Housing loan tops credit portfolio

Loans and advances have increased from Nu. 86.60bn in June 2016 to Nu.95.06bn as of June 2017

Out of the total loans provided by the financial sector (banks and non-banks, excluding NPPF) amounting to Nu 95.06bn in the last fiscal year (2016-2017), the largest share of the credit portfolio has been toward the housing sector with a total amount of Nu 21.52bn.

According to the Royal Monetary Authority (RMA), the sector-wise distribution of credit indicated that the housing sector topped the loan portfolio with a 22.64%.

“As a result of overbuilding, the exposure in housing sector is geographically concentrated in suburbs of the big cities,” states RMA’s latest report.

The housing sector is closely followed by the service and tourism sector with 21.25 percent (Nu 20.2bn). Personal loans came third with 14.35%, amounting to Nu13.64bn.

Trade and Commerce had a share of 13.98% (Nu 13.28bn), while the manufacturing sector had 13.43% (Nu12.76bn).

However, the loan towards the agriculture sector accounted only 5.33% (Nu. 5.07bn) of the credit from the financial sector despite being the largest economic sector.

The Bhutan Development Bank Limited (BDBL) alone financed 98.70% of the total agriculture loan portfolio.

Transport loans also accounted for only 5.26% (Nu 5bn), while the remaining 3.76% were for other types of loans which amounted to Nu 3.57bn.

Of the total credit, 80.71% amounting to Nu 76.72bn was financed by the commercial banks, while the remaining 19.29% (Nu 18.34bn) was funded by the non-bank financial institutions.

With an increase in loans and advances, the non-performing loans (NPL) also increased from 9.10% in June 2016 to 11.36% in June 2017.

However, the RMA states that the trend in asset quality is still manageable since the recovery of the loans begins from the third quarter of the year and the NPL usually stabilizes toward the end of the year.

From the total outstanding loan amount of Nu 76.72bn of the commercial banks, 12.46% was categorized as NPL. Likewise, from the total Nu 18.34bn of the NBFIs, 6.78% was classified as non-performing loan.

According to RMA’s report, trade and commerce accounted for the largest portion of NPLs at 22.66%, followed by service and tourism (21.87%), housing (13.42%), personal (12.74%), manufacturing (12.24%), agriculture (10.73%) and transport (5.61%).

Meanwhile, the banking sector in Bhutan includes state-owned commercial banks (SCBs), state-owned development financial institution (DFI), private commercial bank (PCB) and foreign direct investment banks (FDIs).

Today, there are five commercial banks in the country with an outreach of 128 branches.

Lucky Wangmo from Thimphu