Businesses applying for ESP concessional credit lines can start submitting their proposals to the banks from Monday. Finance Minister Lekey Dorji said this during the Meet the Press session. According to the minister, the implementation was delayed as banks needed to develop internal Standard Operating Procedures and guidelines which the Financial Institutions Association of Bhutan approved earlier this week.
The government has allocated Nu 5.3bn of the Nu 15bn Economic Stimulus Programme package for the phase one Concessional Credit Lines. This includes Nu 3.3bn concessional loans and Nu 2bn reinvigoration fund.
The concessional credit line is targeted to support new businesses. Interest rate for the concessional credit line is fixed at four per cent.
The remaining Nu 2bn has been allocated for the reinvigoration fund which subsidizes existing interests by 4 per cent for up to three years. The reinvigoration fund which the government will lend to banks without charging any interest is targeted to help distressed businesses with potential to grow and recover from the COVID-19 pandemic and other setbacks.
The credit line has three features which include collateral-free loan, four per cent interest, and Non-Performing Loans to be borne by the participating financial institutions.
Bank of Bhutan, Bhutan National Bank, T-Bank, Druk PNB Bank, Bhutan Development Bank, Royal Insurance Corporation of Bhutan, Bhutan Insurance and National Pension and Provident Fund are the eight participating financial institutions.
Lekey Dorji, finance minister said “from the government’s side, we look into fiscal policy and the Royal Monetary Authority looks into monetary policy. So, we discussed it first with the RMA and later RMA with the banks had to come up with a guideline on how to give loans and who can avail themselves of loans. So, while doing so, it took a while.”
The finalized SoP and guidelines for the banks have now been circulated and shared with all the financial institutions.
The minister added that allocation of the funds will depend on the demand and proposals received by these financial institutions.
The Central Bank and the finance ministry launched the guideline on the implementation of the ESP concessional credit lines earlier this month.
Samten Dolkar
