The History of the First Bank of Bhutan

In 1968 His Majesty Jigme Dorji Wangchuck (1952-1972) opened the first bank in the country. In his address to the gathering after the ceremony, the Third King said that, “the establishment of a bank in the country had become inevitable as a result of opening-up of the country and the introduction of money as a medium of exchange.” Until then, Bhutan followed a policy of self-imposed isolation. Cut off from rest of the world, the economy was based on barter system.

Revered as the father of modern Bhutan, His Majesty was in the business of nation building. He built the foundation of many of the institutions that exist today. Two days before the bank opening, His Majesty was in the east to open the country’s first high school. After opening Sherubtse High School, the King rushed down to the frontier town of Phuentsholing and reached in the morning just in time to inaugurate the important institution.

The establishment of the Bank of Bhutan Limited (BoBL) was a game changer. It signalled the end of the barter trade and the start of the modern economy. The state-owned bank had a capital of Rs 44 million. It was built in the record time of one year. On May 2, 1967, HRH Prince Namgyel Wangchuck laid the foundation stone. A year later, on May 28, the bank opened for business under a Royal Charter.  Like Bhutan, Sikkim managed to set up its bank in 1968. It took four years for the State Bank of Sikkim to be set up.

Both Kuensel (v.II no. 10, fortnight ending 31/5/68) and an Indian newspaper (29/5/68 issue) covered the historic event. According to the national newspaper, His Majesty wanted the bank to function first as a commercial bank and to eventually become the country’s central bank with the ability to issue currency notes. In addition, He wanted BoBL to function as the government’s banker. The Indian newspaper’s account of the event, stated that “In opening the bank the King said that introduction of money as a medium of exchange, replacing the traditional barter system in the country had made the establishment of the bank inevitable.”

The bank was set up with the assistance of the Chartered Bank in Calcutta with four objectives. The first goal was to inculcate banking habits among the people. Until then, the idea of banking was a foreign concept. The second aim was for the bank to enable the state to provide the people with opportunities for profitable and safe avenues of investment. The third objective was to boost the commerce and industry of the country, and the fourth and final objective in setting up the bank was to replace the bulky tikchung coins that were in circulation.

In his opening address, the His Majesty emphasised the “importance of developing the saving habit and depositing such savings no matter how big or small, in the Bank as this would generate capital which could be used to encourage trade and commerce in the country”.

Because of the absence of financial advocacy and the low literacy rate, the bank faced many challenges. Some of the major challenges were to prevent the government officials from eroding the capital and attracting deposits was also a big challenge. The latter was due to lack of trust in the new institution. Our Third King stepped in and gave his personal assurance to the depositors. He stated that the government would stand surety for their deposits.

By 1968, when the bank was inaugurated, Bhutan had launched its second five-year plan. India was generously giving grants for the planned economic development. The complexity and dynamism of the economy had increased. His Majesty, realised that BoBL would provide modern banking facilities while dealing with India and other donor countries.

In 1968, during the 28th session of the National Assembly, the House recognised the increasing economic developmental activities.  It promoted the finance secretary, Dasho Chogyal as the country’s first finance minister. The minister converted all the taxes from kind to cash. For the first time all salaries were paid in cash. That year the post of Nyerchen or officer dealing with the state stores was made redundant and abolished.

The Bank of Bhutan, Review Report- 1968-78 and The Ministry of Finance Annual Report of 1972-73 have some details of the history of the bank. According to the review report, the bank faced many challenges in its first few years. However, despite several operational restraints, the bank was able to offer normal deposit banking. With limited lending facilities and lack of human resources, the fledging bank struggled to help traders, businessmen, industries and other members of society who wanted additional banking services such as currency exchange facilities.

The first manager
The bank’s first manager was John Roger Stansfield Holmes. The Chartered Bank in Calcutta sent him on secondment to assist setting up the bank.

The Chartered Bank of India’s staff newsletter, Curry and Rice reports in its pre-monsoon 1968 issue under Comments from Calcutta that “J.R.S. Holmes was with us for a few months prior to being seconded in May to the Bank of Bhutan at Phuentsholing. This is a new venture of the Government of Bhutan and The Chartered are assisting by providing ‘our man in Bhutan’ on temporary secondment.” Holmes took Jiten Babu to assist him.

By the time Holmes was sent to Bhutan, he had finished assignments in Kuala Lumpur, Singapore, New Delhi, Colombo and Kolkata. He was familiar with working overseas. His friends described him as an enigmatic and fearless character with wide-ranging interests. With these attributes, he was the perfect candidate for Bhutan. His outdoor interests included natural history, ornithology, climbing and mountaineering, and he was also an accomplished marksman. While he was serving in Kolkata, he would often travel out to nearby paddy fields and marshes to shoot snipe and sand grouse. One of his former colleagues recalls thinking at the time that had Holmes not been in banking, he might have been a game warden.

The banker’s love for the outdoors, particularly ornithology, increased his commitment to his assignment in Bhutan. He hoped to find the time to catalogue the birds of Bhutan. However, an American Peace Corps volunteer had beat him to it.

One of Holmes great friends in Bhutan was Dasho Penjor Dorji. They had similar interests in birds and nature and the duo spent a lot of time bird watching and enjoying the outdoors. Dasho fondly recollects his time with his friend in the dense jungle of Hongka and the valley of Paro watching birds. Dasho, one of Bhutan’s first ornithologists, said that Holmes was a keen birdwatcher and would spend most of his weekends in Hongka which was a hot spot for birders because it was on the migratory route.

At that time, Dasho Penjor was the Thrimpon or the chief judge of Paro. He said that his friend would plan his business trips to Thimphu according to the migration of the birds. The ornithologist preferred to stay with Dasho in Paro rather than in Thimphu, because they were more birds in that valley.
Holmes was one of the students of Salim Ali (1896-1987), India’s renowned ornithologist and naturalist who is rightly regarded as the father of conservation of wildlife in India.

In addition to helping set up BoBL, the manager made an important ornithological contribution to Bhutan in that, as a keen birder, he was the first to note that sparrows in Bhutan were different from those in other places.

Dasho Penjor, who later founded the Royal Society for Protection of Nature, said that Holmes sent specimens to Mumbai and got confirmation from Salim Ali that they were unique to Bhutan. The Indian guru identified the bird as the cinnamon-headed sparrow. The bank manager was also interested in butterflies and he collected them. He regularly contributed articles to the Journals of Birds of South East Asia.

Holmes was from Malta and died a bachelor. In 1968, during his holiday in Switzerland, a car rammed into his and he succumbed to his injuries. Although not much is known about the banker, he is remembered not only for setting up the first bank in the country, but also for his contributions to ornithology and the collecting and identifying of butterflies. After the death of the un-sung hero, His Majesty sent all Holmes’s records including audio-recordings of bird calls to the Bombay Natural History Museum. His butterfly collection was donated to the National Museum in Paro.  With the abrupt, untimely death of the fledgling bank manager, its foundations had to be reinforced. His Majesty the Third King stepped in to strengthen it.

To be continued…

Contributed by
Tshering Tashi