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Thupten Sangpo
Finance Minister Lekey Dorji said during a question and answer session of the National Committee on July 3 that individuals can obtain personal loans of more than Nu 500,000 from financial institutions (FIs).
Although the upper limit for obtaining personal loans from financial institutions is Ngultrum 500,000, Lyonpo clarified that these loans can be obtained from a number of banks.
However, he added that the loan-to-income ratio should be kept at a maximum of 70 per cent. This means that the total monthly loan amount (including any existing loans) should not exceed 70 per cent of monthly income.
Currently, individuals can get a personal loan of Ngultrum 500,000 from banks with a repayment period of 5 years.
Leonpo was responding to a question from Trashigaon MP Sonam Tobgyel on the government’s measures to revise and increase loan limits for individuals.
He said the current economic situation called for a reassessment of loan limits to ensure they effectively met changing financial needs.
Sonam Tobgyel suggested that the loan period be extended to 10 years and the loan amount to Nu 1 million.
The RMA issued a directive on August 30, 2021 on personal loans, setting a maximum limit of N500,000 and a maximum term of 5 years.
“Contrary to the view that the Nu 500,000 limit safeguards our foreign exchange reserves, the data presents a different view,” said Sonam Tobjer.
As of December 2022, the total amount of loans reached 192.12 billion Ngultrum, most of which was allocated to the housing, construction, services, tourism and transportation sectors.
Sonam Tobgyal said the loan allocations boost imports and could put pressure on foreign exchange reserves.
He added that the inflationary trend in the country coupled with static loan limits could put pressure on people’s purchasing power and asked what initiatives the government had taken to ensure financial inclusion besides effectively alleviating inflationary pressures.
As of April this year, the overall inflation rate was reported to be 4.87%.
The finance minister said the increase in individual loan limits would not benefit rural borrowers as individual loans are salary-based.
Leonpo recommends that people consider alternative solutions offered by banks, such as car loans, housing loans or transport loans for specific needs. The number of financial products offered by financial institutions has increased from 13 in 2019 to 19 today.
He added that the government plans to reduce the minimum lending rate, currently 6.91%.
Leonpo said that to promote financial inclusion, RMA has set up a unit dedicated to business and personal loans such as microfinance, priority sector loans, etc.
The government has also introduced a green classification policy for rural green financing, he added.
Leonpold also stressed the need to control inflation by managing the money supply in the market.
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