Govt. designing NPL interventions

During the 50th meet the press on 30th June 2023, the minister (Lyonpo), ministry of finance (MoF), Namgay Tshering said that non-performing loan (NPL) is a concern. However, he said that until date the government has not faced any substantial concerning issues, due to the monetary measures in place, such as loan deferrals that was brought forth by the Royal Monetary Authority (RMA) which will last until 30th June next year.

The minister shared that based on the government’s discussion, the government has asked the RMA to give a blanket deferral without the risk category to all the people who opted to go for deferral for at least three years.

With the deferral, the minister said that there will be adequate time for business entrepreneurs and people to plan and roll out their capital within themselves and come out with measures to repay their loans once the deferral period ends.

“Currently, it is a concern with the NPL but as the deferral takes place the major concern will be shrinking of the economy because the banks will not be in a position to give the loan amount as money will be blocked with the loan portfolio that has been put under deferral,” Lyonpo said.   

 “So either way the government has to be careful with the way forward,” the minister said, adding that, all the monetary policy measures will be taken care of by the RMA. Lyonpo Namgay said that for the fiscal policies, the government will be working very closely with the RMA.

As an example, he said that the government is looking to see if there is an opportunity to design stimulate windows to inject additional capital into the banking sector so that there will be consistent flow of money in the economy. 

In addition, the ministry of finance is also thinking about implementing a quantitative easing mechanism. “Obviously there would be many interventions and policy measures to see how the government can attract the external investors to come in beyond Foreign Direct Investment (FDI),” the minister said.

Meanwhile, the government will also be negotiating and charting a middle path with the RMA to lift the ongoing prompt corrective measure (PCA) on the loan moratorium on BDBL, CSI development bank and RICBL though the government cannot have holistic interventions. 

Lyonpo also said that currently, the concern is with NPL. Meanwhile, another concern is economic shrinkage because of the lack of money being injected in the economy. The government is designing the NPL interventions accordingly. 

Sherab Dorji from Thimphu