Banks’ green financing dropped in the January-March period of 2024 compared with that in the October-December period of 2023 amid a severe liquidity crisis in the country’s banking sector.
According to a Bangladesh Bank quarterly review report on sustainable finance of banks and non-bank financial institutions, the amount of banks’ investments in green projects declined to Tk 5,967 crore at the end of March 2024 against Tk 6,408 crore at the end of December 2023.
Green financing by the NBFIs, however, increased to Tk 1,271 crore at the end of March 2024 compared with Tk 996 crore at the end of December 2023 and Tk 751 crore at the end of September 2023.
The green finance accounted for 11.82 per cent and 27.9 per cent of the total loan disbursements by the banks and the NBFIs respectively.
Forty-three out of 61 banks and eight out of 34 NBFIs had had exposure in green finance in the reporting quarter while it was 54 banks and 16 NBFIs exposure to green financing in the previous quarter.
Banks’ sustainable finance decreased to Tk 85,337 crore in March-end quarter, dropping from Tk 87,826 crore in December 2023, Tk 32,296 crore in September 2023 and Tk 39,987 crore in December 2022.
The NBFIs’ sustainable finance increased slightly to Tk 3,359 crore at the end of March compared with that of Tk 2,876 crore at the end of December 2023.
Banks’ overall sustainable finance dropped in the reporting period as the banking sector has been struggling with an acute liquidity shortage, which compelled the banks to reduce its lending activities, bankers said.
They said that the sustainable financing increased significantly in December 2023 period as the banks wanted to secure favourable sustainable rating, announced by the central bank each year.
Sustainable finance by banks was 32.22 per cent and that by the NBFIs was 24.6 per cent of their total loan disbursements in the March quarter.
Banks financed the highest in sustainable CMSME for sustainable linked finance, which was Tk 15,969 crore, followed by sustainable agriculture sector Tk 7,157 crore, socially responsible financing Tk 5,777 crore in January-March of 2024.
There was no investment in green bond, green Sukuk or impact fund by the banks and NBFIs in the period.
The total utilisation of climate risk fund in the January-March quarter was only Tk 12.1 crore.
The total outstanding balance of sustainable finance by banks was Tk 3.43 lakh crore and by the NBFIs Tk 17,374 crore at the end of March.
In the January-March period, banks recovered Tk 64,134 crore and the NBFIs Tk 1,313 crore from their disbursed sustainable loans.
In the period, banks rescheduled Tk 1,313 crore and the NBFIs Tk 53 crore in sustainable finance.
Fifty-four out of the 61 banks and 14 out of the 34 NBFIs had had exposure to sustainable finance in the reporting quarter.
In January-March 2024, 26 banks and 10 NBFIs were able to fulfil the sustainable financing target, which is 20 per cent of their total loan disbursements.
During the quarter under review, 27 banks and five NBFIs surpassed the target of green finance (5 per cent) compared with the total term loan disbursement.
The Bangladesh Bank introduced the Sustainable Finance Policy in December 2020.