Observes question the rationale of the move, and say it has come at a wrong time
While words that T-bank will be stopping education visa loans have hit sections of the people hard, there are others who question the move, taking into context the benefits Bhutanese and Bhutan have accrued from the loan and the cascade effect that it will have, ranging from small businesses to the country’s foreign reserves.
An official from T-bank said that Bhutanese should not be alarmed because it is suspended for the time being. “The Bank has hit the exposure limit cap; we have suspended it for the time being,” he said.
He shared that with the increased regulatory vigilance and enforced financial discipline in the recent past by the Royal Monetary Authority (RMA), the bank wants to have due diligence carried out in terms of loan portfolio exposure limit, thus respecting the regulatory norms of RMA.
“T-bank wishes to be a small prudent good bank in full compliance with rules and regulations,” he said.
While the paper could not contact any officials from the RMA, a financial expert said that this move does not appear justified. “The dangers of sectorial exposure are there, due to which ceilings are imposed for different kinds of trade, such as manufacturing, real estate, and others,” he said.
However, he said that in the case of T-Bank, there are no such risks. “Perhaps there are other reasons, but basing it on the exposure limit does not make sense,” he said.
Further, a private entrepreneur questioned if it is the right time for the imposition of such laws at this time. “Laws should be respected and here we see T-Bank following RMA’s directives. But Laws are not Acts and a certain degree of flexibility is required,” he said, adding that the directive has come at a time when the country is reeling under a lack of foreign reserves. He also spoke about the ramifications that will follow.
“T-Banks’ personal loans are linked to scores of small businesses such as educational consultants, who will now be affected. Several people who have dared to dream because of the loan will also be affected. And of all, the remittance will be affected,” he said.
T-Bank, last year was the major contributor in mobilizing the inflow of foreign currencies to the country. With Nu 4.3bn, the remittance inflow from T-Bank contributed about 54% to the overall inward remittances in the country last year, making it the highest remittance inflow among five financial institutions so far.
A rough calculation shows that the bank is one of the major contributors to mobilizing the inflow of foreign currencies in the country. The bank was able to mobilize a total sum of USD 48.77mn from abroad through international remittances last year.
Meanwhile, Tandin, who is self-employed said banking is also business. “I also under that caps are required for products that have risks, such as real estate. But, I do not see why a product that has either no risks at all or very little should have a cap,” he said. “In fact, such products should be promoted and all financial institutions (FIs) can compete,” he added.
T-Bank received Nu 3.6bn (USD 48.77mn) from Australia alone and the remaining Nu 798mn (USD 10.81mn) came from countries like Dubai, Qatar, Kuwait, Japan, and the US last year.
The overall Australian Dollar (AUD) inward remittances have tripled between AUD 4.66mn in 2021, AUD 4.66mn in 2021, and AUD 11.85mn as of March this year. This could be attributed to the increasing number of Bhutanese leaving for Australia.
However, remittances have been a source of foreign currency with the Bhutanese working abroad having remitted a record high Nu 8.062bn as of December 2021.
According to the T-Bank annual report 2021, during the Covid-19 pandemic when the country’s major source of inflow of foreign currencies was severely affected, the Bank was able to contribute more than half of the total remittances.
“Despite the decrease in the international remittances for the bank in 2021 compared to 2020, the bank is still the contributor in mobilizing the inflow of foreign currencies for the country,” the report states, The Bank was able to mobilize a total sum of Nu 6.2bn (USD 84.09mn) in 2020.
“During the period of the covid-19 pandemic, when the major sources of inflow of foreign currencies were severely affected, the bank was able to mobilize a total sum of USD 84.09mn from abroad through international remittances in 2020,” the report states.
Additionally, other than the inward remittances, the bank’s performance for last year is also significantly good, and the bank has recorded a very good financial performance. Further, the profit before tax (PBT) increased by Nu 152.72% from Nu 55.22mn in 2020 to Nu 139.56mn in 2021.
Meanwhile, confirmed sources said that another financial institution is going to offer the same kind of personal loan product as T-Bank does.
Kinley Yonten from Thimphu