The Bhutanese Leading the way.
Financial Institutions Association of Bhutan (FIAB) has announced an extension of the deferment facility for borrowers, offering much-needed relief amidst ongoing challenges in all the Financial Institutions (FIs).
The deferment period is extending up to one year.
The borrowers who have previously availed themselves of the deferment option are eligible to apply for further deferment, subject to assessment criteria set uniformly across all the banks, and to be effective until 30 June 2024.
Notably, the deferment extension comes with certain conditions. While most loan types are eligible for deferment, share and housing/home loans are excluded from this facility.
After 30 June 2024, loans deferred will no longer have the option of a Fixed Equated Installment Facility (FEIF). Borrowers are required to either pay off all accrued interest post June 2024 or add the interest portion to the principal amount before commencing the repayment of Equated Monthly Installments (EMIs) upon completion of the deferment period.
The Executive Director of the Financial Institutions Association of Bhutan (FIAB), Letho Wangchuk, stated, “There will be no change in the interest rate. However, in special circumstances, FIs may consider slightly reducing the interest rate for a limited period if they believe it necessary to revitalize the borrower’s business or to make the Equated Monthly Installments (EMI) more manageable for the borrower.”
If the conditions regarding repayment are not met, the loan will be classified as a Non-Performing Loan (NPL), and FIs will initiate standard procedures to recover the outstanding loan amount.
Regarding those who may not qualify for deferment, the Executive Director noted that there are no alternative solutions available, except for lowering the interest rate under the special circumstances mentioned earlier.
He mentioned that the government could offer support through the Economic Stimulus Plan (ESP) for priority sectors. However, details on how the government will provide assistance to borrowers through the ESP are currently unclear.
While all loans deferred until 30 June 2024 are eligible for extension, approval remains subject to assessment by respective FIs. The repayment schedules and terms may vary between borrowers based on individual assessments.
Borrowers seeking further deferment must submit an application form along with declarations of income and expenses, with specific forms tailored for the hotel and construction sectors.
According to the FIAB, the loans will not be deferred from 30 June 2025.
