The government has no immediate authority to reduce the lending rates among financial institutions, finance minister Namgay Tshering said.

This is because it is the Royal Monetary Authority’s (RMA) mandate to implement the monetary policy, while the government’s domain is within the fiscal policy. “But there has to be some synergy between the two policies,” Lyonpo said.

However, the conversion of Rural Enterprise Development Corporation Ltd into a CSI bank is targeted to provide loans to small and medium enterprises at low interest rates. Lyonpo added that the government also has plans to provide some incentives to the financial institution, which would reduce their operation cost and lead to lowering the interest rates.

Lyonpo said this in response to Athang Thaedtsho MP, Kinley Wangchuk’s question on whether the government has any plans to communicate with the RMA to regulate the interest rates.

“Unlike any other businesses, banks in Bhutan endure no risk of failing because they are well fortified by high interest rates between 9-12 percent and our banks’ interest rates stand as one of the highest in the world,” Kinley Wangchuk said. He added that the higher interest rates have burdened thousands of Bhutanese clients and there is a growing trend of asset being seized from defaulters.

The finance minister said that banks were liberalised in 1999 and high interest rates prevailed. However, with the introduction of base rate system in 2012, interest rates were reduced to about 10.5 percent on an average. “Even this was seen as unfair to the borrowers,” he said. In 2016, the RMA introduced the minimum lending rate and interest rates were reduced by two percent on an average while lending to rural communities were made cheaper.

This, he said was complimented by Priority Sector Lending Scheme which brought the interest rates of loan towards agriculture and livestock to eight percent.

Tshering Dorji