… individuals and businesses benefited Nu 660.86M from interest waiver
Of the Nu 8.817 billion (B) the government refunded to the three financial institutions for Interest Payment Support (IPS/ interest waiver), the housing sector benefited the most with Nu 2.847B among the loan account holders.
Kuensel could not get figures for other financial institutions that were audited by the Royal Audit Authority (RAA).
The interest waiver/IPS was one of the five monetary measures (MM) implemented based on the Royal Monetary Authority (RMA) directives issued on April 14, 2020 in response to the Covid-19 pandemic.
The monetary measures were aimed at providing short-term monetary relief to sectors facing financial distress and assisting businesses and local production.
The MM included: deferment of loan repayment; interest waiver (IPS); extension of the gestation period for projects under construction; term-based soft working capital facility (TBSWCF) for tourism-related business, wholesale distributors and industries; and loans to the cottage and small industries.
Both the Bhutan National Bank Ltd (BNBL) and Bhutan Development Bank Ltd (BDBL) as on December 31, 2021 received refunds of Nu 3.069B and Nu 2.523B respectively from the government (government portion) for the IPS provided to the loan account holders. The government refunded Nu 3.227B to the Bank of Bhutan Ltd (BoBL) as of September 30, 2021.
The BNBL alone provided IPS of Nu 1.11B to the housing sector followed by BoBL with Nu 1.08B and BDBL Nu 659.32M. BoBL and BNBL received refunds of Nu 1.82B as IPS for the trade and manufacturing sector and Nu 1.75B including Nu 647.04M received by BDBL for services. The agriculture sector, for which the BDBL provided loans, benefited from IPS amounting to Nu 874.69M.
Who were the beneficiaries?
More than Nu 660.86M were paid as IPS for individual clients, business entities and companies from April 2020 to December 2021.
Of the total IPS amount the BNBL received, Nu 298.05M representing 9.73 percent was for the Non-Performing Loans (NPLs) as on December 31, 2021.
The top eight individual clients benefited with IPS of Nu 163.51M of which two business entities received the highest refund of Nu 36.7M and 34.8M respectively and the lowest amount was Nu 8.95M.
The RAA also observed that BNBL had sanctioned 143 loans beyond the maximum loan term period of up to five years. The management responded that all the loans in the list are bridging loans/soft term loans granted to the business entities under Phase I & II MM for which a gestation period of one year was granted in Phase I and an additional one year in Phase II. The actual tenure of the loan is four years as defined in the MM SOP Phase I. Therefore, the total permissible tenure of these loans is six years.
In the case of BoBL’s clients, the top 10 companies benefited from IPS amounting to Nu 364.624M as on September 30, 2021. Bhutan Hotels Pvt Ltd benefited the most with Nu 47.687M followed by Bhutan Silicon Metal Pvt Ltd and Zimdra Foods Pvt Ltd with Nu 43.752M and 42.464M respectively. Among the corporations, Druk Green Power Corporation Ltd and Dungsam Cement Corporation benefited from IPS with Nu 40.810M and Nu 38.106M.
While comparing the IPS to the individual clients along with the month-wise from April 2020 till September 2021 status of the loan accounts, the RAA observed that BoBL management had continued paying the IPS to the 172 closed loan accounts amounting to Nu 8.507M.
In response to the audit, the management stated that the bank had re-verified all 172 loan accounts and found that interest support was provided to these eligible loan accounts with strict adherence and compliance with Covid-19 monetary relief support policies and guidelines. It also stated that all loan accounts were opened prior to April 10, 2020 which is the cut-off date for IPS as per MM support policy and guidelines.
Out of Nu 2.523B the BDBL received as a refund from the government for IPS, about 36 percent were for the NPLs for the duration from April 2020 to December 2021.
The top 10 IPS receivers benefited with Nu 132.729M. Druk School Pvt Ltd received IPS of Nu 22.757M followed by Upper Gida Stone Quarry and Bhutan Enterprise with Nu 17.601M and 15.596M respectively. Among individuals, six persons benefited from IPS ranging between Nu 9.177M and 11.470M.
The BoBL had sanctioned 69 TBSWCF loans to tourism-related businesses, wholesale distributors and industries amounting to Nu 2.246B from April 2020 till September 30, 2021, while BNBL approved 77 TBSWCF Nu 721.65M till December 11, 2020. The management of BDBL had sanctioned 26 bridge loans to tourism-related businesses, wholesale distributors and industries amounting to Nu133.043M from April 2020 till December 31, 2021.
The IPS during the first phase of MM was for three months from April to June 30, 2020 and the interest support was to be borne 50 percent by the government and 50 percent by the financial institutions.
The second phase was for nine months from July 2020 to March 2021 and for the first three months (July-September 2020) 100 percent interest was borne by the government and for the remaining six months 50 percent interest by the government and the remaining 50 percent by the client.