Assignment on Green Banking

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Green Banking practices in Bangladesh

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  • Green Banking and Its Present Status in

    Bangladesh along with Bangladesh Bank Policy

    Course title: Strategic Banking

    Course no: FNB 406

    Submitted To:

    Md. Alamgir Hossen

    Lecturer & Course teacher

    Submitted By:

    BBA Program,Batch-02

    Name Students ID

    Rajesh Paul 617

    Savar, Dhaka-1342

    July 16, 2014

    Department of Finance & Banking

    Jahangirnagar University

  • Concept of Green Banking

    Green banking in general refers to the efforts of the Banking sector to keep the

    environment green and to minimize greenhouse effects through rationalizing their

    strategies, policy, decisions and activities pertaining to banking service, business and

    in-house operational activities. Green banking may be seen as a component of the

    global initiative from Banks end to save environment. Green banks or environmentally

    responsible banks do not only improve their own standards but also affect socially

    responsible behavior of other business.

  • Importance of Green Banking operations:

    Banks can help environment through automation and online banking.

    Green banking focuses on social safety and security through changing the

    negative impacts of the society.

    In financing, it always gives priority to investments / loans which consider risk

    factors regarding environmental conditions.

    It always cares for sustainable and green growth in industrialization and for

    social purposes.

    It creates a congenial atmosphere inside and outside the bank.

    It considers the clients as its family members, and as such, guide and supervise

    the projects to reduce pollution and thus implement scientific methods in the

    real sense by implementing environmental due diligence (EDD) checklist.

    It reduces cost and energy, thus saving money and increasing GDP of a

    country.

    It changes the mental faculties of the officials and customers, in line with green

    sensibilities.

    It creates mass awareness regarding healthcare, environment and pollution. Due to IT support in all respects, it significantly reduces mass gathering, energy

    and cost-related adversities.

    It helps green plantation and reduces pollution throughout the country. Banks may play a pivotal role by reducing and prohibiting credit risk against unethical

    activities by unruly industrialist of the country.

    It helps institutions, men and the nation in general live with dignity.

  • Draft guideline of Green banking in Bangladesh

    Bangladesh Bank (BB) has prepared a draft policy guideline for introducing green

    banking this year in line with global development and response to the

    environmental degradation. The guideline, posted on the central bank web site,

    outlines a three-stage roadmap for green banking, requesting public feedback by

    January 25, 2011.

    The guideline, in the first phase, suggests all banks to develop green banking policies

    and establish separate green banking cells and incorporate environmental risk

    management strategies by June 30 this year. In this phase, the banks are also

    advised to introduce green and create climate risk funds to finance flood, cyclone

    and drought prone areas at regular interest rate without charging additional risk

    premium.

    Promoting eco-friendly products, supporting training and events for raising awareness

    for environmental risk management are also suggested to include in the regular

    activities of the bank in the next six months.

    In the second phase, the draft suggests banks to take specific policies by June 2012

    for different environmental sensitive sectors such as agriculture, poultry, dairy,

    farming, tannery, fisheries, textile and apparels, renewable energy, pulp and

    paper, sugar and distilleries, construction and housing, engineering and basic metal,

    chemicals, rubber and plastic industry, hospital/clinic, chemical trading, brick

    manufacturing and ship breaking. During this period, all banks will also set up

    green branches to use maximum natural light, renewable energy, energy saving

    light bulbs and other equipments. During the same period, they will have to

    determine a set of achievable targets and strategies, and disclose these in their

    annual reports and websites. They will have to set up green branches. The banks

    should increasingly rely on virtual meeting through video conferencing.

    According to the draft guideline, banks in the next one year will adopt a green

    strategic plan, determining their target for green banking. The draft says a system of

    environment management should be in place in all banks before they step into the

    third phase of green banking, to be completed by June 2013.

    In this final stage, banks will focus on fine tuning of their green activities and will look

    for more innovative products and services to expand eco-friendly business and

    industries.

