Banks can now invest up to Tk 200cr in green Sukuk

Bangladesh Bank today said banks can buy private sector-issued green Sukuk from their special funds, which they were allowed to form to invest in the stock market.

The central bank in February this year permitted banks to set up a Tk 200 crore fund for investment in stock market by borrowing from it in order to increase liquidity flow in the market.

Since then, a number of banks formed funds and invested in stocks.

Today, Bangladesh Bank allowed banks to invest all of the special fund in asset-backed green Sukuk by private sector.

It said issuer of Sukuk will need to invest 70 per cent of Sukuk in solar power, wind power, hydropower, and renewable energy generation.

The Sukuk needs to be listed or committed to be listed within one year of subscription, said Bangladesh Bank.

The central bank move comes the time when the capital market regulator has extended subscription period for investor to invest in Beximco's green Sukuk Al Istisna of Tk 3,000 crore since investors are showing lack of enthusiasm to invest.

The subscription of the Sukuk through initial public offering (IPO) started on August 16 that was scheduled to end on August 23, but the time was extended until September 6. Then it was extended again to September 30.

Half of the Tk 3,000-crore fund will be raised through private placement and the Sukuk worth Tk 750 crore will be raised from the existing shareholders of the Beximco.

The remaining Tk 750 crore will be raised through an IPO. The Bangladesh Securities and Exchange Commission (BSEC) informed the company in a letter that the public offer would be cancelled if it is not subscribed by September 30.

Ershad Hossain, CEO of City Bank Capital, issue manager of Beximco Green-Sukuk Al Istisna, said the central bank's decision to encourage investment in green Sukuk.

It will impact overall Sukuk sector positively and it is a positive development from the central bank, he added.

In its circular, Bangladesh Bank, however, said a bank cannot buy more than 10 per cent of a Sukuk from special fund.