Home Bangladesh Tk 5,665 cr special bonds of 24 banks
Bangladesh - Corporate - Power & Energy - February 8, 2024

Tk 5,665 cr special bonds of 24 banks

For electricity subsidy

Zarif Mahmud : The Finance Department has signed a memorandum of understanding with 24 banks regarding the issue of bonds for payment of power sector subsidies. The agreement was signed between 24 banks, creditor power generation companies and the power department at Vidyut Bhaban on February 7. This information is known from sources of finance department.
The government and private power plants of the country have outstanding bills of about Tk 30 thousand crore. Out of this, the arrears of private sector power producers (IPPs) are around Tk 23 thousand crores. The power plants are not able to pay the money taken from the banks due to outstanding bills with the government. As a result, the loans of many power plants have lapsed. In such a situation, bonds of Tk 12,000 crore will be issued against the loans of the power plants. On Wednesday, it was decided to approve a new loan of Tk 5,665 crore.
Sources say that the MoU of 24 banks has been signed for the payment of government subsidy in the power sector, where the total amount is Tk 5,665 crores. A letter is likely to be sent to the regulatory body Bangladesh Bank from the Financial Institutions Department of the Finance Ministry on Wednesday for the bond issue. After that, Bangladesh Bank will issue this bond within next 3-4 working days.
When asked about this, a senior official of Bangladesh Bank told that 24 banks have signed the MoU agreeing on the issue of bonds. However, it is not yet certain that any bank has agreed to it. We will arrange the bond issue only after receiving a letter from the Ministry of Finance.
Bonds will remain out of trading limits
Those concerned say that due to various crises, the loans of many power plants have already expired. Banks will be in danger if these loans default. Because banks have a large amount of financing in the country’s power sector institutions. In this situation, the government wants to give temporary relief to power producers and banks through special bond issue. For this, bonds of Tk 12,000 crore will be issued against the loans of power plants. According to sources in the Ministry of Finance, the amount of this oney may decrease slightly.
According to the information, in the case of bond issue, the financing banks will first issue special treasury bonds against the overdue loans of the power sector institutions. Banks will buy those bonds. The money that the government gets for buying bonds from banks will pay off the power plants. Then the power plants will pay the money back to the banks. Through this, the overdue loans of the bank will be saved from default and no provision will have to be made against it. Besides, banks can also use the equivalent amount of the bond proceeds to meet their statutory deposit (SLR) obligations.
Besides, the banks can also take liquidity facility through repo by depositing these bonds with the central bank. On the other hand, if the power plants do not get the full amount of the outstanding bills, they can spend the equivalent amount of the bond to repay the bank loan and this will reduce the liability of the institutions and avoid default.

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