BNBL makes Nu 768mn net profit in 2021

BNBL, BoBL and Druk PNB disburses 1,801 education loans

Druk PNB sanctioned 37 education loans, BOBL 1,094 and BNBL 670 education loans from November 14, 2022, till date

While many people are apprehensive that the education loan, which the three commercial banks, namely Bank of Bhutan Limited, (BoBL), Bhutan National Bank Limited (BNBL) and Druk Punjab National Bank (PNB) provide might reach their exposure limit, making them stop the loans, Chief Operations Officer of BNBL, Hem Kumar Acharya said that BNBL is still maintaining the limit and that they don’t see themselves reaching the limit anytime soon.

“The bank’s exposure limit for special education loans is 5% of the total loan portfolio, or about Nu 2.2bn for unsecured loans, and 10% of the total loan portfolio, or about Nu 4 bn, for secured loans, according to guidelines from the Royal Monetary Authority (RMA),” he said, adding that as of now BNBL is quite comfortable and is continuing to provide education loans.

The BNBL, sanctioned a total of 670 loans amounting to Nu 2.2 bn as of 22nd December 2022.

Furthermore, BoBL’s Chief Credit Officer, Tashi Tenzin said, “BoBL continues to offer education loans while keeping the exposure limit in mind.”

He also said that as of now, BoBL, has received a total of 1,458 applications for the education loan out of which the bank has disbursed around 1,094 loans.

However, the three commercial banks were not providing the education loans to their own staff.  BNBL has now started giving out the education loans to their staff also starting from the day they received the notification from the RMA to provide education loans on November 12. Through RMA directives, they has stopped providing education loans to their staff.

BoBL’s Credit head, Tashi Tenzin rationalized that the bank does not provide special loans to their staff due to restrictions as per the regulatory requirements.”

 Meanwhile, talking about the criteria, he said that there are no changes in terms and conditions from the initial directives received from RMA.

Additionally, PNB was also permitted to provide education loans when the T-Bank education loan program was discontinued. However, within a few weeks, due to the high volume of applications and loans disbursed, PNB too reached its exposure limit and the education loan program was suspended. However, after the RMA’s notification, PNB also resumed giving loans.

Credit officer of PNB said, “Right after the announcement from RMA, we couldn’t accept new applicants as we had a backlog to clear; there were roughly 300 applications which were pending so the bank opted to clear that backlog first and then only accept the remaining application.”

Meanwhile, he also added that the bank recently began accepting new applicants in small quantities while concurrently working on the new applications.

Additionally the credit head of PNB, Sunny Nayyar said, “Since November 14 till now, we have sanctioned around 37 education loans, out of which 17 is secured loans, amounting Nu 58,7mn, and 20 unsecured loans amounting 64.80mn.”

For many Bhutanese, especially those without sufficient financial backing the education loan is a “blessing.” When the loan was temporarily suspended, several students who had already paid their tuition fees were worried. “Without loan, I would not be able to process my visa and I have already paid my tuition fees. I was concerned,” Karma, a 2020 graduate from Sherubtse College said. “We really do not understand what is happening between the RMA and banks. But this loan is a ‘blessing’ for those like us,” he said.

The ones availing the loans are not the only beneficiaries. Consultants and self-employed people, especially those who have become “experts” in writing statements of purpose (SOP) are happy, too. Sources said the rates for one SOP differ and ranges from Nu 4,000 to Nu, 6000. “Everyone knows how difficult it is to survive in Thimphu. With my salary, I cannot even meet monthly expenses. By writing SOPs, I am able to run my house,” one engaged in this business, who did not want to be named, said.

The RMA in its notification issued on November 12, 2022 stated that, “As with all lending, RMA is mindful of the need and use of providing good credit, balanced against underlying and inherent risks therein. This fiduciary duty extends to ensure prudent lending practices are similarly adhered to. The financial institution’s decision to temporarily suspend such loans is one such measure where they are upholding necessary prudent lending practices. However, loan limit ceilings equally apply to other loan product types with alternative risk characteristics.”

The education loan were resumed by RMA on November 12, 2022.

“The revised education loan product modalities under the name ‘Education Loan: Visa Fee and Living Expenses for Overseas studies’ will be issued by the commercial banks with the effect from November 15th, 2022.” stated the press release from the RMA.

Tshering Pelden from Thimphu