Last year the NPLs was 25.94% which accounts to Nu 5.4bn
The Bhutan Development Bank Limited (BDBL) is offering a new strategy for the Non-Performing Loans (NPL) by offering some concessions and portions of write-off for interests for those clients who are having NPLs.
This strategy is an offer for any old loans which have gone into term expired loan and loss category.
The term expires means where the tenure of loan repayment is finished and still some are not able to pay the loans. Loss category means once you are not able to pay dues for one year. It will be eligible for the customers whose term loans expire in 2017 and before.
The Chief Executive Officer of the BDBL, Phub Dorji said if the term loan expires at the end of 2017 and before can avail the concession – 20% of the interest will be written-off and penal interest 100% will be written-off.
However, he said that if the term loan expires in 2016 or before, the percentage of interest write-off will be little higher than 20%, which means people can get a concession of 20% from the interest payment and the penalty for late payment of loans will be also written-off.
The CEO said the reason for offering concessions is because of the pandemic – people are affected and if these people are not being able to pay-off the loan and their financial obligation, it will remain as bad debt for which the interest will be levied.
He said along with the loan people have mortgaged their assets and properties.
In the case of BDBL since most of the clients are from rural areas, they have mortgaged their properties.
“The bank is not interested in taking over their properties as long as we get the money back,” the CEO said.
He said when a person is not able to pay the loan, firstly the loan amount increases and because of bad debt their children cannot avail loans from the financial institutions for any other businesses.
“We feel that this is causing a lot of problems for the people who are having NPLs and the bank is providing one-time opportunity which will be four months from September to December this year,” the CEO said, adding that clients can avail this opportunity and pay off the loans and take back their mortgage in these four months.
He also mentioned that the BDBL officials are going to the gewogs to reach out to the clients, who have bad debt to avail this services, and that credit officers are also calling the clients who are eligible for this service.
For those eligible clients, they can visit the nearest branch office and avail the service. They can also get to know how much they have to pay.
Last year the NPLs was 25.94% which accounts to Nu 5.4bn and there are around more than 8,000 account holders having NPLs. In 2019 the NPLs was 22%.
Phub Dorji said the reason for increasing NPL is because most of the loans disbursed were for agriculture and farmers cannot sell their crops when climatic disasters damage the crops and when there is human wild-life conflicts.
He added that there are also some people who take loans in the name of businesses and consume for personal purposes.
“Now to reduce the NPLs, the BDBL has trained the bank’s staff to minimize NPLs and defaults. They were also trained to do good assessment of the clients,” the CEO said, adding that the bank also has a SOP.
From the system a client can get SMS, 15 days prior to the due date reminding the loan due.
The CEO said credit officers also do constant follow up on how the businesses are doing.
“After a few days of delay of loan repayment, the officials will call the clients and if necessary they will also visit the sites and make an agreement when they can pay. Now we have strengthened the system,” he said.
Globally the NPLs threshold is 15%. If it exceeds 15% it is called a critical juncture for the financial institution.
“During these four months, the BDBL is trying to bring down the NPL critical threshold,” the CEO said, adding that the board and the central bank has also approved the strategy.
RMA has also been encouraging financial intuitions to pursue out of court settlement.
Dechen Dolkar from Thimphu