The Bhutanese Leading the way.
Despite a significant deficit outlined in the Bhutan Development Bank Limited’s (BDBL) 2022 budget report, the bank posted a net loss of Nu 192.435 million (mn), nonetheless, BDBL CEO Tshering Om appears optimistic about the bank’s bounce back in 2023.
To maintain the financial stability, the Royal Monetary Authority (RMA) put a moratorium on loans from BDBL, RICBL, NCSIDBL on 13 May 2022 because of high Non-Performing Loans (NPL).
This hit its profitability in 2022.
BDBL is the only development bank service provider that plays a vital role in fostering the nation’s economic growth. Its main goal is to support Bhutan’s economic development by extending financial services and assistance across diverse sectors of the economy, including the promotion of entrepreneurial endeavors, rural progress, financial accessibility, and prioritized industries.
The door step services provided to the customers through Farmers Outreach Banking (FOB) is a unique service, the BDBL also provide collateral free loans through group guarantee (GGLS) with the objective to reach out the service to the unreached customers and seasonal loan to cater to season agriculture activities.
With the loans being frozen for more than a year, the livelihoods of people have been affected ranging from the farmers to business people.
RMA has lifted partial loan moratorium in 11 branches on 23 March 2023 and on 4 August 2023, BDBL announced the lifting of moratorium on all 35 branches for performing status customer.
According to the CEO, BDBL conducts a thorough risk assessment to identify borrowers who may face difficulties repaying their loans due to exceptional circumstances, such as a pandemic.
The CEO added, “This assessment includes evaluating the impact of the moratorium on the bank’s portfolio and potential credit risks. To maintain financial stability, BDBL set aside provisions and reserves to cover potential losses resulting from the moratorium. Adequate provisioning ensures that the bank has sufficient capital to absorb losses and maintain its capital adequacy ratios as per regulatory requirements.”
“Even during the moratorium, BDBL would continue to adhere to prudent underwriting standards when granting new loans to ensure that credit risks are adequately assessed for new borrowers. This prevents the accumulation of additional risky assets in the portfolio. Diversifying the loan portfolio across various sectors and industries helps mitigate concentration risk. A well-diversified portfolio is less vulnerable to economic shocks affecting specific sectors,” she further said.
BDBL developed plans and framework for the post-moratorium period to manage loan recovery through restructuring, rescheduling, or negotiation with non-willful borrowers who faced financial difficulties during the moratorium and litigation for willful defaulters.
While the loan moratorium is in effect, the bank has implemented measures primarily aimed at addressing the Non-Performing Loans (NPLs), and has established various prudent systems to prevent a recurrence of similar issues after the moratorium ends. As part of these measures, the bank has introduced a pre-screening process for loan applications before they undergo a comprehensive appraisal upon onboarding.
BDBL operates with 35 branches, 27 Gewog Field Office (GFO) and Farmers Outreach Banking (FOB) services across the country with total of 542 employees.
Now as the bank is relatively doing good, there are talks of pay hike for its employees as well.
