Banking: Despite the economic slow down, commercial banks in the country marked a significant growth in its profit last year on the back of credit growth.

Between 2012 and 2013, due to credit restrictions and increasing bad loans, some local commercial banks recorded a significant drop in their earnings for the first time.

After its profit declined by almost 40 percent in 2013, T-bank’s profit last year doubled, from profit after tax of Nu 18.8M in 2013 to Nu 36.6M last year.

T-bank’s chief executive officer, Tshering Dorji said the bank could manage to lend more and subsequently income from interest has increased substantially. He also said the other miscellaneous income like earning from remittances has also increased.

Loans and advances, which are considered an asset in banking has increased by more than Nu 194 M.

The bank, he said has also witnessed a substantial drop in non-performing loan (NPL). A loan becomes non-performing when its repayment has not been made for more than three months.

Similarly, Bank of Bhutan registered a net profit of Nu 750 M last financial year, a growth of 11.5 percent from 2013.

Despite the unfavorable economic conditions, an official of the bank said, it achieved a growth of about 8 percent in loans and advances and 31 percent in deposits.

BoB officials attributed the profit to improvements in core banking operations and cost control measures besides its efforts to widen its reach through establishment of multiple channels such as branch office expansion, ATMs installations, and introduction of IT based delivery channels.

Credit growth in the commercial banks, according to BoB had decelerated on the back of elevated inflation, economic slow-down due to Indian rupee shortage and monetary policies.

Druk PNB, however saw a marginal increase in its profit, from Nu 97M in 2013 to Nu 99M last year. The bank’s CEO, Mukesh Dave said the restrictions on loans were lifted only towards last quarter of the year and that its credit growth has been very slow. On the other hand, he said that the bank had to pay for its liabilities.

Bhutan National Bank (BNB) recorded a net profit of Nu 744M last year against 763M in 2013.

However, BNB’s chief executive, Kipchu Tshering said because of the changes in accounting standard, figures for 2013 has been reinstated as per the Bhutanese Accounting standard (BAS).

He said this was the reason behind decline in profit in the balance sheet. “But in real terms BNB’s profit is about 30 percent more than previous year,” he said.

The Bank’s NPL ratio also decreased substantially to about 6.5 percent and its credit grew by around Nu 396M.

As per the central bank’s report on financial sector performance review, total deposits in all financial institutions has increased by 23 percent against a credit growth of about 11 percent.

Another local banker also said the injection of economic stimulus plan fund has freed up lending for smaller banks.

But in September last year financial institutions in the country had an excess liquidity of Nu 19.7B. However, the Central Banks has revised cash reserve ratio from five to 10 percent to the mop up the excess cash.

Cash Reserve Ratio is the minimum reserve requirement that a bank must set aside from its total deposit base.

By Tshering Dorji