A major worry for the Financial Institutions (FIs) is its Non Performing Loans (NPLs) quite a few of which was even before the COVID-19 pandemic due to an economic slowdown, and now set to be worse when the loan deferral period is over in June 2021.
The NPLs are also impacting the private sector as it traps the collateral assets of companies in lengthy procedures and quite a few of the assets are worth more than the loans.
The Prime Minister Dr Lotay Tshering said that he will be requesting the judiciary to expedite these NPL cases as they have an economic impact.
The PM said, “We have a technical team composed of Economists, Central Bank and Financial Institutions working on NPL and once they have done the ground work very soon they will submit it to the High Level Team and the High Level Team will decide all this.”
Lyonchhen said they will segregate the NPLs into three broad categories.
“One is dead and gone or totally helpless ones and on that part we will have to negotiate with the judiciary to expedite the proceedings and so I am going to sit down with the judiciary. For them I want to request the judiciary to segregate all the court cases that they have registered and those that have economic impact must be dealt with on a fast track mode and those that are routine can take a little backstage and so that would be the Judiciary’s contribution to the COVID-19 fight,” said the PM.
He said that fighting the outbreak or the pandemic doesn’t mean that people have to come out on the streets and carry load. “You can stay in your office, redesign your mode of functioning and see how best you can contribute to this fight. From the Judiciary side it is to expedite the cases that have more of an economic impact,” added the PM.
The PM said the second group is that there is some hope that they can pay though they cannot pay for now then those things can be parked.
Lyonchhen said that third category are they young very short term NPLs and for them the Central Bank and the FIs are designing some schemes and incentives to encourage and counsel them to clear it off.
The Financial Institutions Association of Bhutan (FIAB) head and RICBL CEO Karma said that for those NPLs that are willing to pay, but require an extension, then the FIs are willing to give it.
The FIAB head said that he and the RMA Governor met the new Chief Justice of the Supreme Court Chogyal Dago Rigdzin and the Chief Justice has assured to give whatever help possible within the laws.
He said that the matters are still being discussed with the judiciary.
Earlier an idea had been floated among the FIs and the private sector that in order to fasten the NPL process the banks and the loan clients in common agreement should be able to handover the collateral to the bank directly without going to court.
Here, Karma clarified saying that such an arrangement would not be possible due to the National Land Act which mandates going to the judiciary for such cases.
He said that in fact that clause has been put in place to prevent the FIs from pressurizing people and grabbing their properties.
Karma said that the best option is for the courts to prioritize and fast track such cases.
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