More than 1,000 applicants are awaiting approval

Thukten Zangpo

Prime Minister Tshering Tobgay has signaled the government’s willingness to discuss extending the deadline for the Economic Stimulus Programme (ESP) concessional credit period with the Bhutan Development Bank Limited (BDBL), as the December application window approaches its close.

Lyonchhen was responding to a question posed by Trashigang’s National Council (NC) Member, Sonam Tobgyel, during yesterday’s question-and-answer session at the NC.

Sonam Tobgyel sought updates on the ESP, loan disbursement challenges, the possibility of extending loan period, and the risks and sustainability of the programme for banks.

Lyonchhen said that the ESP, funded by a grant of Nu 15 billion from India, is a critical initiative aimed at revitalising the country’s economy, and expediting the disbursement of loans is essential for swift economic recovery.

To ensure smooth disbursement of funds, Lyonchhen said that the government has reviewed the ESP guidelines in consultation with both government officials and bank representatives.

Lyonchhen added that the Nu 3.3 billion concessional credit would be managed exclusively by BDBL, while other participating banks would oversee the Nu 2 billion reinvigoration fund.

The ESP operates through two main windows: Window-I offers collateral-free concessional loans at 4 percent interest rate, while Window-II, the reinvigoration fund, provides 4 percent interest subsidy on both new and existing loans for businesses affected by the pandemic. For Window-I, Nu 3.3 billion has been allocated and Nu 2 billion under Window-II.

Under ESP credit, seven participating banks, including BDBL, received 1,473 applications, amounting to Nu 3.6 billion. Of this, 262 loan applications, amounting to Nu 398 million, were approved. The government reimbursed this amount to the banks.

Under reinvigoration fund, Nu 70 million has been disbursed in advance to the banks.

Of the 1, 473 applications, Lyonchhen said that the BDBL received 1,265 applications, amounting to Nu 1.27 billion. BDBL approved 242 applications, amounting to Nu 200 million.

Lyonchhen said that those applications approved by other banks will be forwarded to the BDBL.

While banks have received a significant number of applications, the Prime Minister said that the government would engage with BDBL to discuss the possibility of extending the loan period for additional applications.

Currently, more than 1,000 applicants are still awaiting approval.

To facilitate the ESP credit under BDBL, the government plans to establish a dedicated office headed by a general manager, supported by 50 employees, including 12 research officers and 35 dzongkhag coordinators. Remuneration for these positions will be provided by the government.

Unlike earlier practice of reimbursing the funds to the respective banks after approving loans, the BDBL will in advance receive Nu 3.3 billion.

Lyonchhen also addressed concerns regarding loan defaults, emphasising that if applications are properly reviewed based on the applicant’s capability and if robust monitoring systems are in place, defaulters would be minimal.

In 2023, BDBL reduced its Non-Performing Loans ratio from 20 percent to 14 percent.

If any defaults occur despite these measures, the BDBL and the Royal Monetary Authority (RMA) will working on solutions to mitigate these risks, Lyonchhen said.

For the banks to extend an additional Nu 20 billion in general loans, the government is awaiting approval from the RMA to provide subordinated debt of Nu 5 billion.

Launched in May 2023, the Nu 15 billion ESP is a key initiative designed to stimulate Bhutan’s post-pandemic economic recovery, with the primary focus on supporting businesses affected by Covid-19. The ESP was officially implemented from September this year.