REDCL turns first CSI bank in the country

Royal Monetary Authority (RMA) has issued in-principle approval for Rural Enterprise Development Corporation Limited (REDCL) to be the first CSI bank to operate in the country.

The approval was issued during the Bhutan Economic Forum for Innovative Transformation (BEFIT) 2019 summit which was held last week for three days at Royal Thimphu College.

Minister for finance, Namgay Tshering, launched during the second day of the BEFIT.

During the launch, the minister said that BEFIT 2019 theme is in line with the government’s vision for inclusive economic growth through enhanced access to finance.

An official from RMA said that in-principle approval has been provided to REDCL to become a non-deposit taking CSI bank. Currently the REDCL is macro finance institute (MFI).

The RMA approved the rules and regulations for CSI banks in 2018. A three-month window was opened in 2018 calling for applications for non-deposit taking CSI bank license.

The official mentions that REDCL applied and was successfully assessed.

As MFI they can lend only up to Nu 500,000 but now as the CSI bank it can lend up to Nu 10mn.

As per the rules and regulations for CSI, after consideration of the documents and other assessments, the RMA if satisfied, may issue an “In-Principle Approval”.

The rules and regulations state that this approval will be valid for a period of six months. During this period, the applicant will take all necessary preliminary measures specified therein. The issue of “In-Principle Approval” does not bind the RMA to issue a license to conduct business.

Rules and regulations also state that an applicant upon complying with the conditions specified in the “In-Principle Approval” may request the RMA to issue a license. The RMA being satisfied may issue a license to an applicant to carry out a CSI banking business. CSI bank will commence business within three months of issuance of a license.

The Chief Executive Officer of REDCL, Pema Wangdi said that they were given a six month duration to come up with guidelines and policy.

However, he said that they will try as fast as possible to complete the required conditions and acquired for license and operational.

“Interest rate at 4% is not viable to operate the bank and it is likely to increase but below the commercial lending rate,” said the REDCL CEO.

The CEO also mentioned that one condition on CSI banking was that they were asked to move out of Thimphu for the reason of decongestion in capital.

Hesaid that the lending portfolio will be focused on CSI sectors, agriculture-based lending, overseas employment financing window, vocation training loan schemes, marketing and export financing window and value addition.

Now the REDCL will be a specialized bank, catering to the financing needs of the CSIs.

So far REDCL has disbursed Nu 583mn of loan. REDCL is catering to non-formal rural activities and manufacturing and production on low interest rate without any collateral requirement. The government has allocated Nu 1.2bn for start-ups and CSIs in the 12th plan and it is one of the flagship programs.

Dechen Dolkar from Thimphu