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The Royal Monetary Authority (RMA) accepted that it had overlooked the thromdes when it was forming committees for Priority Sector Lending Scheme (PSL) for the dzongkhags.

They realised this after receiving a majority of  inquiries on cottage and small industry (CSI) from proponents in  thromdes.

The RMA is working on resolving this glitch.

Deputy governor of the RMA, Yangchen Tshogyel said that the central bank is gathering feedback, addressing issues and creating awareness on PSL even as it is implementing the scheme.

“This is why, the PSL is a long journey where challenges and hiccups are part of it,” Yangchen Tshogyel said.

The RMA claims that it has done its share to stimulate the supply side of the PSL with the formulation of policy, guidelines, standard operating procedures and commitment of the stakeholders. “But it will not stop here,“ she said.

According to officials, the RMA and financial institutions are already receiving at least ten enquiries a day on the PSL scheme.

Dzongkhags like Chukha and Gasa have formed the PSL committee and are already receiving applications. However, Kuensel learnt that the RMA has not heard from other dzongkhags.

One aspiring proponent from Tsirang said that bureaucratic red tape is unavoidable as all dzongkhag PSL committee members are bureaucrats.

With the central bank’s reach and authority limiting its scope of intervention to boost demand, the dzongkhag PSL committee is expected to play a proactive role.

Yangchen Tshogyel said the Cabinet has empowered the dzongkhag PSL committee to assess and approve PSL proposals and provide necessary regulatory clearances and technical backstopping.

The dzongkhag committee is chaired by the dzongdags. The dzongkhag PSL committee’s mandate, she said is not only to assist clients in getting approvals from various agencies but also to assess the business potential within the dzongkhags.

“We have done our part on the supply side and this year we will divert our attention to translate ideas into business ventures,” she said. “For the first time in the history of RMA, the central bank could bring people from different agencies in one room.”

While acknowledging that challenges and glitches are bound to surface, she said that duplications and systemic burdens are being chipped bit by bit.

Even the PSL, she said is going to take a couple of years to make an impact. “It cannot come overnight,” she said. “We could have launched the policy after everything is in place and washed our hands,” Yangchen Tshogyel said adding that a firm long-term foundation must be laid for institutional set up.

For instance, neither the RMA nor the banks, save for Bhutan Development Bank has experience in agriculture loan. This is why the dzongkhag PSL committee is important in providing assurance to the banks that the proposed agricultural activities are commercially viable.

As for the financial institutions, the deputy governor said that all banks have trained a designated focal person. “They are ready and we have agreements in place,” she said. “But the approval of the dzongkhag PSL committee does not mean that the loan is approved.”

The financial institutions will study the proposals and approvals forwarded by the committee and are subject to the individual banks’ internal regulations. “But the banks will enjoy huge fiscal incentives as there is a tax waiver on lending to CSIs,” she said.

The success of the dzongkahg PSL committee will also depend on the capacity of the members.

She said that PSL council  set up at the central level, would bridge this gap between policy makers and field experience. The council will look into the data and records to see how and where the policy is bugged and increase the efficiency.

In the PSL, primary production related to agriculture activities are backed by insurance instead of collateral. “This is also a new business model for the insurance companies and both RICBL and BIL are supportive,” she said.

However, for the CSI activities, the debt to equity ratio has been fixed at 70:30. This, the deputy governor said is necessary to avoid irresponsible borrowing. “When your own skin is involved in the business, you will take it more seriously,” she said. The central bank is also looking at the FDI policy to explore equity financing from a foreign investor.

Procedure(see box)

Applying for PSL? The proponent will have to get the prerequisites right.

The proponent will have to first check if the proposal is listed in the priority sector and activities prescribed by the RMA in its guidelines in addition to the investment ceiling. This is available on the RMA website.

The proponent will then have to avail a report from the credit information bureau, security and other clearances pertaining to land and community.

Then the proponent will have to submit the PSL application form along with the clearances to dzongkhag PSL committee, which will conduct a field visit for technical assistance and feasibility. Within 10 days of the field visit and if the dzongkhag PSL committee finds no issue, the application will have to be forwarded to a financial institution.

The client will again have to fill an application form prescribed by the respective banks. If the proposal is above Nu 0.5M, a business proposal is required. The financial institutes will disburse the loan after the proponent obtains a CSI license from the department of cottage and small industries. This can be done through the G2C website.

Tshering Dorji

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