Lifting barriers to avail loans

Any employee is now eligible for consumer loans from the bank without fulfilling the earlier requirement of three years in service

 

Incorporating feedback from clients, the nation’s oldest and largest bank, Bank of Bhutan Limited (BOBL) has come up with a much softer eligibility criterion for those applying for consumer loans.

This is despite the ongoing economic situation, especially the Indian Rupee (INR) shortfall and liquidity crisis.

Now, any government or private employee entitled to provident fund and gratuity from their organization can apply for consumer loans without having to follow the earlier requirement of minimum three years in service.

Those employees having completed six months to a year’s service can avail a consumer loan of Nu 0.1mn and Nu 0.2mn for those from one to three years. For three years and above, the limit to consumer loan will remain at Nu 1.5mn.

Over the last few months, most of the banks’ clients, mainly those who have recently joined service had requested BOBL to reconsider the minimum three years requirement. The loan is primarily to help them set themselves up and purchase necessities to start a home.

BOBL’s requirement to consumer loans earlier states that “Any regular employee of government department, government corporation, joint corporation, private companies where employees are entitled to PF and gratuity with minimum of three years in service including probation period and regularized service.”

A bank employee said, “People say the three years requirement makes it difficult to get access to credit and being newly recruited, they need cash to settle down. Most use the money to purchase household goods.”

“For a short period earlier, we tried providing consumer loan to private employees with only one year requirement,” the bank’s chief of credit Karma Dema said.

However, she added there were problems as there was no undertaking required from private employers and one years’ PF was very risky considering the loan repayment.

“Now if our clients have the undertaking from their employers, we provide them the loan,” the chief said.

The repayment directive is that the entire loan with interest should be repaid in a maximum of 84 equal monthly installments. For this purpose 30% of the net take home pay was earmarked for monthly loan repayment. In case the same is inadequate, the quantum of loan to be sanctioned was reduced to the extent permissible.

For loan to be sanctioned to an employee on contract service the repayment period should be limited to the term of the contract period.

Interests on loans ranges from 12 to 13% depending upon the life term of the loan.

The consumer loan can be applied from all 28 BOBL branch offices across the country with forms available on the bank’s website as well.

Currently, there are more than 14,000 consumer loan clients with the bank, amounting to over Nu 2bn.

Minjur Dorji 

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