Almost a year since the launch, the Priority Sector Lending (PSL) scheme is making headway with all dzongkhag PSL committees receiving applications.

As of September this year, the dzongkhags have received 1,161 applications, according to the Royal Monetary Authority’s (RMA)’s latest quarterly report.

Some 494 applications were received in the third quarter compared to 572 in the second quarter and 95 in the first quarter.

Figures indicate that the 20-dzongkhag PSL committees, chaired by the respective dzongdags, receive more than four applications each day.

The dzongkhag PSL committees, however, approved 906 projects, resulting in an approval rate 78 percent.

Once the dzongkhag PSL committee based on the technical viability approves the project, it is sent to the financial institutions for loan approval.

Of the 906 approved, the clients withdrew 30 projects.  The financial institutions however, received only 440 projects between January and September this year, of which 216 were approved.

Those who withdrew cited high insurance cost for livestock and requirement to obtain a CSI license as reasons, according to the RMA.

While the seven financial institutions only sanctioned loans for half of the proposed projects, the RMA’s report stated that close to half of the rejected projects were on account of bad credit records and existing loans.

The financial institutions sanctioned a total of Nu 233M as PSL loan and Nu 181M has been disbursed as of September.

The Bhutan National Bank approved 90 projects worth Nu 140M, while the Bank of Bhutan approved Nu 65M loan for 104 projects. T bank sanctioned Nu 15M against six PSL projects. Bhutan Development Bank and Druk PNB approved a loan of more than Nu 3M each.

Non-banking financial institutions like Royal Insurance Corporation of Bhutan Ltd also participated in the PSL with two projects worth Nu 4.7M. The Bhutan Insurance Limited received four project proposals, of which three were declined and the lone project is under review.

“The PSL initiative saw increased participation with all 20 dzongkhags and seven financial institutions involved in reviewing the PSL proposals,” the quarterly report stated.

However, the RMA found that a majority (80 percent) of the projects received in nine months were agriculture-related projects dominated by livestock and vegetable farming. The remaining were non-agriculture CSI projects.

Also, most projects are clustered around similar ideas and only a handful of proponents formed groups.

Dzongkhag wise, Thimphu continued to receive the highest numbers of applications (216) followed by Tsirang (115) and Dagana (114).

Trashiyangtse received four applications, the least among the dzongkhags. Until the third quarter, the dzongkhag had not received any applications.

While there is no collateral requirement for PSL, insurance is mandatory. As of September this year, a total of Nu 82M was insured for the projects against 199 different policies.

The report highlighted on the need to develop capacities of the dzongkhag PSL committee to carry out technical assessment effectively and even identify potential businesses in the dzongkhags.

Meanwhile, the RMA also begun field visits and has covered 11 dzongkhags so far. The feedback and insights received from the field visits is expected to improve the PSL guidelines in 2019.

Tshering Dorji


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