The Bhutanese Leading the way.
The special education loan scheme introduced by the Royal Monetary Authority (RMA) from Monday has attracted almost 1,300 applications within a week and still counting with the three commercial banks, Bhutan National Bank (BNB), Bank of Bhutan (BoB), and Druk Punjab National Bank (DPNB).
After much outcry from the public and requests from the government, RMA decided to unfreeze the education loans under a new scheme; “Education Loan: visa fee, tuition fee, and living expenses for overseas studies” from 14 November.
The loan scheme provides two kinds of loans: a secured loan type and unsecured loan type. People with mortgages and collateral, in terms of land and building or any immovable property worth about 80 percent of the loan will be qualified for secured loan type.
Those without a collateral worth 80 percent of the loan value or those without any collateral will qualify for the unsecured loan type. However, a certificate from National Land Commission and Department of Revenue and Customs will be required as evidence that one does not have land or property that qualifies or a net taxable income of more than Nu 1 million.
There is an age limit of 18-35 years for those seeking the unsecured loans that has a maximum amount Nu 3.5 million, whereas the secured loan is given to anyone above the age of 18 for a maximum amount of Nu 5 million.
BoB will be offering the loans at the interest rate of 8.5 percent for secured loans and 9.5 percent for unsecured loans. BNB will be offering the loans at the interest rate of 9 percent for secured loans and 10 percent for unsecured loans. DPNB will be offering the loans for secured loan type at the interest rate of 9.5 percent and unsecured loan for the rate of 10.5 percent.
Many people are relieved that the education loans are now available.
“I was quite disheartened when RMA stopped the loan because I was planning to go to Australia for my studies. It was a hurdle in my plans, but now with the loan opened, I’m hoping my plans will go smoothly,” shared Tshering, a graduate who was planning to go for her Masters degree in Australia.
However, another person applying for the loan shared that the education loan offered is quite different from the ones before.
“Even though the education loan reopened, it is not efficient and effective like before. Although RMA released a press release stating the loan opened, when I went to the bank, the procedures have become so complicated. It is quite hard to avail loans with all these long processes and complications,” the person said.
For those wanting avail the loans the documents required are Duly filled in loan application form and signed undertaking letter, CID Copy and 2 passport sized photos of applicant, copy of offer letter from the institute, college or university, cost break-down for VISA requirement, copy of Marriage Certificate (for the married ones), family tree of applicant and spouse. For those seeking secured loans the only additional detail is of the unencumbered assets to be pledged and undertaking from the owner of the asset pledging it against the loan.
If one is going for the unsecured loan with no collateral, then the additional documents required are generating a CIB report for each of the household members to make sure none of them have an NPL and none of the household members should have a net annual taxable income of more than Nu.1 million and for this latest tax returns from DRC for each household member has to be submitted.
None of the household members must have a business overdraft facility or limit of more than Nu. 1 million which must be ascertained from the CIB report and there must be land ownership letters for all household members (from NLC) specifying the location, area, type and PAVA value of land to confirm that none of the land is valued over Nu. 3.5 million.
For the purpose of this loan, “household members” include the applicant, his/her spouse, and both their parents.
It is to be noted that people who have availed themselves of the education and skill enhancement loans from T-bank and DPNB will be disqualified from this loan scheme, and people with non-performing loans will also be disqualified.
Currently, RMA has set a loan ceiling limit for loans as 5 percent for unsecured loans and 10 percent for secured loans of the total loans for each banks. The limit of 5 percent and 10 percent will be determined by a financial institutions loan portfolio, meaning different institutions with different loan portfolio might provide more or less number of loans.
For example, if a bank has a loan portfolio of Nu 42 billion, then the bank will be able to provide loans amounting to Nu 2.2 billion for unsecured loan type and Nu 4.4 billion for secured loan type. Calculating the loans together, this particular bank can offer loan amounting to Nu 6.6 billion. If all the applicants apply for loan amount of Nu 3.5 million, then this particular bank will be able to provide loans to about 1,500 applicants.
However, there are concerns that the loan might get closed again. According to an official from BNB, the loan won’t be closed.
He said, “We will maintain our limit which is 5 percent and 10 percent accordingly. We might stop it for awhile when we reach the limit, however, we will reopen it when people start closing their loans. This is a rolling loan so it won’t be closed.”
