The Bhutan Chamber for Commerce and Industry (BCCI) said that the Royal Monetary Authority’s (RMA) strict guidelines for non-performing loans (NPL) has impacted the business sector of the country and they will be appealing to the RMA to ease the guidelines on behalf of the business sector.
An NPL is a loan which has not been paid for 90 days or more. In October, RMA mandated that if anybody enters NPL, they will have to undergo a six-month cooling period with no access to credit from any financial institutions (FI) even after you pay the NPL.
This cooling period has affected the business sector of the country particularly the construction sector, said business people. A meeting held on December 27th had people from the business sector discussing the impact on the business sector.
According to the president of the Construction Association of Bhutan (CAB), Mr. Trashi Wangyel, the cooling period has deprived people of credit facilities including availing letter of credits and bank guarantee which has impacted the business.
Accordingly, even if a shareholder has an NPL, the businesses are impacted, he added.
According to the president of BCCI, Mr. Tandy Wangchuk, they will be submitting to the RMA pertaining to NPL issues and its six-month cooling period, loan deferment for hotels and interest waivers for hotels on behalf of the business entities.
Since the implementation of the cooling period of six months, many have been objecting to it stating its negative impact on the business sector and eventually the economy of the country.
The cooling period in which one cannot avail any loans from any FI has hampered many businesses and many construction companies have had to surrender their works according to the president of BCCI.
“Generally, a loan becomes an NPL when one is not able to pay the equated monthly installments (EMI) for three months and after clearing it off, there is no need for a cooling period. It has a huge impact on the economy and without access to finance, one won’t be able to do business for six months.”
“NPL will be affecting in general, the private sector. At the moment, contractors and suppliers are affected but generally everyone will be affected down the line. Recovery chance for a business is very less after one enters into the cooling period, and the continuation of the cooling period will be risking the business sector,” he added.
Hotels and restaurant under the Monetary Measures Phase 4 considered hotels and restaurants for a loan deferment of 2 years, but however hotels under NPL were not given the same deferment.
The executive director of the hotel and restaurant association of Bhutan (HRAB), Sangeeta also in attendance shared her agreement with regards to submitting to RMA and added on to submit for the same loan deferment for hotels under NPL and interest rate loan waiver of 3% from 10% to 7% for the loans during the deferment period as occupancy in the hotels are very less due to less number of tourists.
With regards to NPL and loans, BCCI president shared that banks are safe as borrowers have mortgaged their fixed assets which were all valuated years back.
“In Bhutan, all the banks are safe. Banks give loans on 70% valuation of the collateral. Our collaterals were evaluated six or seven years back and currently, if we reevaluate the collaterals, it will be two or three folds more than the valuation. If the reevaluation of the collaterals at the current market rate happens, we can withdraw additional amount of money and pump it into the economy.”
Talking with the chief operations manager of Bhutan National Bank (BNB), Mr. Hem Kumar Acharya, property reevaluation can be done and will be depend on the customer’s approach. “Banks can reevaluate the property depending on the condition of the economic status and it will depend on how the loan will be processed. If one comes to apply for a new loan, we can reevaluate the property which will however depend on the type of loan applied, area of the property and the customer’s approach.”