Gups says BDBL moratorium impacts livelihood but RMA says it is for financial stability

Meanwhile BDBL reduces NPL from 17.37% to 9.22% with RMA set target being 7.5%

With the Royal Monetary Authority (RMA) suspending all loans including Bank Guarantees (BG) of Bhutan Development Bank Limited (BDBL), Royal Insurance Corporation Limited (RICBL) and Cottage and Small Industries (CSI) bank, Gups say rural livelihood has been impacted harshly.

With the loans being stopped for about 5 months, people in the rural areas have had to halt their production activities and plans. According to one of the Gups from Samtse, people have been very forthcoming in enquiring about the lifting of the moratorium.

“Many people have come to enquire about the loans. The community has been badly impacted by the suspension of the loans. People here in rural areas don’t have a source of income, and the loans offered by BDBL was their fund for their activities.”

“There are people who have halted their activities because of the loans. Some people who started constructing and building their houses have halted because they don’t have money to go on, construction have stopped halfway. Agricultural works and livestock farming have all been impacted,” he added.

Some of the Gups of Zhemgang, talked about the impact of BDBL loans.

“People are very dependent on the loans offered by BDBL. It is very beneficial to the people, in terms of agricultural activities, livestock farming and even small businesses. However, with the loans stopped, the impact is highly felt, especially with the youths. There are graduates who have entrepreneurial ideas who want to start business, like workshops or even take up livestock farming, but with the loans stopped, they are unable to do so.”

“I think, for the economy it would be beneficial if the loans were unfrozen. People are discouraged because they do not have a source of income or an investment. People relied on the loans as investment,” he further added.

Local leaders of Trashigang, Paro, Samtse and Zhemgang all agree that the livelihood of people have been impacted because of the frozen loan.

One of the Gups from Trashigang shared, “These loans were used by people to buy seeds, and farm machineries, essentially for many rural activities for agriculture and livestock. With it stopped, people are highly impacted.”

“The people are waiting for the moratorium to be lifted. They are enquiring about the loans and we did enquire to the BDBL, however, we can’t do much as it was a notice from the higher ups,” he added.

“Loans offered by BDBL and CSI banks are usually for rural people, and the interest rates are less compared to other banks. These loans are very useful and helpful for agricultural activities, livestock farming, anything relating to rural activities,” shared Tandin, a graduate who recently left his village.

“With the loan stopped, people can’t do much. We don’t have money and we don’t have a source to borrow from. Other banks loan schemes are not for us, and even if we do borrow, the interest is too high,” he added.

“It is quite disheartening and discouraging. There are some friends of mine who wants to start businesses, commercial farming and do a lot of other things. With the loans stopped for a while, we are very discouraged. I also had a plan to start a small business firm at my village, however, with the loans stopped, I had to think of other plans. Right now, I’m exploring my options, RCSC exams and even Australia,” he added.

The Finance Minister wrote two letters to the Central Bank in response to the moratorium, and the Opposition Party also issued a press release focusing on how it is impacting the lives of those in the rural areas.

According to RMA, the three financial institutions had excessive and risky proliferation of non-performing loans (NPLs). As the regulator and the supervisor of the banking system in the country, the Central Bank was required to undertake immediate remedial actions before the financial institutions plunged into deeper crises.

RMA stated that the excessive level of NPLs poses as a threat to the Bhutanese economy, if left unchecked, as it has a detrimental effect on the banking system of the country.

It also said it does not impose such sanctions lightly, and is keenly aware of the role and need for sound financial institutions to support the financial aspirations of the community of Bhutan, where savings in bank deposits are very crucial investments.

“About 30 percent of the villagers have not paid back the loans, and because of these 30 percent, the rest 70 percent is effected,” one of the Gups added.

“It would be better if they provided loans to those who has good credentials, those who have been paying back their loans on time. Because of people that has not been able to pay it back, the others are affected greatly,” another Gup added.

Talking to the officials of BDBL, they shared that they are putting in their best efforts to recover the loans. “RMA mandates us to keep our NPL at 7.5 percent. We have made a committee where all senior officials are mandated a branch office to recover loans. Comparatively, our situation has improved, and we are making consistent efforts every day.”

In May, before the moratorium, the NPL was at a record high at 17.37 percent, and currently, it has improved to 9.22 percent. Although it is difficult to predict when the moratorium will be lifted, however, sustained efforts are being made to mitigate the situation so the livelihoods of the people are not impacted. 

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