The Bhutanese Leading the way.
Ever since the start of the pandemic in March 2020, Bhutanese have been the recipient of an extraordinary monetary assistance firstly in the form of the Interest Payment Support Kidu from His Majesty The King, followed by a blanket loan deferral for more than two years from March 2020 to June 2022, not comparable to any other country in the world.
According to a reliable source, in all likelihood, there will be no more blanket loan deferrals for all sectors, but instead some sector specific and even loan specific actions will be taken after June 2022. However, this is not yet finalized yet.
The source said that the most vulnerable sector of all is hotels and tourism and so here the Financial Institutions have proposed extending the current 20-year loan period to 35 years.
This has been proposed to the RMA and also in a presentation to the Prime Minister.
This extension, if approved, will reduce the EMI pressure on hotels and the longer period will enable FIs to give a deferral to the hotel sector for some time. For example, an under construction hotel could get a few more years to complete construction beyond the earlier agreed period before starting payments.
Similarly, an under construction building could also get some relief.
Though nothing has been finalized yet, the RMA is expected to provide some broad prudential guidelines on the sectors and measures but a certain flexibility will be left between the FIs and their clients.
Already FIs are in touch with their corporate clients and the feedback coming from many of them is a certain restructuring of the loan giving them a longer time to pay back with reduced EMI pressure in such uncertain times.
The source said that what could happen is that instead of a deferral there could be loan restructuring to give more repayment time to various affected sectors.
An example of things to come can already be seen in the RMA increasing the housing loan period from 20 years to 30 years.
For the RMA giving blanket loan deferrals after June 2022 is not an attractive proposition as it also has to balance the stability and well being of the FIs.
A banker said that the RMA will come out with the broad guidelines for the FIs and as of now they do not know what exactly it will be. But the banker said that one of the relaxations the RMA could issue is in allowing the restructuring of loans beyond current norms.
The banker said restructuring should be the exception rather than the norm and those who can pay should continue to pay.
The RMA has already been meeting the boards of FIs doing a presentation of the stress test outcomes once deferment stops.
Another banker said that the people and the banks are grateful for the support so far and now come June 2022 it is time for some ‘hard objective thinking and some hard banking.’
He said the economy should be rescued, the financial institutions should not be harmed and there should be no loss to the government.
The banker said that measures cannot be applied across the board anymore and there would be responsibility. He said certain viable loans can be rescheduled, but the ones who have no future should not be restructured as it will be expensive.
He said that only those who need the support should apply for it and get it.
A senior official, on the condition of anonymity, said, “Everybody must take moral responsibility as loyal Bhutanese citizens and it will be irresponsible for people to continue looking for free Kidu in the future.”
He said, business people should be responsible and already think of changing their strategy and change certain aspects of their business to be ready for the post pandemic world.
The official said that the fact that the people are keeping their money in record deposits in the banks shows their faith in the banking system.
He said everybody should work and fight together to build resilience.
It has been learnt that the Prime Minister suggested lowering the loan rates and also the deposit rates but the RMA is not very keen on it.
However, all of the above and the final measures will ultimately depend on how COVID-19 and its impact plays out on the economy by June 2022, especially with a new variant.
