On NPL, interest waiver and rents

There are those asking for loan interest waivers for loan accounts which were Non Performing Loans (NPL) before 29th February too.

This is a basic misunderstanding of the Royal Kidu.

The Kidu waiver is for impact caused by COVID-19 (March onwards), and not the other NPLs prior to COVID-19 which are due to non-COVID-19 factors.

His Majesty can’t grant you Kidu to save you from your own poor business decision or risk.

However, His Majesty is intervening in the case of COVID-19 as this is a major act of nature or a disaster that threatens to sink the very economy and many jobs with it.

Another issue is that banks in line with Royal Kidu are already making a huge sacrifice.

Asking them to take an additional burden of waiver of NPL loan interest will push them to the edge and impact the health of the financial system.

It would also set a wrong financial precedent and people will be encouraged not to pay their loans in the future.

Similarly, the Druk Gyalpo Relief Kidu is for the large numbers of people who have lost jobs or income due to the impact of COVID-19.

It is not for people or youth who have been unemployed for years or months prior to COVID-19.

For example, a person with a guide license who has not done guiding work in the last five years cannot suddenly turn up and ask Kidu, just based on the license as the person would anyhow not be impacted.

For youth who need jobs, the government under the National Resilience Fund announced by His Majesty will be coming up with stimulus measures where there will be plenty of job opportunities, if they don’t mind getting their hands a little dirty.

In our typical Bhutanese style some people have started saying that the interest waiver will benefit the rich more as they have bigger loans etc.

However, if you take a look at the loans of the ‘rich’ these are not to buy cars, jewelry, a piece of land or the latest archery bow. They already have that in plenty.

The loans of the ‘rich’ are mostly in huge economic projects like big industries, hotels, projects and other businesses that employ thousands of Bhutanese.

These thousands of Bhutanese employees in turn support tens of thousands of family members and their consumption also drives the economy, apart from the consumption of government employees.

Now let us take the argument for a moment that the ‘rich’ should not benefit and deprive them of the loan interest waiver and loan principal deferral.

Given the state of the economy, this will mean that these big industries, hotels etc who are already suffering, but are still holding on to Bhutanese employees, will have to shut down or let large numbers of employees go to survive.

This will not only increase unemployment over night, but it will have a further snowball effect on the entire economy.

As an example, I know of a new major hotel in Thimphu that has 150 Bhutanese employees with currently zero income per month, but the owner has to come up with Nu 6.5 mn per month to pay their salaries and run the hotel.

If this ‘rich’ owner is deprived of the loan benefit it will put 150 Bhutanese jobs at stake overnight, not to mention of those who will lose out in the supply chain from grocers, vegetable vendors to others who supply the hotel.

Even China has given up on communism as an economic model decades ago, but some of our die hard Bhutanese communists are still stuck in the past.

There is some confusion on the issue of waiver of house rents by landlords.

My understanding is that the rent waiver or reduction should be targeted at affected tenants like tour guides, hotel staff, drayang staff, taxi drivers, shops etc.

Civil servants, government corporate employees or even unaffected private sector employees with fixed pay should ordinarily not come under the waiver or rent reduction category, unless they are affected in terms of supporting more mouths to feed due to the COVID-19 impact.

The reality for landlords in Thimphu is far more complicated than we know, with many new landlords having to pay the majority or even all of their rental income to banks.

Many will start having additional income only around 5-10 years down the line and full income only after 20 years which is the normal loan period.

This is not including the maintenance costs etc.

Buildings, in fact, are not a great investment if you look at the effort, risks and long term returns.

Not everyone can be on the front lines, but instead, for those who can afford it, continue paying your rent, your EMIs (minus the interest now) and your bills on time so that there is liquidity in the banks and economy.

For landlords who can afford it, find out and help those tenants impacted by the economic fallout of COVID-19.

In normal times I don’t mind asking the parking ticket collectors for a little discount if the parking charge is high or goes into hours. These days, I don’t bother asking for the change back given their condition.

When I do go out to get something to eat, I make it a point to tip more than normal even if it is a takeaway. I make sure to pay my bills and pursue those I need to pay.

Small and responsible ways to help the country and fellow citizens.

By Tenzing Lamsang

The writer is the Editor of the paper

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