On top of the current targets for green banking, the Bangladesh Bank has set new plans for bank loan disbursements in financing green and sustainable projects.
The central bank's Sustainable Finance Department (FSD) issued a circular for banks in this regard Tuesday.
According to the circular, at least 2% of the previous year's net outstanding loans and advances, excluding bank employee credits and defaulted loans, will have to be set for environment-friendly projects for the new year.
This rate will be 15% for sustainable financing. Banks have been asked to notify the central bank FSD about the targets within the last working day of January each year.
The current financing targets for environmentally-friendly projects and sustainable schemes based on term loans will also continue.
The circular says the rate of green financing of banks and financial institutions will have to be at least 5% of the total term loans disbursed, excluding the employee loans. On the other hand, the target of sustainable financing should be at least 20%.
In order to expedite environment-friendly financing and sustainable financing, banks and financial institutions will set up "Dedicated Sustainable Finance Help Desk" in their potential branches and conduct "Help Desk" activities synchronising with their Sustainable Finance Unit at the head offices.
According to the Sustainable Finance Policy published by the Central Bank last December, green finance should promote greener technology in other sectors through its lending products. It refers to banks and non-bank financial institutions (NBFIs) lending to projects which reduces negative externality or promotes positive externality within the scope of the environment, thus endorsing or supporting green initiatives through financial instruments of banks and NBFIs.
Meantime, sustainable finance generally refers to the process of taking due account of environmental, social, and governance considerations when making investment decisions in the financial sector.
More specifically, environmental considerations may refer to climate change mitigation and adaptation and the environment more broadly, such as the preservation of biodiversity, pollution prevention, and circular economy.
In another circular Tuesday, the central bank said it had issued a licence to the payment system operator (PSO) John Portonics Limited to provide payment gateways and merchant aggregator services within the country.