The government is requesting the central bank to review interest rates on loans and study the possibility of lowering it down to make it more affordable to the borrowers.
After several proposals from individuals and businesses, including the Bhutan Chamber of Commerce and Industry, the government is looking to discuss with the central bank on lowering interest rates on loans.
Government officials said the prevailing interest rates offered by the local banks were relatively higher in the region, on the other hand banks were declaring huge profits and salary bonuses of up to six months to its employees.
Economic affairs minister, Lekey Dorji said the government does not have the right to reduce or increase interest rates. “However, we are discussing the matter with the central bank and the finance ministry to lower interest rates.”
Meanwhile, bankers believe, the move to reduce interest rates on loans may prove detrimental to the financial system.
“If interest rates on loans were reduced, banks may have to take steps to protect their earnings in order to ensure the sound financial health in the long run,” said Druk PNB’s CEO, Mukesh Dave.
He said there is a possibility that the rate of interest on savings may also come down. “That will not be desirable for the economy because the rate of saving in the country is already too low.”
Most individuals also believe banks are charging extremely high interest rates on loans today.
“If we deposit money in the banks, we are given less interest, Say 5 percent but when we borrow money interest are charged ranging from 12 to 14 percent,” said a health worker, Tshering Phuntsho.
