… lifting in remaining 24 branches will depend on NPL recovery

Thukten Zangpo 

Bhutan Development Bank Limited has lifted the partial loan moratorium in four critical sectors at its 11 branches from March 23 after receiving the Royal Monetary Authority’s (RMA) directive.

According to the Bank, the limited credit services in critical areas like agriculture, livestock, forestry, and logging will be available from 11 branch offices namely Wangduphodrang, Tsirang, Dorokha, Gasa, Trashigang, Gedu, Dagapela, Jomotshangkha, Lhuentse, Zhemgang and Nganglam. However, other loan services will not be available.

Considering the country’s economy, the partial lifting of the moratorium on loans is a special arrangement between RMA and the Bank, the Bank’s official said.  “Agriculture and livestock are important for the livelihood of the rural population.”

She also said that these 11 branch offices have maintained non-performing loans (NPL) ratio below 7.5 percent as of December 2022.

“The RMA mandates the Bank’s NPL threshold of 5 percent by December 2023 and 7.5 percent by December 2022,” the official said.

For the remaining 24 branch offices, it will be still under credit moratorium or lending suspension until such time the branch offices concerned meet the requirements imposed by RMA.

“When the NPL in branch offices improve, reaching the required percentage, loans will be given,” the Bank official said. “As and when the threshold is met, we will request the RMA to lift the moratorium.”

An official said that the lifting of loans totally depends on the NPL recovery and branch offices have to improve NPL recovery.

To maintain financial stability, the RMA put a moratorium on loans from BDBL, Royal Insurance Corporation of Bhutan Limited (RICBL), National Cottage and Small Industry Development Bank (NCSIDBL) on May 13 last year because of high NPL.

The central bank’s threshold for the NPL ratio for the BDBL and RICBL was 7.5 percent. For NCSIDBL, the threshold was 5 percent.

The NPL ratio is the value of NPL to the total value of the loan portfolio.