Govt. to up­grade REDCL to CSI bank

Business Bhutan - - Front Page - Phub Dem from Thim­phu

The gov­ern­ment plans to up­grade Ru­ral En­ter­prise De­vel­op­ment Cor­po­ra­tion Lim­ited (REDCL) to Cot­tage and Small In­dus­try (CSI) bank.

Fi­nance Min­is­ter Nam­gay Tsh­er­ing said this dur­ing the Ques­tion Hour ses­sion at the Par­lia­ment yes­ter­day while re­spond­ing to Mem­ber of Par­lia­ment (MP) from Nanong Shu­mar, Pema­gat­shel, Lungten Nam­gyel.

MP Lungten Nam­gyel ques­tioned if the gov­ern­ment would con­tinue with REDCL or erst­while Busi­ness Op­por­tu­nity and

In­for­ma­tion Cen­ter (BOIC), which was es­tab­lished un­der the eco­nomic stim­u­lus plan by the pre­vi­ous gov­ern­ment.

Ly­onpo Nam­gay Tsh­er­ing said that rather than dis­con­tin­u­ing the pub­lic lim­ited com­pany, the gov­ern­ment would re­form and mod­ify what went wrong.

From 2016 till date, 3,900 small projects loans and about 4,000 em­ploy­ment op­por­tu­ni­ties were cre­ated through REDCL.

How­ever, MP Lungten Nam­gyel ar­gued that the num­ber of projects funded equals the num­ber of em­ploy­ment cre­ated and there­fore REDCL has not re­ally helped in solv­ing the unem­ploy­ment prob­lem. He also added that REDCL’s non­per­form­ing loans have been quite high.

The Fi­nance Min­is­ter said that non-per­form­ing loans have been re­duced to 13%, from 28%. “As per the rule even 30% non-per­form­ing loan is con­sid­ered per­fectly well and the pos­i­tive re­sponse and ex­pec­ta­tions from the ru­ral peo­ple have to be pri­or­i­tized as well,” said Ly­onpo.

Ly­onpo added that 4% in­ter­est loan is one of its kind and it would bridge the gap be­tween haves and havenots and en­hance bal­ance eco­nomic growth.

Op­po­si­tion Leader Dr. Pema Gyamt­sho (Ph.D) sup­ported the gov­ern­ment in terms of re­form­ing cer­tain poli­cies and en­hanc­ing the reg­u­la­tions of REDCL. “We can­not change the fi­nan­cial in­sti­tu­tions like REDCL ev­ery five years,” he said. “How­ever, rather than mak­ing it a CSI bank, the gov­ern­ment can keep REDCL solely as a ru­ral bank since there is BDBL func­tion­ing as CSI bank al­ready.”

Prime Min­is­ter Dr. Lo­tay Tsh­er­ing said that the gov­ern­ment will carry for­ward the works and ini­tia­tives of pre­vi­ous gov­ern­ments with cer­tain re­form and al­ter­ation to ben­e­fit the peo­ple. “REDCL is one such ex­am­ple of the gov­ern­ment’s ac­cep­tance of car­ry­ing for­ward the work in progress,” said Ly­onch­hen.

The Fi­nance Min­is­ter added that be­fore the pre­vi­ous gov­ern­ment came up with BOIC in 2014, the GDP growth of the coun­try was just 2.14%, the poor­est in the global mar­ket. “There­fore to ad­dress this is­sue, the then gov­ern­ment started BOIC from the re­volv­ing fund (RF) of Nu 1.9b from Nu 5bn grant pro­vided by the gov­ern­ment of In­dia.”

Ly­onpo said BOIC was fur­ther di­vided into RF-I amount­ing to Nu 1.5bn that fo­cused on cot­tage and small in­dus­try and star­tups and the re­main­ing Nu 400mn was al­lo­cated for ru­ral de­vel­op­ment.

How­ever in 2016 BOIC was dis­con­tin­ued since it was against the Con­sti­tu­tion and was not prop­erly man­aged and op­er­ated.

REDCL was launched on 21 May 2016 with the ob­jec­tive to con­tinue the ac­tiv­i­ties of RF-II of the erst­while BOIC. Of the to­tal fund of Nu 1.9 bn, Nu. 400mn for RF-II for non-for­mal ru­ral ac­tiv­i­ties, which was for­mally al­lo­cated to BOIC, was taken over by REDCL. The RF-II has a ceil­ing of Nu 500,000 per ac­tiv­ity at the an­nual in­ter­est rate of 4% and is meant for non-for­mal ru­ral ac­tiv­i­ties like live­stock, agri­cul­ture, man­u­fac­tur­ing and oth­ers.

The RF-I with to­tal Nu 1.5bn fund has been handed over to Bhutan De­vel­op­ment Bank Lim­ited since REDCL is a mi­cro­fi­nance in­sti­tu­tion and does not have the li­cense to pro­vide loan above Nu 500,000 per year.

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