Finance Minister Namgay Tshering

Finance Minister updates members of NA on NPL and Samtse-Phuentsholing highway repair

The Finance Minister, Namgay Tshering, updated the members of National Assembly on Samtse-Phuentsholing highway work progress and NPL during the question and answer session.

The busy Samtse-Phuentsholing highway was in an immediate need of repair and renovation.

According to the Finance Minister, Nu.33-37 million has been invested to renovate the highway. The critical need for renovation is the 9 km road that stems from Samtse to Woezergang and the renovation is to be concluded in June 2023.

Lyonpo also touched on the issue of Non Performing Loans (NPLs) stating it is not a new problem since NPLs have piled up over years.

When the current government took over in 2018, the loan outstanding was Nu 145 billion with NPL at Nu 26 billion. Currently, the NPL is at 14 percent, and it is mandated for the financial institutions for the NPL to be at 5 percent on an average.

The Finance Minister stated that the reason for NPL could be because people take loans without carrying out the cost benefit analysis. People do not calculate the Equated Monthly Installments (EMI) and the interest rate while applying for loans, and then they are not able to pay it back.

Loan appraisal system and credit checking system of the financial institutions are weak, and people are using loans that were applied for business purposes to build one’s assets. However, people are not able to generate enough EMI to pay back the loans.

He stated that the ministry of finance can only offer recommendations and advice regarding the issue but does not have the authority to regulate the financial institutions, as it is solely in the hands of Royal Monetary Authority (RMA).

The minister provided the solution of loan rescheduling, stating the issue of EMI payment where people are not able to generate it. In EMI payment system, the loan amount is repaid in pre-fixed installments which comprises both principal and interest components.

The loan rescheduling is to lower the loan tenure as it will benefit both the financial institutions as well as the people.

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