Financial institutions incur loss of Nu 1.49bn

The financial institutions incurred a loss of Nu. 1.49bn in June 2019. This was mainly due to an increase in Non-Performing Loans (NPL) and subsequent increase in provisions for the bad loans.

In June 2019, the total NPL stood at Nu 21.43bn.

According to the financial sector performance report June 2019 the financial sector’s total loan to the economy stands at Nu 129.6bn, as compared to Nu 108.81bn in June 2018, showing an increase of 19.11%.

The report states that the housing sector has the highest loan exposure with Nu 32.58bn followed by service and tourism and trade and commerce sectors with Nu 31.52bn and Nu 17.72bn respectively.

The report also states the share of loan to medium enterprises constitutes 24% (Nu 30.47bn, followed by Large and Small enterprises with 16% (Nu 20.81bn) and 10% (Nu 12.78bn) respectively.

The loans to Micro and Cottage enterprises accounted only 5% amount to Nu 6.92bn and remaining 45% amount of Nu 58.61bn are loans to non-enterprises.

The total deposit of the banks stood at Nu 123.43bn, which is an increase by 8.77% as compared to June 2018.

However in terms of absolute increase in loans for the period ended June 2019, the loans to the housing sector experienced the most rapid increase by Nu 6.86bn followed by loans to service and tourism sector by Nu 6.32bn and trade and commerce sector by Nu 2.7bn.

The report also mentions that the asset quality of the financial sector has deteriorated with the increase in NPL from Nu 12.54bn in June 2018 to Nu 21.43bn in June 2019, showing an increase of Nu 8.89bn.

Analysis on the sectoral NPL of the financial sector for June 2019 reveals that service and tourism has the highest share with 31.12%, followed by trade and commerce with 21.51%, production and manufacturing with 11.53% and housing with 11.4%.

On the funding side, the deposit has increased by 8.77% in June 2019 as compared to June 2018. The total deposits stood at Nu 123.43bn in June 2019 as compared to Nu 113.48bn in June 2018.

During the period ended June 2019, the financial sector maintained the Statutory Liquidity Ratio (SLR) at 20.96% which has decreased by 7.69% as compared to June 2018. This drop in SLR was primarily due to the increase in total liabilities by Nu 8.19bn, which mainly consists of deposits.

The SLR positions of both the banks and non-banks have declined by 8.42% and 2.61% respectively.

Dechen Dolkar from Thimphu