Finance Secretary lists measures to deal with NPLs

According to Ministry of Finance, the Non-Performing Loans (NPLs) in the trade and commerce sector are approximately 7.7 percent. In contrast, NPLs in the tourism and housing sectors are relatively low, at 1 percent and 2.2 percent.

During the Meet-the-Press, the Finance Secretary, Leki Wangmo, shared, “This issue is largely due to NPLs in the groceries and commodities sector, which have been affected by COVID-19, leading to the cancellation of many small business licenses and closures. The hardware and construction sectors are also struggling, still feeling the effects of a recent moratorium on housing loans. While the major projects outlined in the 13th Five-Year Plan (FYP) are in progress, they have not yet been fully implemented.”

As for NPLs in the tourism and housing sectors, this indicates that these sectors are still developing and have potential for future growth. The Secretary characterized these low NPL rates as manageable concerns.

To address NPLs, the Royal Monetary Authority (RMA) has introduced measures to support businesses facing immediate challenges. These include allowing businesses to restructure their loans, extending repayment periods up to ten years if needed.

Additionally, RMA has provided a framework for dealing with loans that cannot be revived, allowing financial service providers to write them off.

Despite these measures, the Secretary emphasized that the government is still working to recover from the impacts of COVID-19, aiming for an economic growth target of 8 percent in the next five years, compared to the current 6 percent.

“This gap of 2 percent needs to be closed through effective implementation of the 13th FYP and the Economic Stimulus Plan (ESP),” the Secretary added.

The Secretary stressed that both individuals and businesses have important roles in addressing NPLs. “They should focus on sustainable business models instead of following trends that lead to oversaturation in markets. The government will continue to support economic growth through the frameworks established by the RMA while encouraging a shift towards more thoughtful entrepreneurship. These efforts are aimed at long-term economic stability and growth,” she added.