Dechen Dolkar

The government has allocated Nu 2 billion from the Economic Stimulus Plan to address non-performing loans (NPL) and loan deferments.

The finance minister Lekey Dorji announced this during the question and answer session at the National Assembly yesterday.

The Member of Parliament (MP) from Boomdeling-Jamkhar constituency, Wangdi, raised concerns about the country’s total NPL, which has increased to Nu 19.3 billion, making it difficult for people to obtain loans and expand their businesses.

He said that the National Credit Guarantee Scheme alone has around 2,684 individuals with NPL.

He asked if the government a bail out plan for these businesses.

The MP from Lamgong-Wangchang Constituency, Sonam Tashi, said that many businesses have been struggling to revive their operations despite loan deferrals and interest waivers due to the impacts of the pandemic.

He said that consequently a significant number of business loans has become NPL, rendering businesses ineligible for new loans or bank guarantees necessary for performance security and mobilisation advances.

Considering entrepreneurs as crucial drivers of economy, the MP asked whether the government has put in place strategic measures to allow the affected businesses to access new loans and bank guarantees to help them recover and stabilise.

The finance minister said that the Royal Monetary Authority has already implemented monetary policies to reduce NPL by splittingloan repayment. “Businesses have to pay only 50 percent of the monthly loan installement while the remaining 50 percent is deferred with interest accrued under a fixed equated monthly installment to avoid compound interest,” Lyonpo said.

Recently, the Financial Institution Association of Bhutan announced that borrowers will no longer have the Fixed Equated Installment Facility account. Instead, they will have to pay off all accrued interest after June 30 this year or add the accrued interest to the principal amount before starting regular monthly repayments upon completion of the deferment period.

The finance minister said that with this policymeasures, the central bank and the government have restructured and rescheduled loans, increasing the loan term tenure.

“The government has also allocated Nu 2 billion from the ESP to address NPL issues and financial institutions’ loan deferment,” Lyonpo said.

Lyonpo mentioned that currently the NPL stands at Nu 6.93 billion, which is constitute 3.2 percent of the total loan disbursement value ofNu 215.5 billion.

At the end of 2019, the NPL stood at Nu 16.5 billion, which decreased to Nu 15.9 billion in 2022. As of April, the total NPL was Nu 19.3 billion.

Lyonpo explained that the central bank has a charge-off of Nu 12.4 billion, which is not included in the current NPL, leaving the NPL at Nu 6.93 billion.

A charge-off means a lender or creditor has written the account off as a loss, and the account is closed to future charges. A delinquent borrower is still responsible for paying debt that is a charge-off.