Thukten Zangpo 

Private sector business representatives are calling for an independent committee to assess who would avail the loan deferment concession after the government gave the authority to individual banks to decide who and how they get the deferments.

The president of the Bhutan Chamber of Commerce and Industry, Tandy Wangchuk said that an independent committee can come up with a standard operating procedure for loan deferment.  This is in keeping in mind that with the reservations about the recent shift in responsibility for deferment from the government to individual banks, many borrowers would not qualify for the loan deferment. 

The deferment until monetary measures IV was led by the finance ministry in consultation with the Royal Monetary Authority (RMA) and the private sector where many private sectors could recover from the deferment strategy. 

“The initiative for loan deferment must be spearheaded by the government through proper dialogue with the private sector, RMA and other relevant stakeholders,” the president said.

He added that if the authority of loan deferment is solely given  to the banks, they will not look after the welfare of the borrowers. Banks, he said,  for the last 10-15 years have been making profits with high interest rates on loans. 

The Financial institutions Association of Bhutan, yesterday notified borrowers wishing to seek deferment to fill up the loan deferment forms and submit them to the latest by 5pm on June 30 this year. 

The current loan deferment period ends on June 30 this year.

Financial institutions will assess the eligibility of the request for deferment and will inform the borrowers accordingly. Deferment will be offered to those borrowers who do not submit their deferment application. 

Moreover, the loans against shares and housing or home loans will not be eligible for deferment. 

Bank officials said the financial institutions (FIs) would offer loan deferment from six months to one year to borrowers facing genuine financial hardships. 

However, the deferments will be granted by individual FIs based on a thorough client assessment on a case-by-case basis. 

Banker said that the assessment would be strict and consider factors such as borrowers’ income, occupancy rate for hotels, and overall business performance. 

Borrowers with demonstrably not adequate or reduced income can apply for deferral from six months to one year. 

Hotels, particularly those with low occupancy rates of 35 percent and below are likely to be considered for deferment.

Tandy Wangchuk said that  one-year loan deferment would be a big relief when businesses were in a downturn in the last three years. 

“Income from businesses alone is not adequate data for loan deferment assessment,” he said, adding that there should be data on how many businesses have recovered and lost or retained their employees.

Tandy Wangchuk assumes that the banks will assess the past income performance of a business. However, he said that the government has plans for the economic recovery with Nu 15 billion economic stimulus programme (ESP), a target of  300,000 tourists arrival, and the 13th Plan which will boost the local economy.  

The Chamber on behalf of the business community of 10 dzongkhags submitted a letter to the Prime Minister on May 21 requesting  government interventions with monetary measures IV ending next month.

“Majority of the businesses communicated their inability to resume full loan repayments due to continuing economic strain,” the letter to the prime minister stated.  

For promoting business continuity, Tandy Wangchuk said that the loan deferment can play a crucial role in the survival of Bhutan’s cottage, small, and medium enterprises and mitigating the risk of widespread defaults and bankruptcies. 

The Chamber also requested the government to incentivise businesses that are able to start repayment by offering 2 percent incentive.  “This will improve bank liquidity while encouraging responsible repayment behavior,” Tandy Wangchuk said. 

Meanwhile, businesses also requested reviewing and relaxation of the 91-day cap for loan accounts entering into non-performing loans (NPL) and revise the NPL threshold for the FIs from 5 percent to 8 percent.