    Commercial banks will have to adopt a comprehensive green banking policy

    by December 2013 as part of the central bank's efforts to make banking

    practices more responsible to social and environmental causes. The central bank will

    name top ten banks for their overall performances in green banking, and will take

    into account to give it permission to open new branches. In its policy guideline for

    green banking, the BB said co-friendly business activities and energy efficient

    industries should get preference in financing by the banks. The banks will have

    to inform the BB of their initiatives on a quarterly basis within 15 days after the end

    of a quarter. The first quarterly report has to be submitted by July 15, 2011.Besides

    avoiding negative impacts on environment through banking activities, the banks are

  • expected to introduce environment friendly green products to address the core

    environmental challenges of the country.

    The commercial banks will now require taking measures to protect environmental

    pollution while financing a new project or providing working capital to the existing

    enterprises. The guidelines advised the banks to facilitate their clients with utmost care

    in opening letter of credit for installation of effluent treatment plant (ETP) in the

    industrial units. They were also asked to finance in solar energy, biogas, ETP and Hybrid

    Hoffman Kiln (HHK) in brickfield under BB efinance scheme.

  • Green Banking Activities of Banks

    (As per the report of Bangladesh Bank published at March 2014)

    Policy Formulation and Governance:

    All 47 banks (scheduled before 2013) have their own Green Banking Policy Guidelines

    approved by their Board of Directors/Competent authority and have Green Banking

    Unit (GBU) for pursuing Green Banking activities. They also have their own Green Office

    Guide for conducting their in-house green activities.

    Out of 9 new banks, 2 have formulated their own Green Banking Policy Guidelines

    and none has formed Green Banking Unit (GBU). 2 new banks have prepared own

    Green Office Guide.

    Allocation and Utilization of Fund for Green Banking Activities:

    Out of Tk. 171,606.12 million for green banking activities, banks have allocated Tk.

    170,286.78 million for green finance, Tk. 956.25 million for climate risk fund and Tk.

    363.09 million for Marketing Training and Capacity Building. This allocation has been

    made on annual basis.

    37 banks have utilized Tk. 78,859.96 million (up to March 2014) for green banking

    activities. Out of which, Tk. 78,693.82 million for green finance, Tk. 146.83 million for

    climate risk fund and Tk. 19.31 million have been utilized.

    Only one (NRB Bank Limited) of the new banks has allocated and utilized fund for

    green banking in the reporting quarter. It has invested Tk. 90 million in green finance.

    Major Green Banking Activities at a Glance in March 2014:

    Green Banking unit has been established in 47 banks.

    47 banks have introduced a Green Office Guide.

    Environmental Risk Rating has been done for 9,191 projects.

    7,115 rated projects have been financed.

    361,665.73million taka has been disbursed against rated projects.

    315 branches and 187 ATM/SME unit offices are powered by solar energy.

    4,525 branches have been facilitated with online coverage.

    Taka 78,693.82 million has been disbursed as green finance.

    Taka 146.83 million has been utilized from climate risk fund.

    Taka 19.31 million has been utilized for green marketing, training and

    development

  • References

    1. Bangladesh Bank Info on Mon, March 28 2012 08:55 am

    2. FE (The Financial Express) Report, http://www.thefinancialexpress-

    bd.com/more.php?news_id=112054

    3. FE (The Financial Express) Report, http://www.thefinancialexpress-

    bd.com/more.php?news_id=112054.

    4. Star Business Report, http://www.thedailystar.net/newDesign/news-

    details.php?nid=154690.

    5. http://www.thefinancialexpress-bd.com/more.php?news_id=114842.

    6. http://theindependentbd.com/business/banking/12386-green-banking-gets-

    bangladesh-banks-support.html

    7. http://www.bibm.org.bd/index.php?option=com_content&view=article&id=1

    57&Itemid=6

    8. http://bankinfobd.com/blog/bb-draws-green-banking-roadmap

    9. http://www.bssnews.net/newsDetails.php?cat=2&id=135054&date=2010-10-

    02

    10. www.bb.org.bd/pub/quaterly/greenbanking/greenbanking_dec2013.pdf

    11. www.bangladesh-bank.org/mediaroom/circulars/.../apr112013gbcsrl01.p...

    12. www.bangladesh-bank.org/mediaroom/.../aug112013gbcrd04e.pdf

    13. www.bangladesh-bank.org/.../greenbanking/greenbanking_mar2014.pdf