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Thukten Zangpo 

Non-performing loans (NPL) are becoming a growing concern.

The Public Accounts Committee (PAC) Chairperson Ugyen Tshering said, during the review of the RAA report 2020 in the National Assembly session on December 14, that the PAC had a discussion with the financial institutions about the possibilities of refinancing.

“If projects are good, the financial institutions can refinance defaulters,” he said.

Chairperson and National Council (NC) member from Paro, Ugyen Tshering, said that once the loan is listed as a NPL, he or she is not able to get loans.

Financial institutions have an opportunity to refinance with prior approval from the RMA, he said.



According to the RAA report 2020 regarding the irregularities under shortfall, lapses, and deficiencies, financial institutions saw the most cases of irregularities at Nu 651 million (M), contributed by NPL.

The Bhutan Development Bank Limited had NPL amounting to Nu 311.02M, followed by the Royal Insurance Corporation of Bhutan Limited at Nu 183.445M, and the Bank of Bhutan Limited with 160.442M.

Trashigang NC member, Lhatu, said that a detailed study must be conducted on the factors causing the NPLs.

“If the interest rate is high, it has to be decreased, and if the loan ceiling is high, it needs to be brought down,” he said.

Ugyen Tshering said that the committee had several consultations with borrowers, contractors, the Ministry of Finance, and financial institutions.



An eminent member of NC and member of the PAC, Phuntsho Rapten, said that the RAA report 2020 pointed out that the common cause of defaults are the inability of borrowers to repay as per the terms of loans.

The report stated that there is a need to review existing norms and procedures applied in appraising creditworthiness and monitor enforcement on a regular basis.

“There could be the possibility of fudging the creditworthiness of clients by circumventing critical requirements in appraising and scrutinising the clients’ applications,” it stated.

The report stated the banks must reinforce their follow-up mechanisms and monitor recoveries.

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