Royal Monetary Authority (RMA) has issued directives on priority sector lending (PSL) lending scheme to all the financial institutions to supplement the government order.
The ceiling for interest rates has been fixed at 8 percent for primary production under Agriculture CSI and 8.5 percent for non-agriculture CSI and projects involving value addition to primary production.
However, 100 percent debt financing will be available only for primary production, which is capped at Nu 0.5M. For other PSL leans, 70:30 debt to equity will apply.
Primary production mainly involves agriculture, livestock and forestry activities such as cultivation of crops, livestock farming, production of farm inputs like fertilizers, seed, pesticides, animal feeds and purchase of green house, fencing, machinery and farm equipment.
Under the PSL, agriculture CSI has been grouped into three categories: Primary production, processing and packaging and marketing and sales.
“The value chain approach to financing will provide access to all activities in the value chain either as independent activities or as an integrated project that involves more than one activity,” the PSL credit manual states.
PSL loan will be available for both new projects and for the purpose of business expansion. The RMA has also identified different crops, livestock and forestry activities that could be taken up.
Under the non-agriculture CSI, list of 13 priority products are identified under production and manufacturing while there are 16 products under services including research and development centres, performing arts, cleaning services and mule transportation.
The revolving funds under the stimulus plan does not provide loan to the service sector.
For loans up to Nu 0.5M, the gewog technical window service will be given the authority to issue technical clearance. For loans above Nu 0.5M and upto Nu 1M, the dzongkhag technical window is the authority. If the loan amount is more than Nu 1M, regional technical window will issue the clearance.
The credit manual contains all the verification, recovery and approval process that banks must adhere to.
The RMA directive also set a target for the banks to achieve this year. Each bank is required to lend one percent of the total portfolio to agriculture CSI projects, except for Bhutan Development Bank, as it has already highest share of agriculture loan. Banks are also asked to increase their lending to non-agriculture CSI by one percentage point over their exposure as of June end, 2017.
“All financial institutions will ensure seamless service delivery through special PSL credit channels,” the directive stated that each bank must have focal person for PSL.