SFD Circular No. 07: Green Transformation Fund (GTF) in Taka for Export and Manufacturing-Oriented Industries

Page No.-1 Phone: 88-02-9550448, 9554896, IP: 88-02-55665001-6, Fax: 88-02-9530479, www.bb.org.bd

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh

Managing Director / Chief Executive Officer All Scheduled Banks Operating in Bangladesh

Dear Sir,

Regarding the provision of refinancing facility for the Green Transformation Fund (GTF) in local currency established for the export and manufacturing-oriented industries.

Bangladesh Bank has established the Green Transformation Fund (GTF) in local currency to promote sustainable development in the export and manufacturing-oriented industries through the implementation of green policies in the country. Under this fund, refinancing facilities in local currency (Taka) will be provided against the bank's financing for the payment of the import value of eligible customers' capital machinery and parts, or against the purchase of locally produced machinery and parts. The policy regarding the aforementioned refinancing fund is as follows:

1. Size of the Fund: Tk 5,000 (Five Thousand) Crore (Approximate).

2. Source of the Fund: Own source of Bangladesh Bank.

3. Tenure of Refinancing Facility: 5-10 years (depending on the type of project).

4. Objective of Fund Formation: To facilitate the import/purchase of eco-friendly capital machinery and parts in the export and manufacturing-oriented industries under the following initiatives: a. Water Use Efficiency (Water Use Efficiency); b. Water Conservation and Management (Water Conservation and Management); c. Waste Management (Waste Management); d. Resource Efficiency and Recycling (Resource Efficiency and Recycling); e. Renewable Energy (Renewable Energy); f. Energy Efficiency (Energy Efficiency); g. Heat and Temperature Management (Heat and Temperature Management); h. Airflow and Flow Efficiency (Airflow and Flow Efficiency); i. Cleaner Production Initiatives (Cleaner Production Initiatives); j. Other areas periodically directed by Bangladesh Bank (As and when directed by Bangladesh Bank).

5. Participating Financial Institutions (Participating Financial Institution - PFI): Banks interested in receiving refinancing facilities under this fund must enter into a Participation Agreement (PA) with the Director, Sustainable Finance Department, Bangladesh Bank, Head Office, Dhaka. The banks bound by this Participation Agreement will be considered Participating Financial Institutions (PFI). The PFI must comply with the instructions periodically issued by Bangladesh Bank through Circulars/Circular Letters under this fund.

Date: 07 December 2022 22 Agrahayan 1429

Sustainable Finance Department SFD Circular No.-07

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6. Interest/Profit Rate Structure: 6.1) The interest/profit rate payable by the PFI to Bangladesh Bank is 1% and 6.2) The customer interest/profit rate shall be maximum 5%.

7. Type of Refinancing Facility: Medium-term Loan/Investment (Medium Term Loan/Investment).

8. Grace Period: The grace period shall be maximum 01 (one) year depending on the relationship between the PFI and the customer.

9. Eligibility of Customers for Refinancing Facility: 9.1) Refinancing facility from this fund shall be available against the bank's financing for the payment of the import value of eco-friendly capital machinery and parts under the initiatives mentioned in Clause 4, or against the purchase of locally produced machinery and parts; 9.2) The loan/investment-to-equity ratio for a borrower under this fund shall be maximum 70:30. However, no single borrower shall be eligible for a loan facility exceeding Tk 20 (Twenty) Crore under this fund; 9.3) Non-performing loan borrowers shall not be considered for refinancing facility. The PFI must collect the latest EQR (Environmental Quality Report) of the concerned customer and their concerned institutions before applying for refinancing facility to ensure that the customer's loan is not non-performing; 9.4) If two consecutive Installment Repayment Dates (IRD) remain fully or partially unpaid (as defined in the Standard Operating Procedure for Refinancing - SOP-RF), the refinancing facility under this fund shall not be considered; 9.5) Appropriate KYC (Know Your Customer) formalities must be completed.

10. Eligibility of PFI for Refinancing: 10.1) All state-owned banks can provide loans under the aforementioned refinancing facility; 10.2) In the case of private and foreign banks, the ratio of Priority Sector Lending/Investment (PSL) must be less than 10%; 10.3) Regarding the maximum limit of loan/investment facility for a single customer or group, banks must follow the instructions of the Companies Act, 1991, along with the instructions mentioned in BRPD Circular No.: 1/2022 issued by Bangladesh Bank; 10.4) Banks must ensure compliance with all risk management policies periodically issued by Bangladesh Bank.

11. Schedule of Charges: In the matter of determining fees/charges against the loans provided under this refinancing fund, the instructions mentioned in the Circular issued by the Banking Regulation and Policy Department of Bangladesh Bank on June 10, 2021, regarding "Schedule of Charges," along with periodically issued Circulars/Circular Letters, shall be applicable to scheduled banks.

12. Documentary Checklist: 12.1) At the time of applying for refinancing to Bangladesh Bank, the concerned bank must submit the following documents: a. Letter from the customer regarding the acceptance of loan/investment under the refinancing facility; b. Latest EQR of the customer; c. Copy of the approval letter from the Management Committee of the concerned bank in favor of the customer for receiving refinancing facility from this fund; d. Profile of the customer and the concerned project; e. Latest statement of the loan/investment account.

