The Bhutan Development Bank Limited (BDBL) has announced a one-time special loan scheme aimed at helping borrowers with long-overdue loans and reducing the bank’s mounting non-performing loan (NPL) portfolio.
According to a BDBL official, the scheme targets over Nu 3.8 billion in NPLs, covering more than 4,000 loan accounts that were sanctioned before the pre-pandemic cut-off date of March 31, 2020, and are classified as non-performing as of July 31, 2025. These loans will be eligible for significant interest and penalty waivers under the initiative.
The official said that the scheme was launched in response to the prolonged financial challenges borrowers have faced since the onset of the COVID-19 pandemic. Although the bank had implemented various relief measures over the past four to five years, such as interest payment support and loan deferments, many clients, particularly in rural areas, continued to struggle with repayments due to the heavy accumulation of unpaid interest and penalty charges.
“Following the expiration of the first phase of loan deferment in June 2024, borrowers are now expected to resume their repayments. However, our review of loan performance has shown a decline in asset quality, which prompted the bank to offer this temporary concession scheme to assist clients and improve recovery rates,” said the official.
With a full waiver of penalties, interest concessions ranging from 30% to 90%, and an option for loan restructuring, the bank expects to recover at least 50% of the total eligible NPL amount through this initiative.
All loans sanctioned prior to March 31, 2020, and classified as non-performing by July 31, 2025, are eligible for this scheme. “Borrowers under this category will receive a 100% waiver on penal interest, meaning no penalty charges will be levied on their outstanding loans. This waiver applies across all loan categories, including those originally sanctioned under the former National CSI (NCSI) Development Bank Limited.
He further added that in addition to the penalty waiver, borrowers can receive interest concessions depending on the amount of principal they repay and how quickly they do so. “Those who repay their full or partial principal within three months will receive higher waivers, while those settling their dues within four to six months will receive slightly lower waivers.”
For instance, borrowers who repay 100% of the principal within three months will receive a 90% interest waiver in addition to the 100% penalty waiver. Those repaying 90% of the principal will receive an 80% interest waiver, and so on. The same pattern continues for repayments made within four to six months, though with slightly reduced interest waivers. For example, a full principal repayment during this period will receive an 80% interest waiver.
The scheme also applies to loans currently under litigation, enforcement, or court verdicts, provided the borrower repays the full amount under the scheme’s terms. Even loans of deceased clients are eligible, as long as a legal representative applies on their behalf.
Borrowers must submit a formal application to the bank to participate in the scheme. There are no processing or service fees involved. Once the loan is fully repaid, BDBL will issue a clearance letter, restoring the borrower’s financial record.
The official shared that participating in the scheme will not affect a borrower’s credit record, nor will it impact eligibility for future loans. “All future lending decisions will continue to be assessed in accordance with the Royal Monetary Authority (RMA) regulations.”
The scheme will remain open for six months. Borrowers who repay their loans earlier within this window will receive higher concessions. “However, if the repayment is not made within the scheme’s timeframe, the borrower will forfeit all waiver benefits, and standard interest and penalties will once again apply,” added the official.
“Moreover, even if a borrower cannot repay the full principal, partial repayments are eligible for proportionate waivers, and such cases may be considered for loan restructuring based on the borrower’s repayment capacity.”
The scheme is open to all types of borrowers, including individuals, institutions, and companies. “It aims to give financially distressed clients a chance to clear their dues and return to good financial standing,” the official said.
When asked whether such large waivers could encourage future loan defaults, the official shared that this is a one-time, exceptional measure, introduced specifically to address the long-term economic
impact of the pandemic. “We are making every effort to clearly communicate that this scheme does not set a precedent for future loan settlements,” the official said adding that public awareness campaigns have been launched via social media, branch offices, and the Bhutan Broadcasting Service, as well as through engagement with Members of Parliament.
In addition to offering this temporary relief, BDBL is also undertaking institutional reforms to improve credit discipline and prevent future defaults. These include strengthening credit appraisal and risk assessment frameworks, enhancing post-disbursement loan monitoring, and conducting financial literacy and advisory programs to support borrowers in managing their finances more effectively.
Nidup Lhamo
from Thimphu
