Industries will now have access to over Nu(M)500 million in short-term working capital loans to import raw materials.
The Royal Monetary Authority (RMA) launched the monetary measure yesterday as part of its fundraising campaign to help the industrial sector cope with the impacts of the Covid-19 pandemic.
Working capital will be provided at an interest rate of 7.02% or at the institution-specific minimum lending rate or whichever is higher.
The installation went into effect yesterday, April 21, and the gestation period for this installation will be until June 30, 2020. The gestation period is extended by three months depending on how the situation develops.
According to RMA, working capital provided to manufacturers who have been identified by the Department of Industries and the Department of Cottage & Small Industries (DoI and DCSI).
With this facility, industries are expected to continue supplying local markets and export-oriented businesses.
Financial institutions will sanction loans based on the companies’ credibility, business relationship with the borrower, and working capital requirements validated by DoI and DCSI.
The collateral will be LTV (loan-to-value) of 100% of the value of the collateral.
To ensure that loans are not misused, financial institutions will make payments directly to the provider through banking channels.
Loan applications will be assessed on the basis of the amount validated by DoI and DCSI and sanctioned on the basis of the provision of the invoice and import authorization.
The facility will only be provided to customers whose loan accounts were not NPL (non-performing loan) as of February 29, 2020. Financial institutions will be required to perform due diligence in accordance with their internal policies and procedures.
For convertible currencies, they will be subject to the requirements of foreign exchange rules and regulations.
Repayment of the loan after June 30 will be made according to the normal terms, including interest rate, of the respective financial institution.
At the launch, RMA Governor Dasho Penjore said the essence of rolling out the monetary measure was to keep industries going and minimize the impact of the Covid-19 pandemic.
He said this was the third monetary relief measure announced to deal with the pandemic and that RMA expected zero NPL by the end of the year.
Expressing satisfaction with the monetary measures, Finance Minister Namgay Tshering said the pandemic was crippling the economy.
He said government spending, which is crucial for growth, would depend on the performance of industries.
“We are forced to do import substitution. It should be seen as an opportunity rather than a constraint,” he said.
Bhutan Chamber of Commerce and Industry (BCCI) Chairman Phub Zam said some industries felt that the interest rate was still high and the loan term was short.
She said BCCI’s research found no corporate sector spectrum remained untouched. “We always appreciate initiatives,” she said.
Over 95% of Bhutanese industries are small and cottage industries according to Ministry of Economic Affairs records.