Macro-level issues should be solved first – FIAB President

The meeting between the finance minister (FM), representatives of financial institutions (FIs) and the private sector held on August 17, saw members deliberating on several issues ranging from loan deferment, export, delayed services, confusion with the systems, tourism and others. One of the most important remarks of the meeting came from the President, Financial Institutions Association of Bhutan (FIAB), Pema Tshering, who is the chief executive officer (CEO) of T-Bank. The FIAB President said it is paramount to first solve macro-level issues, following which others would be solved.

Pema Tshering underlined the importance to put issues into proper context at a macro level, as a way forward. “If the government is not able to solve the macro-level issues, then the micro-level issues cannot be solved. It is important that the government and the Central Bank solve macro-level issues in order to have a proper direction,” he said.

Pema Tshering reiterated that unless macro-level issues are not solved micro-level issues, such as the challenges of the private sector, will not be solved. “If the private sector takes loan, then they will not be able to pay the loan, and it will be an issue for the financial institution as well unless the issue at the macro level is addressed,” he said.

FIAB’s President further shared that in the case of micro-loan deferment and NPL issues, the financial institution just need to be fundamentally brilliant, be very cautious about what the institution is doing, and should also keep close contacts with the clients to address NPL.

Regarding loan deferment, the President said that only a few clients will come to seek updates from the financial institutions. If the financial institution gives a blanket deferment, then the clients will take advantage.

Pema Tshering said it is better if the financial institutions deal with their own clients regarding loan deferment, since the financial institution will know the situation of their own clients.

Similarly, CEO of the Royal Insurance Corporation Limited (RICBL), Karma, also shared that it is important to look into three things, including the regulatory framework, public services, and efficiency at the macro level by the royal government and the Central Bank.

“The deferment can be supported in this current situation; however, it is important to address the issue at the macro level if the issue is to be solved in the long run,” he said. 

Meanwhile, the meeting saw a member of the private sector sharing that the private sector is not really asking for loan deferment but a clear cut picture on whether the government is going to consider the loan deferment to them, since they will also need to plan and strategize their business accordingly.

Another private sector member said, “We should focus on export markets instead of import-oriented markets in the current situation rather than raising issues and challenges over construction and tourism, amongst others.” He said Bhutan should focus on export, as Bhutan has a huge export potential and will have to take advantage of it and analyze fundamental things at this juncture on how the business can be promoted. .

Concerns were also raised over service delivery by the financial institutions and the central government with arguments that individuals were left at the juncture where they did not know which FI to approach.

“If we go to the banks, they say that they have to follow the Central Bank, and if we go to the Central Bank, we are told that it solely depends upon the banks,” one said, while asking for clarification in this regard.

To this end, the FM said that the government has taken up the issue concerning export promotion, including mineral water exports, boulder exports towards Bangladesh. He said consultant meetings with different stakeholder groups were held. In addition, the FM said that the tourism policy can be changed as and when the situation is studied and when needed.

Regarding service delivery, the minister said that the royal government has put up a letter to the Central Bank and asked for a response within a week. The minister said that he hopes that issues and challenges will be solved at the ground level.

During the meeting, the finance minister, also said that there were many individual requests for loan deferment, additional loans, tax, undervaluation, and attempts at tax evasion, amongst others.

To this end, the finance minister said that many consultations have been done with the financial institutions, the Royal Monetary Authority (RMA), and the private sector. He said that people should think that from one side the private sector is asking for loan deferment and from one side non-stop loan sanction, “which means we will have to think twice and understand the stands of the financial institution.” The finance minister also said that rather than the micro- and macro-level issues, it is much more important to solve the current short-term issues, wherein macro-level issues are the responsibilities of everyone.

However, the finance minister said that the royal government has full support and has been supporting it, and talks with the Central Bank have always been taken forward to make it more beneficial for the people.

Meanwhile, the cabinet has submitted a letter of proposal to the Central Bank for addressing the current situation of the private sector and is expecting a response within a week.

Sherab Dorji from Thimphu