The Bhutanese Leading the way.
In July 2020 as part of the monetary measures for COVID-19 the RMA announced Short Terms loans or bridging loans to businesses by banks at a 5% interest rate to pay for wages and salaries to employees, overhead expenses like rents, utility bills, lease, insurance premiums and procurement and purchase of raw materials.
It said that eligible businesses can avail the soft loan facility for a period of one year, from 1st July 2020 to 30th June 2021 and this period shall be treated as a gestation period.
Interest accrued from 1st July 2020 to 30th June 2021 was to be capitalized at the end of gestation period. The capitalized amount was to be amortized and repaid over a period of 4 years
The Financial Institutions determined the loan size to finance operational expenses for one year until 30th June 2021. It said the loan to value (LTV) ratio can be up to 100 percent.
The loan was disbursed on a monthly basis in the case of salary whereby the loan was sent directly into the accounts of employees.
One of the main customers of this loan scheme were certain hotels who used this to tide over including some other businesses.
However, with the loan scheme coming to an end and then not being extended like the loan deferral has come as surprise to some hoteliers.
The Chairman of the Hotel and Restaurant Association of Bhutan (HRAB) Sonam Wangchuk said that he had not got any official communication on the matter. Sonam said that the bridging loan was important as some major hotels which had not opted to be quarantine centers used it to pay staff.
He said that there is less demand for loans during the pandemic and so banks would at least earn some money.
A hotelier said that with the pandemic their income is down by 98 percent and this loan helped to pay their staff.
He said that when he asked the banks they told him that the bridging loan money came from the various deposits that banks have to keep with the RMA and that limit had been exhausted.
He pointed out that banks right now have excess liquidity and such a loan would actually help banks to earn something too. He said that if this issue is not resolved then some hotels may have to look at laying off employees.
He said apart from some hotels the loans had been taken by some contractors and businesses.
The Construction Association of Bhutan President said that some Contractors have availed the bridging loan but at the same time he said the situation for the contractors this year is much better than in 2020.
He said there is some kinds of works for most contractors from farm roads to offices and even if they are not like the mega projects, they are something. He said that he expects for things to improve even more after the second dose.
The BCCI is expected to take up the matter with the RMA and the government. However, any intervention looks difficult if the limits set by the RMA for such borrowings have already been reached as the FIs are also wary of Non Performing Loans.
