Thukten Zangpo

Royal Insurance Corporation of Bhutan (RICB) partially lifted the suspension on loans in eight sectors from July 1 this year after a year of suspension. 

The sectors include forestry and logging, hotel and tourism, loans for shares and securities, mining and quarrying, personal loans, production and manufacturing, and transport loans.

The General Manager of the Credit Department, RICB, Pema Yangchen, said that these sectors’ gross non-performing loans (NPL) ratio were brought down to 5 percent and below. 

“As and when the NPL threshold for other sectors and subsectors comes below 5 percent, we will lift the loans,” she said. 

Other sectors like housing loans, agriculture, trade and commerce, education among others remain frozen. 

On June 30 this year, the Royal Monetary Authority directed RICB to allow lending in these sectors and subsectors after a gross NPL ratio was below 5 percent as of June. 

“The corrective measures are being taken by the RICB for the entire credit ecosystem,” it added. 

The Authority also directed that the loans have to be approved from the centralised credit-sanctioning authority, the corporate office in Thimphu.

The RMA also asked RICB to strictly follow the revised credit manual and also provide updates on the new loans sanctioned on a monthly basis and present the new loans sanctioned to the RMA board by December-end this year.

With the centralised credit approval system from the corporate office, corrective measures like new credit system and revised credit manual including credit appraisal risk, the NPL for these sectors would not fall below 5 percent hereafter, Pema Yangchen said. “We have all control measures in place.”

Since May 10 last year, under the RMA’s prompt corrective action, considering the amount of NPLs above 5 percent and the governance practices, three financial institutions (Bhutan Development Bank, RICB, and National Cottage and Small Industry Development Bank) loans were temporarily frozen from lending new loans.

According to the RMA, the risk of increasing NPLs will threaten the viability of the financial service providers and if not contained, the problem could also threaten the viability of the financial system. 

Under forestry and logging, the sub-sectors include forestry infrastructures and support, silviculture and logging. 

Hotel and tourism sector include loans to homestay and guesthouses, hotels, restaurants and bars, and travel and ticketing agents. 

Loans for shares and securities are loans to purchase and against shares and securities. 

Loans for mining of chemicals and minerals, quarrying are under mining and quarrying while personal loans include consumer loan and mortgage loan.

Production and Manufacturing loans are arts and crafts, electronics, home and office furnishing, garments, textiles and jewelries, groceries and other related commodities, hardware and construction materials, manufacturing of chemical and petroleum product, renewable and non-renewable energy, printing and production of recorded media, stationaries, vehicles, machineries and equipment.

Additionally, transport loans include carrier, heavy machineries, personal vehicle, public transport, taxi and tourist vehicle.