The Economic and Finance Committee of the National Assembly has raised concerns that rigid loan eligibility criteria are sidelining thousands of distressed businesses from the Economic Stimulus Programme, despite its core mandate to support economic recovery. The committee recommends relaxing the criteria for those who have poor credit history and previous loan defaults.
Under the current framework, applicants with NPL and poor Credit Information Bureau records, and those under cooling periods after the loan defaults, are disqualified from obtaining loans under both the concessional scheme and the reinvigoration fund of ESP.
According to the economic and finance committee, this contradicts the ESP’s mandate of supporting distressed businesses, many of which are recovering from pandemic-induced financial setbacks.
According to the RMA, Non-Performing Loans amount to more than Nu 6bn across more than 6,500 accounts.
The committee, along with a majority of the Members of Parliament, now recommends relaxing loan conditions so that distressed businesses with poor credit history or previous loan defaults can have a fair chance to recover.
Namgay Dorji, Draagteng-Langthil MP said “If the NPL criteria are not relaxed, those already affected by it will continue to be denied access to loans. We need to address this issue. So, even if it’s temporary, I urge the government to ease these criteria a little.”
Sonam Tashi, Lamgong Wangchang MP said “Currently, the ones under NPL are big businesses. If somehow, they can’t pay the loan at all, their businesses will have to close down. This will, in turn, affect the government’s tax income. And employment opportunities will go down. So, the recommendation made right now, if the government could carefully look into it, people will also get ESP loan and in turn, improve the country’s economy.”
In response, the Prime Minister said that the final decision lies with the Royal Monetary Authority, even if the recommendation is passed.
He further suggested that the proposal to relax the criteria be returned to the committee for a thorough review.
“My recommendation is that the committee should present to the RMA a well-reasoned proposal addressing key questions: Why did these businesses face distress? How long can we support them? If the rules are changed, what impact will it have on the country? And if the criteria are relaxed, how will it help both in the short and long term?”
The Speaker suggested that the government and the committee negotiate with the Royal Monetary Authority and revisit the proposal in the winter session.
However, the committee insisted on discussing the matter in the current session.
The committee reported that so far, almost Nu 746 M has been disbursed under concessional loans. Although demand for concessional loans has surged to Nu 11.5bn, only Nu 1.66bn has been approved for disbursement.
Samten Dolkar
