Banks prepared to defer EMIs

It’s only a matter of time, FIs say

MB Subba  

Financial institutions (FIs) together with the Royal Monetary Authority (RMA) are finalising options like deferring equated monthly installments (EMIs), providing moratorium and increasing grace period on loans for businesses affected by the Covid-19 pandemic.

In the face of the new coronavirus affecting the economy, those hit hard by the pandemic are requesting the government to look into their interests.

President of Financial Institutions Association of Bhutan, Karma, said that the FIs as responsible institutions are prepared to give relief to borrowers. “We are in discussion with the RMA,” said Karma, who is also the CEO of Royal Insurance Corporation Limited (RICBL).

He said that FIs have already met and discussed the issue and that they would be flexible in giving relief to their clients.

FIs, including Bank of Bhutan (BOB) and RICBL, already received formal requests for deferment of loans. Renewals of insurance schemes have slowed down, according to officials.

Among the businesses facing difficulties to pay the EMIs are the hotels, nightclubs, tour operators and airlines and those owning commercial vehicles. Some entrepreneurs say they are using their savings to pay EMIs and rents.

The CEO of BOB, Dorji Kadin, said that the RMA and FIs had been discussing the issue at formal forums and that they have agreed to support the affected clients.

FIs, he said, needed to follow the RMA’s decision on guidelines. “We have received formal requests for deferment of loans,” he said, adding that a decision from the RMA was expected to come soon.

As to how long FIs would be able to give such reliefs, Dorji Kadin said that it was uncertain when the situation would improve. He added, “During our discussions with RMA, we were indicating that the help could be given until the situation improves.”

He said that the affected businesses receiving help from FIs was only a matter of time. Asked whether the bank had seen loan defaults, the CEO said that the data would be known once the closing of the last is finalized.

The EMI deferment, which is a monetary measure, is expected to come as part of the economic stimulus plan (ESP). As per the government’s earlier statements, the ESP should have come a few weeks earlier.

Finance Minister Namgay Tshering said that his ministry had forwarded the ESP to the Prime Minister’s Office (PMO). The ESP, he said, was being reviewed by PMO and an independent special team that includes RMA.

He said that EMIs deferment should be part of the ESP although issues related to EMIs fell under the purview of the RMA. He said that the government had asked the RMA to look into recommendations on EMIs.

Expressing his personal opinion, the finance minister said that banks needed to give deferment of loan repayment to keep businesses afloat and sustain on a case-by-case basis.

“Whatever we do, our plan is such that we will not release the entire ESP package in one go,” he said, adding that the most affected would fall in the first priority list.

The finance minister said that EMIs were one of the most important relief measures as businesses would not be ale to pay back the loans if they were to close. EMI deferments, he said, was also expected to help businesses retain their employees.

Businesses, especially those that depend on tourism, have completely lost their income and are looking forward to the government to announce relief packages.

One of such businesses is the first shuttle bus service between Paro International Airport and Thimphu, which was launched in May last year.

Promoter of the shuttle bus service, Kinzang Wangdi, said that money for EMIs needed to be borrowed or withdrawn from prior savings.

“Our bus has not been doing well much before Covid-19, but the virus has put the final nail in the coffin,” he said. “EMIs have to be paid.”

A Phuentsholing-based truck owner said that most truckers are jobless due to the closure of border to prevent Covid-19. “Banks are calling, telling us to update our loan accounts,” he said.

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