PM promises to look into loan deferment categorization and NPL issues in monthly BCCI meeting

The Bhutan Chamber for Commerce and Industry (BCCI) held its monthly meeting with the Prime Minister on 26th May where the PM met with the representatives of the private sector. He promised to look into the grievances raised giving his word to look into the loan deferment issues and non-performing loan (NPL) issues.

The members in attendance raised issues on the categorization of high, medium, low risk under Monetary Measure 4 and asked to consider its extension beyond 2024 and that fixed equated installment facility (FEIF) accounts be extended up to 10 years from 5 years and NPL issues.

They also raised issues on loan accounts that have been categorized under NPL, even after repayments and the cooling period.

With regards to the Monetary Measure 4, the Prime Minister shared that the categorization was done by the Royal Monetary Authority (RMA) by looking at the cash flow.

“One of these days, I’ll ask RMA to revisit the framework and look into the current situation to recategorize.”

FIEF accounts were essentially created by financial service provider for transfer of accumulated interest during the deferment period under the monetary measures. With regards to that, Prime Minister shared that he will talk with RMA regarding  it.

“I agree with the private sector that being able to pay back the accumulated interest in the next five years will be difficult. Financial institution might have to take some loss, as what they have to collect will be collected at a later time. Money changes value over time so the financial institutions will have to calculate some losses. However, I’ll talk with them to see what we can do.”

With regards to the NPL issues, Prime Minister acknowledged that they are looking into it. “The highest loan exposure is from the hotel industry and the construction sector. As many of the borrowers are unable to pay back the NPL, we need to stop blaming the borrowers and consider whether it is a systematic fault. It seems like the situation will remain similar; tourism won’t change drastically over the year, and if it remains so, we can’t fault the borrower and there are chances of our economy shutting down. So, we are looking into it.”

With regards to the 6-month cooling period, Prime Minister shared that the RMA agreed to relook into it. “When I meant relook into, I did not mean for it to be undone. It is also a component of reforms and we need to give the reform enough chance for it to succeed. I’m not saying that the concept of NPL’s 6-month cooling period should be removed but we need to relook into the blanketed components that has impacted other businesses and we’re working on it.”

Other grievances also included vehicle moratorium. With regards to it, the Prime Minister shared that vehicle moratorium was instituted due to the dwindling convertible currencies. “We have no choice, because we cannot import with our Ngultrum. As we are not comfortable with our convertible currencies, almost 5 billion worth of convertible currencies are used for vehicle import, so we are not able to lift the moratorium. From my understanding, it feels like our economy has a fundamental problem.”

“We have Ngultrums currently. If we release Ngultrum, it will invite import in the country. To import, we need either US Dollars or INR, which we don’t have enough. Ngultrum and Indian currency are pegged however, there is a clear indicator that Ngultrum is not equivalent with Indian currency. So, unless we have comfortable convertible currency account, free flow import will be very difficult,” he added.

Few other grievances related to private sector was raised with the Prime Minister promising to help and look into things he will be able to help with.  

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