The Bhutanese Leading the way.
Deferred Loans as of March 2025
The Royal Monetary Authority (RMA) has announced a set of loan restructuring support measures to take effect after the current deferment period ends on 30th June 2025.
The decisions were made in close consultation with Prime Minister’s Office (PMO), Ministry of Finance (MoF) and RMA Board and Financial Institutions (FIs). There was detailed data driven consultation with FIs. There was a strong consensus that deferment is not sustainable with the need to adopt a structured and targeted approach instead.
Under the restructuring policy, RMA outlined seven support measures.
These include interest-only payment, allowed for a maximum period of two years, and payment moratoriums, also capped at two years.
Other options are capitalization which means combing the loan and unpaid interest into one loan, extension of maturity terms or rescheduling which is like taking a loan payable in two years and extending it to three years, enhancement of credit facilities through loan top-ups with adequate collateral coverage, loan splitting which where a large loan is split into two so that the client can pay one half while the other half gets a payment moratorium, and conversion to term loans where a loan product like an Over Draft loan can become a term loan.
In addition to these, FIs have the flexibility to combine the above measure or propose alternative restructuring solutions, as long as they are approved by their respective boards and endorsed by the RMA.
The authority has designated a three-month consultation period, from July to the end of September, for FIs to engage with clients and assess appropriate restructuring plans.
RMA cautioned that prolonged deferment carries several risks, including the creation of a false sense of relief among borrowers, continued interest accrual, deterioration in asset quality, challenges in identifying genuinely distressed borrowers, and a potential negative impact on banks’ future lending capacity.
The total loan deferred as of March 2025 was Nu 29.618 billion (bn) of which the highest was in Hotel and Tourism with Nu 11.724 bn, with others like production and manufacturing, trade and commerce and loans to contractors following behind (see box).
Among the FIs, RICBL has the highest value of deferred loans, amounting to Nu 7.22 bn across 375 accounts. BDBL holds the highest number of deferred loan accounts, totaling 3,645 and amounting to Nu 3.38 bn. On the other hand, NPPF recorded the lowest amount of deferred loans, with five accounts totaling Nu 685 million (mn) (see box).
When one looks at the aging analysis of deferred loans, the chunk of them at Nu 20.610 bn were taken between 2016-20 when there was a burst in hotel construction with many fiscal and other incentives.
The RMA data pointed out that even though the hotel and tourism sector was the highest in the loan deferral category at Nu 11.724 bn this is only 35.50 percent of the loans in this sector. The total loan here is Nu 33.051 bn with 64.50 percent opting to pay.
Thimphu has the highest value of deferred loans by location, with Nu 16.1 billion spread across 950 accounts, followed by Chukha with Nu 4.48 bn for 673 accounts. Gasa recorded the lowest loan deferrals, with Nu 0.77 mn for two accounts.
A survey carried out by FIs among hotels found that 339 hotels with Nu 6.294 bn in loans wanted to end the current deferment system while 138 hotels with 5.430 bn in loans did not want to end it, and that the average occupancy rates of hotels stood at 20.8 percent.
RMA pointed out that there will also be a review of the Minimum Lending Rate (MLR) to soften the loan interest rates (story on pg 1).
MoF confirmed that the deferment period will end on 30th June 2025. From then on, all borrowers are expected to move into regular repayment or enter into formal restructuring arrangements. The policy is designed to address loans with repayment issues, including those in the tourism sector, specifically three-star hotels.
The Minister of Industry, Commerce and Employment, Namgyal Dorji, stated that in order to prevent an economic crisis, the government is complying with all relevant laws and cautionary measures.
Lyonpo Namgyal Dorji added that if the government were to provide loans on existing Non-Performing Loans (NPLs), it would result in a loan on top of a loan, which would be disastrous. He emphasized that, as the Prime Minister noted during the Economic Stimulus Program launch, the government is bold but not reckless. He said the government will stimulate the economy, but within the boundaries of the policies that are in place.
