A new CSI bank in the offing

During the Friday Meet, the Finance Minister was asked if the ministry is doing something to ensure access to credit and reducing Non-Performing Loan (NPL) as a custodian of REDCL which is a state owned enterprise.

The Finance minister said that the government is going very strong on establishing a Cottage and Small Industries bank.

The Finance Minister said BoIC was started in 2014 and later bifurcated to REDCL and the fund was bifurcated to revolving Fund 1 and 2 because of the legality issues. Now with REDCL, for initial BoIC fund have bifurcated into revolving Fund 1 and 2. The revolving Fund 1 was actually to finance the major CSI projects which also includes agriculture and was placed under BDBL and REDCL was mandated to look after revolving Fund 2 and the maximum ceiling for that was Nu 500,000 per applicant.

“Now if you look into the NPL RF1, of course, has highest NPL that was carried forward since 2014 but REDCL RF2 has most minimum NPL across all banking sector at 12.5 percent,” said the minister.

Lyonpo said with REDCL to turn into a full-fledged CSI bank soon,  it will have the enhanced loan portfolio that will go beyond agriculture into seasonal and export loan, overseas employment loan.

“I think we are actually putting more capital, more equity injected in the CSI bank and access to financing will definitely be improved and I think a person who is actually not a responsible lender from RF 1 and 2 might be experiencing some difficulty in accessing additional funds, but otherwise I think both access to lending from RF 1 and 2 is still being continued,” he said.

The minister said that NPL is actually good at this point of time and access to financing is also being enhanced and that they are also engaged with the financial institutions in Bhutan to upscale the loan portfolios to the agriculture and rural based economy.

The PM said, ‘’Farmers have defaulted, but the target of the loans may not be agricultural activity. REDCL authorities have found out few specific examples whereby the person who has taken loan is now crippled with a lifelong disease and no other family member could support.”

PM added that there are many such cases to be dealt separately and agencies are asked not to waive off the loans. “Bhutan has not reached this pathetic stage so they will have to deal with it. The CSI bank along with MoEA should have an advisory board for the potential loan receivers. Economic opportunities should be identified, and then CSI bank should have office which will ensure continuity of the bank, business and see if there is any risk of default, if there is any room we can intervene and correct, we should do it so that NPL percentage should drop down,’’ said the PM.