In 1968, the first manager of Bank of Bhutan died in a car crash in Switzerland. With the tragic accident of Mr. John Roger Stansfield Holmes, the country’s first bank had to explore other options of management. The, ‘Review Report 1968-78,’ which documents the history of the bank talks about how a joint team of banking experts from India and Bhutan was constituted to study the problems of the new bank. One of the recommendations was to collaborate with a leading Indian commercial bank.
On 7th October 1971, Bhutan signed an agreement with the State Bank of India as its partner bank. According to the White Paper, at the end of the agreement, Bhutan had the right to buy the shares from the SBI. As the leading commercial bank of India, SBI was brought in for the purpose of collaboration in the capital management.
According to the 18 page, Review Report, BoB was re-constituted, under a fresh royal charter issued by His Majesty on 18th February 1972. Two weeks later, on 1st March, the collaboration came into force. The report states the paid up capital of Nu. 2.5 million (M) is to be held by the Royal Government of Bhutan and the SBI in the ratio of 3:2; as such, Nu. 1.5M and Nu. 1M had to be contributed under the terms of collaboration. The collaboration has been initially entered into for 10 years ending in December, 1981. “At the conclusion of the period of collaboration, the Royal Government of Bhutan shall have the right to purchase the shares held by the State Bank of India.”
The collaboration yielded good dividends. It facilitated the two banks to draw remittance from each other’s branches. It made it easier for payments to be made for trade and other purposes.
The constitution of the bank, entrusted the management of the bank to a Board of Directors with seven members. The RGoB nominated four of its members including the chairman. The SBI nominated the Managing Director and three other board directors.
Bhutan’s Finance Minister, Lyonpo Chogyal became the bank’s first Chairman. The three Bhutanese Directors were HRH Ashi Dechen Wangmo Wangchuck, HRH Namgyal Wangchuck and Dasho Tshewang Penjor. The two Indian Directors were Mr. N. Roy and Mr. R. Sinha. Both were from the local head office of SBI in Calcutta. The Managing Director was Mr. H.C. Vishnoi.
The Review Report mentions, “the Board gives overall directions on all important matters and the Managing Director, the Chief Executive of the Bank is required to translate these directions into practice.”
Under the new management, the bank made good progress in all areas of banking including deposits, granting advances, fostering development of self reliance amongst the local populace, implementation of modern management techniques in cash management and other areas, deployment of funds, development of manpower resources and establishment of bank branches across the country.
Within a decade of it’s opening, BoB opened 10 branches. By end of 1970, the bank opened its first branch in Thimphu (1st October). This was followed, by opening of the branch offices in Samdrup Jongkhar (28th September) and Gelephug (4th December) in 1972.
The first branch in the east of the country changed the landscape of the economy. People no longer had to travel to the neighboring Indian town of Guwahati to get money.
In 1976, a branch was opened in Chimakothi (19th June). In 1977, three branches were opened in Samchi (18th February), Tashigang (20th April) and Damphu (2nd July). Two years later, a branch was opened in Phuentsholing (17th February).
His Majesty the Third King Jigme Dorji Wangchuck achieved a lot in a short time. In four years, the bank was able to achieve most of its objectives. The economy was monetized and the country was reaping dividends from the banking activities.
With His Majesty’s personal assurance people started to trust the bank and opened interest-bearing accounts. The deposits in the bank grew steadily.
In the first two years (1968-70) it reached Nu. 8.6M with a growth of 28%. The next two years saw a bigger jump. In 1972, the growth reached 133% touching Rs 15.5M. In 1974, the government printed and issued the first Ngultrum notes during the coronation of our great Fourth.
The Tikchungs were gradually removed from the economy. As envisioned by our late Majesty until 1982, BoB did part of the work of the Central Bank until the Royal Monetary Authority was established.
In 1968, Sikkim also set up its first bank. However, it was called the State Bank of Sikkim and was like the many other state banks in India. Bhutan could have followed suit but did not.
Like any good bank report, the BoB Review Report is filled with numbers. However, the numbers are punctuated with the history of the institution. Almost three years after the tragic death of its first manager, BoB re-started in December 1972, with paid up capital of Nu. 2.5M. By end of 1978, the profit of the bank shot up from Nu. 1.4M to Nu. 8.6M or 515%. The total income rose from Nu. 2.8M to Nu. 13.8M or 393%. Similarly, the expense went up from Nu.1.4M to Nu. 5.2M. The increase of Nu. 3.8M was attributed mainly to the interest paid on deposits which rose up from Nu. 400,000 in 1974 to Nu. 2.8M. However, due to the wise investment of surplus funds, the bank closed its book in 1978 with a reserve of Nu 24.6M. Today, BoB share capital has grown to Nu 3,000.00 million. RGoB holds 80% of it while SBI owns 20% of the shares. With 36 branch offices and 13 extension counters spread in 20 dzongkhags, the bank is not only the oldest bank but the biggest in the country.