TBT DESK: Bangladesh Bank (BB) has allocated Tk 1,000 crore from its revolving Green Transformation Fund (GTF) to support environmentally sustainable industrialisation in rural and local industries across the country.

The central bank announced the initiative through a circular issued on Monday, aiming to help small and regional entrepreneurs adopt green technologies and transform traditional production units into environmentally friendly industries.

Officials said the move is intended to expand sustainable economic activities beyond major urban centres and encourage greener industrial practices at the grassroots level.

Earlier, Bangladesh Bank had created a Tk 5,000 crore revolving Green Transformation Fund from its own resources to promote sustainable growth in manufacturing and export-oriented industries. Of that amount, Tk 1,000 crore has now been earmarked exclusively for rural and local industrial enterprises.

Under the refinance scheme, participating financial institutions (PFIs) will receive funds from the central bank at an interest rate of 1 per cent, while the maximum lending rate for borrowers has been capped at 5 per cent.

The loan tenure will range from two to five years, depending on the nature of the project. Entrepreneurs may also receive a grace period of up to six months, subject to their banking relationship and project conditions.

The fund will support projects related to renewable energy, energy efficiency, water conservation and management, waste management, recycling and resource efficiency, as well as initiatives aimed at improving workplace environments.

Bangladesh Bank said the scheme is designed to accelerate the adoption of green technologies and sustainable production practices among small and regional industries.

According to the circular, a single borrower will be eligible for loans of up to Tk 5 crore. The debt-equity ratio must not exceed 80:20 of the total import or purchase cost of machinery and equipment.

The central bank has also made renewable energy use mandatory for financed projects, requiring at least 10 per cent of electricity consumption to come from renewable sources.

Strict eligibility conditions have been imposed for borrowers. Loan defaulters will not qualify for financing under the scheme, while participating banks must verify updated Credit Information Bureau (CIB) reports before approving loans.

All state-owned commercial banks will be eligible to participate in the programme. Private and foreign commercial banks, however, must maintain classified loan ratios below 20 per cent to qualify. Islamic Shariah-based banks will also be allowed to participate through approved investment mechanisms.

Banks willing to join the programme will have to sign a participation agreement with Bangladesh Bank’s Sustainable Finance Department, although banks already operating under existing GTF agreements will not need fresh approval.

The circular was issued under Section 45 of the Bank Company Act, 1991, amended in 2023, and took immediate effect.

To ensure transparency and accountability, participating financial institutions will be required to submit quarterly reports to the Sustainable Finance Department within 15 days after the end of each quarter.

Bangladesh Bank warned that penalties may be imposed for providing false information or failing to comply with reporting requirements.