EXIM Bank’s Rampal Project Financing Dilemma

Abstract

Export Import Bank of India (EXIM Bank) had agreed to finance a US$1.62 billion debt which constituted 70% of the capital needed to construct a controversial 1320 MW coal-based thermal power plant in Rampal, Bangladesh. The plant was located within 14 km of the Sundarbans, recognized by UNESCO as a world heritage site. According to environmentalists, the construction and operation of this plant would give rise to serious environmental, social, and governance issues which would have an adverse, irreversible, and unprecedented effect on the Sundarbans and its people. Amidst growing pressure from activists, Yaduvendra Mathur, Chairman and Managing Director of EXIM Bank, has to take a call on whether to go ahead with financing the project or not. The decision will not only involve assessing the financial impact of the Rampal exposure on the bank given the risks associated with the project, but also involve evaluating issues relating to financing fossil fuel exposure at a time when the financial community has taken climate change seriously and is decarbonizing its portfolios while investing in clean energy.