With over Nu 21bn as a non-performing loan, the financial institutions’ (FIs) outstanding loan to the economy stands at over Nu 143bn as of June 2019. This was revealed during a meeting between the finance ministry and Financial Institutions Association of Bhutan (FIAB) held yesterday.
According to the Royal Monetary Authority (RMA), the country’s loan disbursed by various lending institutions increased from Nu 83.5bn to 132.5bn last year. Likewise, the non-performing loans also increased from Nu 4.7bn to 12.3bn for the same period.
Non-performing loan (NPL) is a sum of borrowed money upon which the debtor has not made the scheduled payments for a specified period.
Going by the loan trend in various sectors, Service and Housing sectors availed the highest loan with over Nu 35bn as of June this year. In terms of the NPL, Service and, Trade and Commerce sectors had the highest totalling to over Nu 11bn.
The president of the FIAB, Karma said, “I am concern with the growth trend of NPL and this is something we all should be concerned about. NPL at a sectoral level is 15% and of course, driven by the Royal Insurance Corporation of Bhutan and the Bhutan Development Bank Ltd. We should understand NPL is growing and we should address it now because some of these institutions may not be sustainable at the rate that we are growing in terms of NPL.”
According to the finance minister, such a meeting is expected to promote the country’s economic growth as it will look at addressing key issues concerning the fiscal and monetary sector.
“I think this platform is equally important to make ourselves resilient to both the external and internal, for instance, how prepared we are to faced the economic downturn in India which has huge potential to influence our economy,” Lyonpo Namgay Tshering said.
Besides discussing the issues, the meeting also came up with certain recommendations to improve the loan situation. They recommended for the collateral base system, accountability in various government sectors, increasing the number of commercial courts, better loan management and financial sector transformation.