highest amount of sustainable CMSME for sustainable linked financing at Tk 15,969 crore, followed by sustainable agriculture sector Tk 7,157 crore, socially responsible financing Tk 5,777 crore in January-March 2024.

During the period, banks and NBFIs did not invest in green bonds, green Sukuk or impact funds.

The total utilization of the climate risk fund in the January-March quarter was only Tk 12.1 crore.

The total outstanding balance of sustainable financing by banks stood at Tk 3.43 lakh crore and by NBFIs at Tk 17,374 crore at the end of March.

In the January-March period, banks recovered Tk 64,134 crore and NBFIs Tk 1,313 crore from their durable loan disbursements.

During the period, banks redeployed Tk 1,313 crore and NBFIs Tk 53 crore into sustainable finance.

Fifty-four out of 61 banks and 14 out of 34 NBFIs had had exposure to sustainable finance in the quarter under review.

By January-March 2024, 26 banks and 10 NBFIs were able to achieve the sustainable finance target of 20 percent of their total loan disbursements.

During the quarter under review, 27 banks and five NBFIs exceeded the green financing target (5 percent) compared to total term loan disbursement.

The Bangladesh Bank introduced the Sustainable Finance Policy in December 2020.

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