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Thukten Zangpo 

The government has recommended rescheduling the loan repayment period to the Royal Monetary Authority (RMA) to resolve non-performing loans (NPL), Finance Minister Namgay Tshering said.

Suppose the loan repayment period is extended from 10 to 20 years, it could benefit both the lenders and the borrowers, he said when quizzed by the Nanong-Shumar MP Lungten Namgyel on NPLs in the National Assembly on November 18.

Lyonpo said that people take loans without carrying out a cost-benefit analysis – not knowing how much they have to pay on loans’ interest rate and equated monthly instalments.

He said that the loans availed for the purpose of businesses are spent on the development of their assets. “Loans for buying houses and land were highest in the year 2019, 2020 and 2021.”

Lyonpo added that the banks also do not properly check the credit quality and loan appraisal systems are a little bit weak.



He added that the ministry can only recommend to RMA, and the authority has the sole responsibility for monetary policy.

NPL is not a current issue; Lyonpo said adding that of the total loan outstanding of Nu 145 billion (B) in financial institutions (FIs), Nu 26B equivalent to 46 percent was NPL in 2021.

He said that the NPL ratio is better now at 14 percent of the total loan portfolio and banks with NPL have to maintain the NPL threshold at 5 percent.

Since May this year, the Central Bank has directed the Bhutan Development Bank (BDB),  Royal Insurance Corporation of Bhutan (RICB) and National Cottage and Small Industry Development Bank (NCSIDB) to suspend loans because of high NPL.

The NPL has crossed the central bank’s threshold of 7.5 percent for BDBL and RICB and 5 percent for NCSIDB.



The Central Bank’s recent financial sector performance report shows that NPL to the total loan ratio dropped to 8.64 percent (Nu 16.06B) in June this year from 14.08 percent (Nu 24.24B) in the same period last year. It saw a decrease of Nu 8.2B.

“The service and tourism, trade and commerce, and production and manufacturing sectors saw a substantial decrease in NPL by Nu 2B, 1.8B, and 1.5B respectively,” the report stated.

The highest NPL was recorded for service and tourism at 5.12B followed by production and manufacturing at Nu 3.08B and trade and commerce at Nu 2.87B.

These sectors account for over 50 percent of the total loans and were impacted by the Covid-19 pandemic.



As of June this year, the total loans disbursed by the FIs increased to Nu 185.91B from Nu 172.12B in the same period, the previous year.

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