RMA puts a temporary moratorium on new housing and hotel construction loans

The Royal Monetary Authority (RMA) has imposed a temporary moratorium on New Housing and Hotel Construction loans in lieu of the dwindling foreign currency reserves and Non-Performing Loans (NPL).

 The Central Bank during its 202nd Board of Directors meeting held on 6 June 2023 approved the imposition of a moratorium. The moratorium is being imposed in view of the broader concerns from RMA as well as the Royal Government of Bhutan on the associated outflow of foreign currency, high credit concentration, and NPL risks in these two sectors.

The Financial Institutions (FIs) are directed to suspend the approval of new loans for the construction of new housing and hotels with effect from 9 June 2023 till 31 December. The moratorium will also apply to the pending applicants that are at various stages of appraisal by FIs and new loans for expansion.

However, the moratorium will not apply to loans that are sanctioned/approved as of 8 June, irrespective of the status of loan disbursement, and repairs and renovation.

A hotelier. Tshewang Jurmi, shared his opinion on the moratorium. “The current situation of the country’s economy is not doing well, and no private business is thriving. However, we keep working and running in hope that there is something good coming in the future, irrespective of the current scenario. If we need to work, we need capital and the source of capital, in our context, as of now, is loan. Now that there is a temporary moratorium upon loans, I don’t know how we are supposing to work, hoping for a better future ahead. We don’t even know how we are supposed to survive and can’t even picture the future scenario.”

In the FY 2021-22, the highest sectoral loan exposure was recorded by the housing and service and tourism sector. According to RMA’s annual report, the housing sector’s loan amounted to Nu 48,658.6 million and service and tourism sector at Nu 47,886.4 million.

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