…loan deferment in moderate risk sector to be client-based

Thukten Zangpo  

The Royal Monetary Authority (RMA) is discussing extending its one-year loan repayment deferment for the moderate risk category under monetary measures IV (MMIV) that ends this June.

Also, the six months observation period for non-performing loans (NPL) that have become performing through repayments is under review. During the observation period, borrowers were not able to get bank guarantees and letters of credit.

The government and the Authority informed the private sector of these developments in a meeting at the Bhutan Chamber of Commerce and Industry (BCCI) on February 24.




An RMA official said that fiscal and monetary measures have benefited the private sector in the last three years.

He said that the previous monetary measures up to MMIII were blanket support measures, while the MMIV was targeted measures that were based on the statistics.

He said that the authority is aware that the impact of the pandemic is not yet over.

The MMIV provided support measures to sectors categorised under high, moderate, and low risk.

The official said that the high and low-risk sectors are safe since the loan deferment extends until June next year.




“The extension on the loan deferment for the moderate sector would be distinguished or client based,” he said adding that if borrowers were unable to pay, it would add to an already high NPL ratio of 30 percent.  

The moderate risk sectors include construction (contract-based), hospitality, entertainment, and recreational services, mining and quarrying, manufacturing enterprises, handicrafts and textile production, trade (retail), housing (commercial), home loans, personal loans (consumer and mortgage), transport (commercial and non-commercial), and education loan.

Under the high-risk sectors, hotels and restaurants, tourism, and airlines were given two-year loan deferment until June 2024.

Agriculture-related services, trade, education, and health services, which fall under the low-risk sector, got a gestation period of up to two years that can be extended depending on the progress of the project.

On the six months observation period, the RMA official said that the authority is working on whether to reduce it to three months as requested by the government to loosen the monetary measure to support the private sector.

Lyonchhen Dr Lotay Tshering said that the government and the RMA are discussing the issue and that it is under review.




Lyonchhen said that the NPL’s observation period and creditworthiness are correlated and the six-month observation was kept because of the no proper transparency and efficiency in operations.

Lyonchhen said that some borrowers have taken multiple loans from different banks with collateral.

The RMA and the international experts question how the borrowers cleared the NPL from one bank, and if the borrower has cleared with borrowed amount from another bank and is under NPL, the borrower has to be kept under observation, Lyonchhen said.

If a borrower is taking advantage of the system, Lyonchhen said that the RMA and international experts say that the individual would come out in six months.

Lyonchhen also said that the government has asked the RMA about the importance of categorising NPL.




“There is room to relook if borrowers have gone under NPL with factors over which the borrowers do not have any control,” he added.

President of the Construction Association of Bhutan, Trashi Wangyel said that the construction sector is in a unique situation since the government is their major client.

He added that when the government keeps 10 percent as retention money, even if the work is completed if the loan under NPL is not cleared, the contractors do not get the bank guarantee and cannot take out the money to pay to the banks.

President of the BCCI, Tandy Wangchuk said that the authority could implement the observation period in progressive mode, beginning with a one-month observation period.




A private representative asked to waive the six-month observation period because the businesses have to continue work even after the pandemic, which requires working capital.

Of the Nu 150 billion (B) total loan outstanding, Nu 123B are with three banks -Bank of Bhutan Limited, Druk Punjab National Bank Limited, and Bhutan National Bank Limited.

Of the total loans, 35 percent are in the construction sector and 28 percent in the hospitality sector.




Lyonchhen said that the loan portfolio has not changed since 20 to 30 years ago, although the whole economy and needs have changed.

The members also shared the issues on the sustainable development fee, budget hotels, Suvidha-online web-based system, waterways, refinancing borrowers under distress, and collateral-free loans, among others.

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