Govt. to upgrade REDCL to CSI bank

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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 have-nots 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.

Phub Dem from Thimphu