The Bhutanese Leading the way.
Hoteliers have raised concerns over T Bank’s recent decision to increase interest rates on existing loans, a move they fear could further destabilize their already fragile financial situation of the hotel industry.
A hotelier, who availed a capital loan in 2018 for hotel construction, expressed concerns over the upward revision of the interest rate from the original 8.5% to 9.75%.
Hoteliers say that the bank first increased the interest rate from 8.5% to 9.25% and has now increased to 9.75%. They said that given the huge amount of the loans they have, even a slight increase in the interest rate drastically changes the total amount they have to pay back.
A hotelier emphasized that the original terms, offered in good faith, were a deciding factor in choosing T Bank over other financial institutions. In light of the ongoing challenges faced by the tourism industry, particularly those linked to policy changes such as the Sustainable Development Fee (SDF), the increase in loan repayment obligations was described as unsustainable.
Another hotelier said that they are struggling to even pay their staff and at this time, when the banks increase their interest rates, they will be driven to the ground with debt.
In response, T Bank acknowledged the concerns raised but noted that interest rates are revised twice annually, in accordance with the Royal Monetary Authority (RMA)’s Minimum Lending Rate (MLR) framework.
The bank explained that several factors—such as credit risk, tenure risk, and business strategy premium—are taken into account alongside the bank’s own MLR to determine the final lending rate.
Based on these metrics, the revised rate should have been 11.68% per annum. However, the bank reportedly opted to cap it at 9.75%, citing sensitivity to the hotel and tourism sector’s current struggles.
T Bank conveyed that it was already incurring a loss of approximately Nu 33 million due to this reduced rate and requested understanding from clients in view of the broader economic context. It also reaffirmed its commitment to serving the hotelier community despite these financial pressures.
In the last round of loan deferrals, Hotel and Tourism loans worth Nu 20.981 billion (bn) for 1,240 loan accounts had been deferred till 30th June 2024 under Monetary Measures 4. After this came to an end, the RMA left it on a case by case basis between the Financial Institutions (FIs) and hotels.
The FIs went by a common Standard Operating Procedure agreed to by all the FIs and so the deferral was extended for 503 loan accounts worth Nu 13.508 bn for another year till June 2025 based on their payment capacity.
Hoteliers argue that while they recognize the pressures faced by financial institutions, a blanket increase in rates—especially for sectors hit hardest by policy shifts and global downturns—could lead to greater long-term damage.
