The Case Of Bhutan’s NPLs II

Today when the government or the RMA talks of NPLs, they talk of only the lending financial institutions and the borrowers - two principal architects of the calamity that has befallen the country. The wiz kids at the helm of things will have you believe that tolling the bells of doom on the floor of the National Assembly is fulfillment of their responsibilities. Many reasons have been offered why we are in the doldrums - we are yet to hear from them when and how they intend to fix accountability on those who must assume responsibility for allowing the country to arrive at such a dangerous situation.

And, what is even more pathetic is that no assurance has yet been given as to how they hope to protect the innocent victims - the clueless depositors - whose life’s savings will be imperiled when the overexposed lenders begin to fall like ninepins.

Down playing the problem with sugar-coated glib tongues from the pulpit of the National Assembly Hall is not going to help - if we want to solve the problem we need to catch the bull by the horn. But who will do it? Not the sycophants, nor the brown-nosers. They are too busy furthering their own causes.

For many decades now, people have known that the lending agencies’ loan eligibility appraisal process was inadequate - in fact downright casual and irresponsible. I have heard of rumors that some borrowers have been able to avail loans that included a cost of a car for his mistress - what famously came to be known as the “kaanchi car”.

In some cases, I am told that the borrowed amount is far in access of the total cost of construction of the house for which the loan was obtained. It does not take an Einstein to figure out what may be at play.

There needs to be a complete shake-up. Look at the way the banks set the value of a collateral. It is atrocious - it is totally designed to over-secure themselves, only to find that they cannot - that is why they have NPLs galore.

One of the most ridiculous reasons a house owner in Thimphu will give you for high house rent that he is asking for is:

“You know, I need to recover enough to be able to pay back the monthly installment on my bank loan”.

Really? He would dare to pass on a portion of the cost of his “kaanchi car” to his tenants? What a world we live in!