CSI banks to be in­sti­tuted to boost mi­cro-in­dus­try

Business Bhutan - - Money - Dechen Dolkar from Thim­phu

Cot­tage and Small In­dus­tries (CSI) banks can lend col­lat­eral loan free up to Nu 400,000 in case of cot­tage in­dus­tries and up to Nu 2mn in case of small in­dus­tries against the per­sonal guar­an­tee of the own­ers of the CSI un­til such time the Credit Guar­an­tee Schemes are in place.

This is one of the rules and reg­u­la­tions framed for CSI banks drafted by the Royal Mon­e­tary Au­thor­ity (RMA) tak­ing into ac­count the role of CSI in the over­all eco­nomic de­vel­op­ment of a coun­try par­tic­u­larly for de­vel­op­ing coun­tries like Bhutan and the fact that CSI banks can play an im­por­tant role in the sup­ply of credit to CSI in the coun­try.

CSI banks will en­gage in giv­ing loans to CSI, which in­cludes man­u­fac­tur­ing, ser­vices, trade and com­merce, and agri­cul­ture sec­tors.

Ac­cord­ing to the Depart­ment of Cot­tage and Small In­dus­try, cot­tage in­dus­tries should have around four em­ploy­ees with in­vest­ment costs up to Nu 1mn. The em­ploy­ment size for small in­dus­try should be up to 5-19 while in­vest­ment cost should be from Nu 1mn-10mn.

CSI banks will de­velop, pro­mote, as­sist and sup­port the es­tab­lish­ment of, ex­pan­sion or im­prove­ment of cot­tage and small in­dus­tries by grant­ing credit fa­cil­i­ties to fos­ter job cre­ation and in­come gen­er­a­tion thereby in­creas­ing their par­tic­i­pa­tion and con­tri­bu­tion to the Bhutanese econ­omy. It would also fur­ther fi­nan­cial in­clu­sion by pro­vid­ing sav­ing fa­cil­i­ties in case of de­posit-tak­ing CSI bank.

A CSI bank may seek col­lat­eral for credit fa­cil­i­ties of more than col­lat­eral free loans. Where a CSI bank seeks col­lat­eral in sup­port of an ap­pli­ca­tion by a bor­rower for credit, a CSI bank will en­sure that any col­lat­eral be­ing sought is rea­son­able and pro­por­tion­ate.

Also, a CSI bank may, on the ba­sis of good track record and fi­nan­cial po­si­tion of the CSI en­ter­prise with the ap­proval of their board, in­crease the limit to dis­pense loans with­out the col­lat­eral re­quire­ment up to Nu 500,000 for cot­tage in­dus­tries and Nu 3.5mn for small in­dus­tries.

The in­ter­est rates on loans will be based on Min­i­mum Lend­ing Rate Frame­work of the RMA. How­ever, a CSI bank wish­ing for waiver of in­come tax on in­ter­est in­come earned through pref­er­en­tial lend­ing to CSI en­ter­prises would be gov­erned by the Fis­cal In­cen­tives of Gov­ern­ment is­sued by the Min­istry of Fi­nance.

The pref­er­en­tial lend­ing rate shall be de­ter­mined by the RMA in con­sul­ta­tion with the fi­nance min­istry. The de­posit rates in case of a de­posit-tak­ing CSI bank may be re­vised from time to time with ap­proval of their re­spec­tive board and sub­se­quent no­ti­fi­ca­tion to the RMA. The ap­proved rates and any re­vi­sions thereof must be pub­licly an­nounced.

Photo Cour­tesy: Tourism Coun­cil of Bhutan

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