Industries will now have access to more than Nu 500 million (M) in short-term working capital loans to import raw materials.
The Royal Monetary Authority (RMA) launched the monetary measure yesterday as part of its push for financing to help the industrial sector deal with the impactsof the Covid-19 pandemic.
The working capital will be provided at an interest rate of 7.02 percent or the institution specific minimum lending rate or whichever is higher.
The facility became effective from yesterday, April 21, and the gestation period for this facility shall be until June 30, 2020. The gestation period is extendable by three months depending on the evolving situation.
According to RMA, the working capital provided to manufacturers that were identified by the Department of Industries and the Department of Cottage & Small Industries (DoI and DCSI).
With the facility, industries are expected to keep catering to local markets and for export-oriented business.
Financial institutions will sanction the loans based on the companies’ credibility, their business relations with the borrower and based on the working capital requirements validated by DoI and DCSI.
The security will be LTV (loan-to-value) of 100 percent of collateral value.
To ensure that the loans are not misused, financial institutions will make payments directly to the supplier through banking channels.
Loan applications will be assessed based on the amount validated by DoI and DCSI and sanctioned based on the provision of invoice and import authorization.
The facility shall be provided only to clients with loan accounts that were not NPL (non-performing loan) as of February 29, 2020. Financial institutions will be required to carry out due diligence as per their internal policies and procedures.
For convertible currency, it will be subjected to the requirement of Foreign Exchange Rules and Regulations.
Repayment of loan after June 30 shall be as per the normal terms and conditions, including the interest rate, of respective financial institution.
RMA Governor Dasho Penjore at the launch said that the essence of rolling out the monetary measure was to keep industries running and minimise the impact of the Covid-19 pandemic.
He said that it was the third monetary relief measure announced to cope up with the pandemic and that RMA expected a zero NPL at the end of the year.
Expressing his satisfaction over the monetary measures, Finance Minister Namgay Tshering said that the pandemic was paralysing the economy.
He said that the government’s spending, which is crucial for growth, would depend on industries’ performance.
“We are forced to do import substitution. This should be taken as an opportunity, rather than compulsion,” he said.
Bhutan Chamber of Commerce and Industries (BCCI) president ,Phub Zam, said that some industries were of the view that the interest rate was still high and the loan term was short.
She said that BCCI’s research had found that no spectrum of the business sector had remained unaffected. “Still we appreciate the initiatives,” she said.
More than 95 percent of the Bhutanese industries are small and cottage scale as per the economic affairs ministry records.