National CSI Bank Board Director detained for issuing 5 mn loan to son

Board Director appointed by Govt despite Nu 1 mn bribery case trial

The Board Director of the National Cottage and Small Industries Development Bank Limited (NCSIDBL) Tshewang Tashi, who is the Deputy Chief Planning Officer of the Ministry of Agriculture and Forests (MoAF) was detained last week by the Anti Corruption Commission (ACC).

The detention happened as it is alleged that Tshewang Tashi as the Chairman of the Board Credit committee took part in giving his own son a Nu 5 mn loan for a meat processing unit.

Of the Nu 5 mn Nu 3.9 mn had already been disbursed.

All loans above Nu 3 mn are sent to this sub-committee of the board for approval. With Tshewang as the Chairman, its members are an independent Director, CEO and a member of the management.

The loans are given at a concessional interest rate of 8 percent with no collateral required and a repayment period of 10 years.

A total of three people have been detained but the other two are family members of Tshewang. The case is in the NCSIDBL bank in Paro, which is its head office.

However, what is also an issue in the case is that Tshewang had been investigated by the ACC in 2017 and 2018 for bribery. The ACC investigation found that Tshewang had accepted Nu 1 mn in bribes from a private firm called SAI Trading to fix a tender for SAI to win.

The OAG around 2019 registered his case in the Thimphu district court and his trial is still going on.

Despite this he was still appointed as the Board Director of the bank in 2020. The ACC had written to the Ministry of Finance (which appoints board directors) asking if he was fit for the position and if MoF had sought approval from RCSC as he was a civil servant, but there was no reply.

Tshewang was not only appointed in the bank’s board but he was also appointed to be a board member of the Bhutan Livestock Development Corporation which is another State Owned Enterprise under the MoF.

The above case brings into question how the MoAF, Ministry of Finance (MoF) and the Cabinet itself appoints Board Directors to State Owned Enterprises (SOEs) and on what grounds. 

The Corporate Governance Guidelines for State Enterprises 2019 amended by the MoF says the Investment and Corporate Governance Division (ICGD), Department of Macroeconomic Affairs (DMEA) will prepare list of potential candidates in consultation with Portfolio Ministry (MoAF in this case) based on relevance of qualification, functional skills and personal attributes necessary for effective Board performance and obtain their CVs.  Candidates in financial institutions shall fulfill the RMA’s Fit and Proper test. DMEA shall seek consent from the nominated candidates and submit the preliminary list of nominations to Ministry of Finance for review and finalization.

The Ministry of Finance in consultation with Portfolio Ministry shall review and recommend the list of nomination of Board Directors to Lhengye Zhungtshog (cabinet) for endorsement.

After obtaining endorsement from Lhengye Zhungtshog, the Ministry of Finance shall convey the government endorsement to the companies on the Board composition and appointments.

The same Corporate Governance guidelines also talks about conflict of interest and how to deal with it. It says Directors are required to take all reasonable steps to avoid actual, potential or perceived conflicts of interests.

Directors and senior managers are required to provide formal disclosure and notify the Board and the Company Secretary of any actual, potential or perceived conflict of interests as they may arise thereafter.

The Board shall develop procedures for directors to follow if an actual, potential or perceived conflict of interest should arise. The procedures shall include disclosure to the Board of any conflict of interest; the taking of steps to resolve any conflict of interest; and withdrawal from any discussion or vote on the matter where there exists conflict of interest.

The Guidelines show that the MoF is responsible for establishing well-structured, merit-based and transparent nomination of Board and endorsement of CEO appointment, and to evaluate the performance of the Board as per the Performance Evaluation Framework (PEF) prescribed by MoF. The above case now questions if these regulations really are applied.

Tshewang is currently on Extraordinary Leave (EOL) for two years since early this year but he is still on the board.

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