Government plans to lower interest rate for rural people

The government plans to lower the interest rate for rural people. This was mentioned with regard to those people who are not able to repay Bhutan Development Bank (BDB)’s loans.

During the question and answer session of National assembly on Friday, Dewathang Gomdar constituency Member of Parliament (MP) Ugyen Dorji said that BDB was established to help farmers borrow through minimum lending rates.

However, he said that as the lending rates were the same as that of other commercial banks, the farmers could not reap the benefits as per the goal of the establishment. To cite an example, the highest Non-Performing Loans (NPL) have are with BDB and the bank has seized houses and lands of the rural people. The MP asked what were the plans and strategies to solve the matter and whether they fulfilled their mandate. Most of BDB’s clients are rural people.

He said that during his constituency visit the local government members expressed their concern that rural people’s lands are seized by banks and the government needs to do something.  “When they give the loan, does the bank evaluate whether the people can repay the loan or not? There are thousands of people who are not able to pay the loan,” he said.

He also said that he asked the rural people why they were not able to repay the loan and they said that it is mainly due to the high interest rates.

Finance Minister Namgay Tshering said that the major problem of the non performing loan is that when people take the loan they take it easily and when it comes to repayment people feel difficulties.

In 2010, with economic development activities, BDB was approved as deposit taking banks by Royal Monetary Authority (RMA).

Lyonpo said that as per the June, 2019 report, BDB alone has disbursed loan amount of Nu 6.2bn for rural people. Out of eight financial institutions, BDB has disbursed 95.5% of the loan and 60% were rural clients.

Lyonpo urged people not to take loans unnecessarily. Banks face challenges in collecting loans from people.

“Government plans to lower the interest rates for those people of BDB who are not able the repay the loans,” Lyonpo said.

Lyonpo also said that from now onwards banks will also strictly evaluate and thoroughly verify for what purpose the people are taking loans.

BDB has the highest NPL from rural people. Last year, the bank auctioned rural land from around 75 rural individuals. Some of the lands auctioned are more than 10 acres from individual people.

According to the annual report of BDB in 2017, the bank generated a total revenue of Nu 2.193bn in 2017 compared to Nu 2.203bn the previous year. However, the Bank incurred a loss of Nu 879.76mn during the year due to the loan provision on account of high NPL. The NPL increased to 22.72% during the year from 12.48% in the previous year. BDB has high NPL from rural people which up to 20% in 2018.

In 2016, rural people took Nu 10.5bn, Nu 12bn in 2017 and Nu 12.4bn in 2018.

Lyonpo mentioned that when the Cottage and Small Industry bank is ready, the government hopes to offer the loan at low interest rates to the people.

Dechen Dolkar from Bhutan