Syful Islam
The central bank has rejected the power division's plea for allowing the banks to lend funds exceeding 25 per cent of banks' paid-up capital to single borrowers for establishing large power plants, officials said.
Instead, the Bangladesh Bank suggested seeking syndicated loans for financing such capital-intensive power projects.
The suggestion came as the power division in a recent meeting advised amending the Bank Company Act for making available large-scale loans for power-sector single borrowers since nearly US$30 billion will be needed by 2021 to realise the government plans for providing electricity to all.
According to section 26 (B) of the Bank Company Act a bank is not permitted to lend an amount exceeding 25 per cent of its paid-up capital to a single borrower.
The meeting, as such, noted that nowadays large-sized power plants need to be set up to meet a growing demand for electricity. And it requires big amounts of money.
"If the government provides state-guarantee for loans considering power as a priority sector, necessary large-sized loans can be made available through forming syndication (among several banks)," BB general manager Abu Farah Md Naser said in a letter to the ministry of finance.
"The amendment of the relevant section of the Bank Company Act is not necessary for providing large-sized loans to power sector," he noted.
He also said that, generally, the banking companies provide special importance considering power as a priority sector.
The central bank welcomed a proposal for issuing bonds by power division to collect money for setting up power plants, saying that banks and financial institutions will be interested to make long-term investment in those bonds.
The BB also opined that there is no barrier to investing money from 'Government Islamic Investment Bond' in the power sector. But the issue has to be incorporated through an amendment into its policy. According to central bank data until June this year, some Tk 88.14 billion was collected through issuing three-to-six-month-term Islamic Bonds.  Of the money, some Tk 47.70 billion was invested in different sectors and the rest remained unutilised.
The unutilised sum can be invested in power sector, the BB opined.
A senior finance ministry official told the FE that country's banks and financial institutions, both in public and private sectors, possess large sums of idle money which can be invested in power sector to help generate necessary electricity to meet the growing demand.
"We want them to invest in power sector instead of keeping money idle and counting loss from interest payments," he said.
The official also said central bank's opinion is now under scrutiny for next course of action.
     syful-islam@outlook.com

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Source: The Financial Express