All other financial institutions will participate in a Nu 2 Billion Reinvigoration Fund, designed to assist borrowers by reducing non-performing loan (NPL) interest rates by 4% for eligible and genuine cases.
The government has designated Bhutan Development Bank Limited (BDBL) as the lead institution for the disbursement of collateral-free loans under the concessional credit line (CCL) as part of the Economic Stimulus Plan (ESP). This decision, based on BDBL’s extensive reach and experience, was shared by Prime Minister (PM) Dasho Tshering Tobgay during the National Council’s (NC) question hour on Thursday.
Similarly, during the monthly meet-the-press held on Friday, Director at the Prime Minister’s Office (PMO), Chencho said that except BDBL, other FIs in the country does not have branch offices and cash counters at the local government level. “BDBL already has the resources to reach the people in the far flung corners of the country.”
In an effort to expedite the implementation of the ESP concessional loans, the government has made revisions to the implementation modality. The government has issued directives to implement the entire Nu 3.3 Billion concessional loans solely through BDBL given their reach and experience.
A dedicated team headed by a General Manager (GM) will be established within the BDBL to carry out the assessment and disbursement of ESP concessional loan applications. The Chief Executive Officer (CEO) of the BDBL has also been included as a member of the ESP Steering Committee, which will help in resolving any implementation issues related to concessional loans and resolve problems promptly.
“This is expected to minimize the failure of the approved projects,” he said.
All applications received by the other six Participating Financial Institutions (PFIs) till date will be transferred to the BDBL. “On the loans sanctioned by other PFIs, the BDBL and the Royal Monetary Authority (RMA) are yet to discuss whether those should be transferred to the BDBL or will continue to be implemented by the respective banks.”
He said that those wishing to avail the concessional loans should now apply through the BDBL branch offices as other PFIs will no longer accept any application. “The BDBL is currently in the process of detailing out the implementation plan.”
The PM said that the government has allocated Nu 3.3 Billion to support BDBL’s operations, including setting up an ESP office and recruiting 50 officials. On mitigating risks, the PM assured that BDBL would conduct thorough project assessments and maintains robust monitoring systems, with collaboration from RMA to address any challenges that may arise.
The PM said that from the Nu 15 Billion committed under India’s support, Nu 5 billion has been received. “Financial institutions disburse loans, which are later reimbursed by the government.”
The PM said that to encourage greater PFI participation, the three meetings were held with financial institutions. He also announced plans to provide Nu 5 Billion as subordinate debt, subject to RMA approval, which could enable loans of up to Nu 20 Billion.
In term of risk-sharing, he said that there is already a risk sharing in the concessional loans. “Of the 4% interest rate, 3% is to cover for the NPL risk as initially agreed by participating financial institutions themselves. However, the government can discuss this further with the BDBL as the implementation modality has now changed.”
Meanwhile, all seven banks in the country will participate in a Nu 2 Billion Reinvigoration Fund, designed to assist borrowers by reducing non-performing loan (NPL) interest rates by 4% for eligible and genuine cases.
The ESP concessional loan application window will remain open till December 31, 2024 as initially announced. The decision to extend the deadline will depend on the availability of the fund balance.
Currently, from the 1,473 applications received, 262 were approved, resulting in loans worth Nu 398 Million. Additionally, Nu 70 Million was allocated to the RMA to support distressed borrowers, bringing the total disbursed amount to Nu 1.468 Billion.
Nidup Lhamo from Thimphu
