The Bhutanese Leading the way.
If one reads the Non-Performing Loans data carefully, it shows that our economy is still shaky, with several sectors still suffering or unable to recover properly. It reflects past pains and current challenges. The data tells a story of both the health of the financial system and the larger economy.
Record NPL
Non-Performing Loans (NPLs) hit Nu. 11.729 bn, or 4.07%, in August 2026, making this the highest amount ever recorded.
The NPLs among Financial Institutions are BNBL, with Nu. 3.173 billion (bn), followed by BoBL at Nu. 2.742 bn, BDBL at Nu. 2.446 bn, RICBL at Nu. 1.586 bn, DPNB at Nu. 759.15 million (mn), T Bank at Nu. 619.11 mn, BIL at Nu. 241.60 mn and NPPF at Nu. 161.57 mn.
In terms of sector exposure, of the Nu. 11.729 bn in NPLs, the highest is in trade and commerce, at Nu. 2.479 bn. This is troubling because the NPL rate here is 10.94%.
This shows that the sector has performed poorly, especially after the pandemic, with fewer customers due to migration, more competition from an increasing number of shops, and the advent of online businesses that sell goods but do not pay tax and do not need to pay rent. The main clients here are wholesalers and importers.
Though small in size, loans against shares and securities have NPLs of Nu. 336.89 mn, a high rate of 15.50%. This reflects the state of the stock market, which has been mostly in the red this year.
Another area with high NPLs is transport loans, with NPLs of Nu. 775.04 mn and an NPL rate of 9.21%.
The agriculture sector, with NPLs of Nu. 727.75 mn and an NPL rate of 13.89%, reflects the perennially troubled nature of this sector.
Loans to contractors have NPLs of Nu. 796.42 mn, representing an NPL rate of 7.83%.
The housing sector, mainly due to its sheer size, has NPLs of Nu. 2.367 bn, but the NPL rate is low at 2.98%.
The Hotel and Tourism sector has loan NPLs of Nu. 1.168 bn, which is deceptively low at 3.10% due to the ESP interest subsidy for now, but this figure could rise sharply in the future.
While all eyes are on the NPL rate, there are two other interesting figures to watch that also indicate the health of the financial sector and the larger economy.
Loans not paid for more than 60 days
The first figure is for loans that have not been paid for more than 60 days.
This shows loans that could become NPLs, as well as distressed loans where borrowers are having difficulty making payments on time. The figure for loans overdue by more than 60 days is Nu. 6.863 bn. This is not NPL yet.
Charged-off loans
The other figure to watch is that for charged-off loans, which are basically past NPLs that have been fully provisioned for against the profits of the banks and have therefore been moved off the books. They are no longer reflected as NPLs, but the debt is still there. The main problem with these amounts is recovery, until which time the profits of the banks remain tied up in them.
These charged-off loans amount to Nu. 15.266 bn. The highest holder of charged-off loans is RICBL, with Nu. 5.865 bn, followed by BNBL at Nu. 2.923 bn, BDBL at Nu. 2.169 bn, BoBL at Nu. 2.578 bn, DPNB at Nu. 569.97 mn, T Bank at Nu. 386.78 mn and BIL at Nu. 322.34 mn.
The highest amount of charged-off loans is owed by contractors, at Nu. 4.449 bn. The main issue here is contractors bidding low for projects and then being unable to complete them or finishing them at a loss. This is also coupled with past years when there was not much government work.
The second highest is trade and commerce, at Nu. 2.187 bn, which again shows how troubled this sector has become, especially after the pandemic.
The third spot is occupied by transport loans, at Nu. 1.583 bn, showing that this is another troubled sector.
This is followed by the service sector, at Nu. 1.523 bn, which includes schools and educational institutions, ICT, tourism, entertainment and recreation, and professional services. This also shows that the sector is not in the best shape.
There is then housing, at Nu. 1.339 bn, where the main problem is that rental income is unable to cover loan payments, despite frequent complaints that rents are too high.
Production and manufacturing have Nu. 1.274 bn in charged-off loans, showing that this sector is also not in great shape.
There is then Nu. 974.71 mn in hotel and tourism loans, which is a well-known saga. This is followed by Nu. 693.17 mn in personal loans, showing that ordinary people are failing to repay even smaller amounts, indicating financial weakness among them too.
This is followed by mining, at Nu. 572.39 mn, and Nu. 556.30 mn in another sector, showing that both sectors are also not doing well overall.
When current NPLs and past NPLs, against which money has been provisioned, are combined, the actual NPL rate is 8.89%, and the total amount is Nu. 26.99 bn.
Interconnected
A seasoned banker said that the above data reflects the state of the economy and that Financial Institutions cannot thrive if the economy and its various sectors are not doing well either.
Another senior FI official said that recovery is becoming a challenge, even through auctions, as people do not seem to have the money to purchase properties being auctioned. It also does not help when the collateral consists of land in remote areas.
While the Royal Monetary Authority (RMA) has implemented various prudential measures to strengthen the management of non-performing loans (NPLs), it is also undertaking initiatives to develop appropriate frameworks and institutional mechanisms to address the challenges associated with charged-off loans.
These efforts include engagement with the Judiciary and multilateral development partners to enhance the NPL management framework.