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12.2) A valid Energy Audit Certificate issued by an Energy Auditor certified by the Bangladesh Energy Conservation Company (BECC) must be submitted;
12.3) To receive the refinancing facility, the PFI must submit the Board Resolution, Terms and Conditions of Loan, and Terms and Conditions of Investment signed by the Managing Director/Chief Executive Officer of the institution after the approval of the refinancing facility.

13. Refinancing Application Process: 13.1) The application letter signed by the Managing Director/Chief Executive Officer of the PFI or a designated officer below that level, along with the documents mentioned in Clause 12, must be submitted to the Director, Sustainable Finance Department, Bangladesh Bank, Head Office, Dhaka; 13.2) At the time of applying for the refinancing facility, banks must follow SFD Circular No.: 04, dated July 28, 2020, issued by the Sustainable Finance Department regarding the Standard Operating Procedure; 13.3) The Sustainable Finance Department will conduct a pre-inspection of the concerned project before approving the refinancing facility. Based on the inspection report, submitted application, and relevant documents, the limit of the refinancing facility will be determined.

14. Refinancing Disbursement Process: 14.1) The refinanced amount shall be collected by the PFI from Bangladesh Bank according to the specified repayment schedule on a quarterly basis; 14.2) The installment due on the date specified in the repayment schedule, along with interest/profit, shall be deducted from the current account of the concerned PFI maintained at Bangladesh Bank; 14.3) In the case of syndicated financing, only the lead PFI will apply for refinancing to Bangladesh Bank, and the quarterly installment of the refinanced amount shall be collected from the lead PFI. The distribution of refinancing facilities and the collection of installments and other liabilities of the refinanced amount shall be entirely the responsibility of the lead PFI among the participating PFIs in the syndication. All participating PFIs in the syndication, including the lead PFI, must separately enter into a Participation Agreement (PA) with Bangladesh Bank in accordance with Clause 5; 14.4) On the date specified in the repayment schedule, PFIs must maintain sufficient funds/balance in their current accounts at Bangladesh Bank. If the installment of the refinancing facility cannot be collected due to insufficient funds/balance in the current accounts of the PFIs, the due amount shall be collected with additional interest/profit at a rate 3% higher than the interest/profit rate imposed during the refinancing period, along with the funds/balance deficiency.

15. Reporting and Monitoring: 15.1) PFIs must submit quarterly reports along with the attached table showing the latest details of the amount received for refinancing, along with a Forwarding Letter signed by the Managing Director/Chief Executive Officer, to the Director, Sustainable Finance Department, Bangladesh Bank, Head Office, Dhaka, within 15 (fifteen) days after the end of each quarter. PFIs that have not received refinancing facilities under the Participation Agreement (PA) must submit zero reports. In the case of syndicated financing, all member PFIs, including the lead PFI, must submit separate quarterly reports for their respective refinanced shares; 15.2) If a PFI receives refinancing facility by providing false information or if Bangladesh Bank's field inspection reveals that the amount of loan/investment is not used properly, the amount provided for refinancing shall be recovered in a lump sum from the current account of the concerned PFI at Bangladesh Bank, along with interest/profit at a rate 3% higher than the interest/profit rate retained by Bangladesh Bank.

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16. Other Terms: 16.1) Banks must provide loan/investment facilities in favor of customers in accordance with their risk management policies and the instructions of the Sustainable Finance Department regarding SOP (SFD Circular No.: 03, dated June 26, 2022), as well as other existing relevant rules and regulations of Bangladesh Bank, regarding the selection of loan/investment recipients, approval and distribution of loan/investment facilities, execution of documents related to loan/investment, proper use of loan/investment amounts, and monitoring of loan/investment. All liabilities for the recovery of distributed loans/investments shall rest with the bank distributing the loan/investment. There shall be no connection between the recovery of customer loans/investments and the installment payment of the concerned refinanced amount to Bangladesh Bank; 16.2) Islamic Shariah-based banks can provide investment to customers under this fund based on their approved investment methods without any difference in terms.

17. The Sustainable Finance Department, Bangladesh Bank reserves the right to add, subtract, and modify the terms of the refinancing fund.

18. This Circular is issued under the powers conferred by Section 45 of the Companies Act, 1991 (amended in 2018) and shall come into force immediately.

Yours faithfully,

(Md. Rajib Ali) Director (SFD) Phone No: 9530320 E-mail: rajib.ali@bb.org.bd

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Appendix Quarterly Report on Green Transformation Fund (GTF) Disbursement

Name of the Bank: .................................... Branch: ....................................

S.No.	Name of the Customer	Project Name	Project Cost (Tk)	Amount Disbursed (Tk)	Amount Recovered (Tk)	Outstanding Amount (Tk)	Outstanding Amount as of DD/MM/YYYY	Remarks
1
2
3
4
5

Priority Sector Lending (PSL)

Date: DD/MM/YYYY

Signature of the Authorized Signatory Name and Designation Seal of the Bank