The Bhutanese Leading the way.
The loan deferral is coming to an end for various sectors in June 2024 and after this, blanket deferrals of the past is unlikely.
According to a reliable source the Royal Monetary Authority (RMA) is keen to let the banks decide client by client on who can pay or not pay instead of giving sectoral deferrals.
However, a final decision is pending with various sides requesting and petitioning the government, though any final decision will be entirely that of the RMA.
The source said that an important indicator to be looked at is the economic recovery as just another blanket deferral will just be artificially insulating lenders as the economy rebounds.
The source said that some sectors can rebound like for example housing.
There was once a fear that the exodus would lead to low occupancy when new units are being constructed, but that has not been seen said the source.
The source said that banks can individually sit with the client and discuss. For example, a certain house may be doing well but another is not doing well.
Certain considerations can be made like for example the automobile dealers who may have taken loans but are unable to pay right now due to the vehicle import ban.
The source said that when it comes to tourism the data shows that tourism is rebounding back.
A problem of repeated deferrals for the financial institutions is that they are losing track of their clients because when the banks call the clients they get upset and say they are on deferral Kidu and so the bank should not contact them.
The macro assessment of the economy shows it is rebounding back and so there is a reluctance to give the same level of deferrals as in the past.
The source said it will be important to test the waters.
The Finance Minister Lekey Dorji said, “Loan deferral ends by June. The government is discussing with RMA on how best to carry this forward.”
The BCCI President Tandy Wangchuk said, “We’re going to put in a proposal to the government on the loan deferment issue. We’ve talked with the private sector and they’ve shared their concern on the issue.”
The Chairman of the Hotel and Restaurant Association of Bhutan, Jigme has already said that most of the hotels are not in a condition to pay and those who pay should be given some incentive.
A question whose answer is not known now is how the Nu 15 bn Economic Stimulus Plan will play out when it comes to loan deferments.
The PDP Manifesto when it comes to ESP had said amongst others, ESP will be used in the Banking sector to inject liquidity, enable loan deferments, reduce interest rates, create other loan scheme to boost the economy.
It would be used to set up special loan schemes to support special groups such as farmers, women, youth, persons with disabilities. There would also be special investments for economic growth of the Rural areas and creation of a specialized credit window dedicated for the CSIs.
When it comes to loan deferment the first monetary measures which started from April 2020 gave a three-month loan deferment till June end 2020.
The second phase monetary measures from the end of June 2020 gave loan deferment till June 2021.
The third phase monetary measures pushed the deferment to June 2022 and the fourth phase monetary measures till June 2023 for low and moderate risk sectors and June 2024 for the high-risk sectors.
High risk sectors were tourism hotels and restaurants, airlines, tour operators and ticketing agents .
The moderate risk category are Construction, Entertainment and recreational services, mining and quarrying, handicrafts and textiles, manufacturing, retail trade, housing (commercial), home loans, consumer loan, mortgage loan, transport, education loan.
The last change in 2023 pushed the low and moderate risk sectors deferment to June 2024 too, but with strict conditions.
In March 2023 RMA provided special consideration for extension of the loan deferment (full or partial) for sectors under the low and moderate risk category till June 2024.
In 2023 RMA said borrowers are required to submit a request for deferment to financial service providers in the Form prescribed by the FIs. The FIs were to carry out detailed assessment of the borrowers requiring loan deferment based on the assessment criteria developed by FIs.
The assessment criteria for corporate borrowers had to include information on latest audited financial statements and cash flow statement to see the performance of the company.
For individual borrowers, the FIs were to review the impact of the pandemic on their employment and source of income.
