BRAC Bank to Issue Tk 1,000 Crore Green Bond
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BRAC Bank announced at a press conference in Dhaka today that it will issue a Tk 1,000 crore green bond to channel long-term debt into industrial energy-efficiency and renewable projects.
The three-year debt instrument carries a face value of Tk 10 lakh per unit and targets a yield of 7.5 percent, priced at roughly Tk 8.05 lakh at issuance under annual compounding.
Led by Managing Director and CEO Tareq Refat Ullah Khan, the private lender is launching the first debt offering in Bangladesh aligned with the central bank’s green bond policy.
Structure of the Zero-Coupon Paper
The issue will be senior, unsecured, non-convertible, fully redeemable and zero-coupon. Rather than disbursing periodic interest, the bank will sell the paper at a discount and redeem it at par upon maturity.
Corporate institutions, individual investors, and qualifying corporate provident and gratuity funds can subscribe to the tranche. The paper adheres to Bangladesh Bank’s green bond financing guidelines alongside the International Capital Market Association’s Green Bond Principles, backed by a second-party opinion from S&P Global Ratings.
Proceeds will target factory energy retrofits, rooftop solar arrays, and certified green commercial properties. The lender expects the deployment to align with United Nations Sustainable Development Goals covering clean energy, industry innovation, sustainable cities, and climate action.
Factory Energy Demands Drive Tenor Mismatch
Export-oriented manufacturing plants and textile suppliers across Bangladesh face steep domestic power tariffs alongside buyer pressure to decarbonise supply chains. Factory owners frequently seek multi-year capital expenditure loans to replace aging machinery with automated, low-emission lines.
“Rather than disbursing periodic interest, the bank will sell the paper at a discount and redeem it at par upon maturity.”
Commercial banks usually finance those long-term outlays with short-term customer deposits, creating chronic liquidity strains on balance sheets. Locking in three-year fixed capital through non-convertible debt gives the lender a matched pool of cash, though the three-year duration remains relatively short for heavy industrial upgrades.
This green bond marks an important milestone in BRAC Bank’s sustainable finance journey and represents a meaningful step towards deepening Bangladesh’s capital market,said Tareq Refat Ullah Khan, managing director and chief executive officer of BRAC Bank.
The zero-coupon structure provides a distinct advantage through domestic tax exemptions supported by the Bangladesh Securities and Exchange Commission. Because taxable income from standard coupon payouts is avoided, institutions holding the debt can preserve effective yields in a high-inflation environment.
Shallow Corporate Debt Market Faces Test
Domestic capital markets in Bangladesh remain overwhelmingly concentrated in government treasury bills, leaving private corporate paper thin and illiquid. Most local companies rely on direct bilateral bank loans rather than secondary debt markets to fund operational expansions.
If institutional pension managers clear the Tk 1,000 crore book cleanly, other commercial lenders will likely package similar trade-finance and manufacturing loans into fixed-income paper. If orders fall short, mid-tier lenders will find themselves locked out of local capital markets and forced back into competitive deposit gathering.
Lender Expands Sustainable Portfolio
Sustainable finance currently makes up more than 60 percent of BRAC Bank’s total lending book. The private lender previously issued a dedicated social bond to fund rural micro-enterprises and small suppliers.
The bank has secured a spot among the central bank’s top-rated sustainable financial institutions for five straight years and holds the leading position among local lenders in Bloomberg’s ESG Rating. Annual audits will track the disbursement of funds to verify that borrowers apply capital strictly to certified sustainable projects.
Distribution desks are now taking formal indications of interest ahead of official allotment dates, with secondary trading liquidity serving as the real test of institutional appetite.
Questions & Answers
Q.How will the proceeds from the green bond issue be used?
How will the proceeds from the green bond issue be used?
The bank will direct the capital into factory energy retrofits, rooftop solar arrays, and certified green commercial properties. These investments aim to help export-oriented manufacturers cut emissions and meet international buyer demands while aligning with United Nations Sustainable Development Goals.
Q.What financial benefit does the zero-coupon structure offer to investors?
What financial benefit does the zero-coupon structure offer to investors?
Investors purchase the paper at a discount of roughly Tk 8.05 lakh per unit and receive the full Tk 10 lakh face value upon maturity. This structure provides domestic tax exemptions supported by the securities regulator, helping institutions protect their effective yields against high inflation.
Q.Why is BRAC Bank issuing bonds rather than using standard customer deposits?
Why is BRAC Bank issuing bonds rather than using standard customer deposits?
Commercial banks in Bangladesh typically fund multi-year industrial loans using short-term deposits, which causes balance-sheet liquidity strains. Issuing a three-year bond provides a matched pool of fixed capital, helping the lender finance capital expenditure upgrades for factories without worsening its maturity mismatch.