Yangchen C Rinzin

The five financial institutions in the country have the highest unresolved budget irregularities— Nu 294.488 million (M), according to the Royal Audit Authority (RAA) report 2019.

Bhutan Development Bank Limited (BDBL)

RAA issued one audit report for the BDBL where 21 observations amounting to Nu 0.570M were pointed out. Only one was resolved as of January 2020.

BDBL had sanctioned the loans to 52 account holders without approvals and without signing the loan agreement, sanction letter, appraisal form, and disbursement memo, which amounted to Nu 50.336M.

This was against the BDBL Credit Manual 2015. According to the bank’s manual, disbursement and sanctioning of the loans should be completed only after approval of the credit committees.

“The bank has also sanctioned an OD loan of Nu 10M for a client, which amounted for 92 percent of the total cost,” the report said. “This has contravened BDBL Credit Manual where the debt to equity ratio should be 75:25 while sanctioning loans.”

Following a wrong appraisal by project service officers and improper verification by the credit committee or approving officers, BDBL had sanctioned the overdraft loan amounting to Nu 2M to a client in 2015.

The amount, the report stated, was beyond the value of collateral risking high credit, which would be difficult to recover in case of a default.

It was also observed that the bank sanctioned multiple loans of Nu 3M to a client against the boulder extraction works. However, the same work order already had an overdraft loan of Nu 63M with the same bank against the transportation of stone from a quarry to crusher plant.

Sanctioning of additional and ad-hoc loan facilities to non-performing loan (NPL) account holders were also observed which clearly indicated contravention to RMA Prudential Regulations.

“It was revealed that three clients were sanctioned Nu 0.5M each in 2016 and later Nu 1.5M in 2018 to the same clients who were NPL account holders,” the report said.

Bhutan National Bank (BNB)

The RAA had made 13 observations which involved Nu 230.785M. None of the observations was resolved as of January. The bank has loans amounting to Nu 3.944M under suspense account due to default by clients.

BNBL made excess payment of Nu 0.638M to three companies for the quantities of work claimed in the bills which were different from the works actually executed at the site.

In another case, the bank had sanctioned Nu 3.874M to a client in February 2015 to buy a machine. The client was supposed to submit all the relevant documents within a month of disbursement. However, the bank failed to follow-up and the client had passed away without buying the machine.

The branch office in Gelephu had outstanding loans and advances of Nu 111.294M against 68 clients and defaulted overdraft loan of Nu 111.816M against 28 clients.  This was attributed to the failure of credit monitoring and supervision unit that failed to follow-up with the clients.

The same branch office also had unclaimed demand drafts of Nu 2.055M pertaining to five years from 2014-2018.

Bank of Bhutan (BoB)

The RAA issued 18 observations amounting to Nu 10.136M of which not a single observation was resolved as of January 2020.

BoB’s branch office in Gelephu had outstanding loans and advances of Nu 4.947M against 17 clients, accumulating interest of Nu 0.600M. The same branch also had unclaimed demand drafts of Nu 4.643M between 2013 and 2018.

National Pension and Provident Fund (NPPF)

There were four observations amounting to Nu 54.482M of which Nu 0.55M was resolved as of January 2020.

The audit observed that NPPF had paid two months’ salaries as bonuses to all employees apart from performance-based variable allowances to 168 staff.

This was paid based on the aggregate target achievement of 98.23 percent.

However, it was observed that NPPF had paid this against the achievement of 14 percent growth of the investment portfolio for the year when the set target was 16 percent.

“The PBVA and bonuses were paid regardless of the target achievement,” the report said.

The NPPF had unclaimed government employee provident funds of Nu 48.544M, which has remained unclaimed for many years.

The beneficiaries were either expired, did not possess required documents for releasing the payments, or the beneficiaries were not traceable.

Royal Insurance Corporation of Bhutan Limited (RICBL)

The RAA made 20 observations for the institution. Not a single observation was resolved as of January 2020.

RICBL’s branch office in Wangdue had 22 NPL accounts and four litigation cases. The RAA has advised the branch office in consultation with RICBL to initiate ways to get the accounts regularised before it becomes bad debt.

“It was also observed that RICBL had not carried out the security analysis for clients with multiple loan accounts. This is one of the requirements required as per the Credit Manual 2011,” the report said.

This has revealed that the loan amounts were more than the value of collateral securities exposing the company to higher risks, the report observed.