AIIB comes up with investment in private sector City Bank for the first time
City Bank secures $75m loans from AIIB and NDB, which will be provided to private sector projects focused on energy and infrastructure
City Bank, a leading private commercial lender of the country, has secured $75 million long-term financing from two global multilateral development lenders, the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB).
This is the first time private sector loans in Bangladesh from the AIIB and the NDB without sovereign guarantee, which will have a direct contribution to the country's foreign exchange reserves.
The AIIB acted as the lead arranger, providing $50 million, while the NDB contributed $25 million, according to a statement released by City Bank.
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This financing will provide long-term funding to private sector projects, with a strong focus on renewable energy and sustainable infrastructure. The facility aims to narrow Bangladesh's infrastructure financing gap and support investments in energy, energy efficiency, e-mobility, and digital infrastructure.
The loan agreement was signed recently by Mashrur Arefin, managing director and CEO of City Bank, Gregory Liu, director general, Financial Institutions and Funds Clients, Global at the AIIB, Roman Serov, vice president and COO, and Bin Han, director general from the NDB, according to a statement issued by City Bank.
City Bank got the loan for five years which will help to bridge the country's infrastructure financing gap by mobilising private sector capital, enabling longer-term infrastructure loans, and supporting projects across key sectors.
Commenting on the loans, Mashrur Arefin said, "This long-term financing partnership with AIIB and NDB not only demonstrates their confidence in City Bank but also will contribute to empowering us to accelerate investments in renewable energy and infrastructure projects, the critical areas for the country's sustainable development goals."
This credit facility underscores AIIB's and NDB's ongoing efforts to build resilient and sustainable infrastructure ecosystems across its member economies through partnerships with the number one-ranked sustainable bank of Bangladesh, he said.
City Bank's strong profile attracts lenders
Global lenders have chosen City Bank due to its strong balance sheet and top rating on sustainable banking by the Bangladesh Bank, Mesbaul Asif Siddiqui, deputy managing director of City Bank, told TBS.
Moreover, the bank is rated by international rating agency Moody's, which is also taken into consideration, he added.
City Bank has a foreign investor, IFIC, on its board with the single highest shareholding of 5%. City Bank made a record-breaking consolidated net profit of Tk1,014 crore for 2024, the highest in the bank's 42-year history, joining the Tk1,000-crore profit club.
Mesbaul said borrowers will get financing at a comparatively lower cost under this fund than direct borrowing from abroad. It is because City Bank secured the loan at low cost due to its good rating, when an individual commercial organisation would have to pay a high-risk premium for direct borrowing from foreign lenders, he added.
At present, banks can charge SOFR plus a maximum of 4% against foreign currency loans as per the Bangladesh Bank guidelines.
Mesbaul said the repayment risk for City Bank will not be high as the forex market is now stable. Moreover, the Federal Reserve Bank has already started to cut interest rates, which will reduce the debt servicing burden in the near future, he added.
The US Fed cut interest rates by 25 basis points in September, bringing the federal funds rate to a range of 4.00%-4.25% hinting at cutting rates two more times this year.
How City Bank loan will build reserves
Private sector long-term foreign loan is a component of the financial account. The inflow of financial accounts helps build foreign exchange reserves. The direct loan from the AIIB and the NDB will also contribute to the reserves.
The country's gross foreign exchange reserves stood at $26.3 billion on 25 September, which covers imports for nearly six months, well above the international standard for three months.
Despite negative growth in private sector foreign inflow, the country's reserves have been increasing gradually, thanks to export and remittance earnings.
The private sector foreign borrowing has remained downward for the last two years due to rising costs amid the hiking interest rate by the Fed.
The medium- and long-term foreign loans registered a 9.2% negative growth in the 2024-25 fiscal year due to low demand amid sluggish investment.
However, private banks started to borrow again from foreign sources, expecting a rebound in demand soon after the national election, said industry insiders.
