The Bhutanese Leading the way.
Recently the automobile and vehicle dealers approached the government complaining of banks making vehicle loans more tough.
There has also been issues with an ongoing liquidity crunch with banks going slow on loans and even stopping loans and turning away many seeking loans. The few loans that are being given are in selective areas only like projects in commercial areas of Thimphu.
Bank insiders themselves admit that Financial Institutions have gone on a lending spree in the last few year and some have even over lent to the extent that many FIs don’t have the funds to lend out as per the market demand.
The issue of a liquidity crunch has also been accompanied with a growing Non Performing Loans in over exposed sectors like hotels, housing and other areas.
To address this and other issues the Finance Minister Lyonpo Namgay Tshering is planning to have a meet with the RMA Governor and the Financial Institutions Association of Bhutan (FIAB).
Lyonpo said he wants to have a discussion on the issues and also the best possible way forward.
The minister said that the in his informal discussions with the banks so far the issue is not any notification from RMA to go slow on loans but an interim measure by the banks themselves going slow on loans to recover their loans in certain overexposed sectors.
Lyonpo said that banks have their own governance structure and take decisions accordingly.
He said that banks have sanctioned huge loans and some of them may be certain companies or sectors like hotels that are now struggling due to a competitive market.
Lyonpo said that the government cannot interfere in monetary policy which is under RMA but he said it is important that the monetary policy and fiscal policy are in tandem.
Lyonpo said the effort would also be to see what can be done on the fiscal side. He said that he is aware of the various concerns made. The minister said that RMA is doing a good job evident in its huge dividend to the government.
While most bankers have been reticent to officially admit there is a problem the former BNB MD and President of FIAB Kipchu Tshering said that he had declared months ago that there is going to be a liquidity crisis which is happening now.
He said that Financial Institutions had over lent to hotels, vehicles and other areas. He said Hotels are already overcrowded in areas like Thimphu and to an extent Phuentsholing.
The former MD dismissed the voices who said it is a cyclical issue by saying that there is no other visible source of deposits in the banks and so it is not a cyclical issue.
He said that the economy is an issue, there are no large projects and people do not have money to deposit in the banks.
The current FIAB head and CEO of RICBL Karma said that there are no large investments in the economy and not enough savings for the banks which could be due to the fact that the economy is not as vibrant like a year or two ago.
The FIAB head said that banks are dealing with the money of the depositors and so that will have to be careful in terms of how it gives and loans and prices them. The RMA, which has maintained a stony silence on the issue so far, was not available for comments despite efforts.
