ROYAL MONETARY AUTHORITY OF
BHUTAN
Revised Guidelines on Consumer Loans
2014
[Draft]
1. Definitions
i.
Borrower means a natural person applying for consumer loan;
ii.
Family is defined as a person, his spouse and dependent children;
iii.
Consumer loan shall mean loan given purely for personal consumption purpose and
not for investment or purchase of properties;
iv.
Financing Limit is the maximum limit up to which a FI shall finance, which shall
be based on the salary/income of the client;
v.
Loan to Income (LTI) is defined as ratio of total monthly debt obligation to that of
monthly gross disposable income from all sources, expressed in per cent;
2. Criteria for Consumer loan(CL)
i.
CL shall be provided only for personal consumption purposes which shall be defined
by the FIs and approved by the FI Board.
ii.
CL shall be available to a person ONLY upon full liquidiation of the previous loan if
any. CL shall not be provided in the form of overdraft facility to an individual.
iii.
CL shall be provided to a Borrower only by one FI at a time and multiple raising of
CL on the same collateral shall not be permitted.
iv.
CL shall have a maximum loan limit of Nu.5,00,000 with a maximum loan term of 5
years.
v.
CL loan cannot be used for purchase of immovable property (land and building etc)
3. Financing limit for CL loan shall strictly be as follows:Financing Limit (Loan
Amount)
Up to Nu. 5 Lakhs
i.
The amount of loan sanctioned to a borrower shall be strictly in line with the
financing limit as provided above.
ii.
Collateral will be required in the case of non-salaried people availing CL.
iii.
FIs and the non-salaried borrowers, through a legal undertaking, shall ensure that
the proposed collateral up to 150% of the loan outstanding at a point of time is
free of any debt obligations
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4. Repayment Capacity Methodology
i.
FIs shall determine the monthly repayment installment of each borrower in a manner
that is consistent with monthly income.
ii.
Every financial institution shall compute the LTI ratio of a borrower applying for CL
in accordance with the following formula:
iii.
𝐋𝐓𝐈 =
iv.
The total monthly debt obligations of a borrower shall consist of the sum of the
monthly repayment installments of all credit facilities granted by financial institutions,
and other creditors.
v.
The gross monthly disposable income from all sources, including the income from the
commercial property, shall consist of:
𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑑𝑒𝑏𝑡 𝑜𝑏𝑙𝑖𝑔𝑎𝑡𝑖𝑜𝑛𝑠
𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑔𝑟𝑜𝑠𝑠 𝑑𝑖𝑠𝑝𝑜𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑓𝑟𝑜𝑚 𝑎𝑙𝑙 𝑠𝑜𝑢𝑟𝑐𝑒𝑠
× 100
Source of
Income
Income to be considered for the purpose of LTI
calculation
Fixed Income
100% of average of past 12 months income
Variable
Income
Up to 70% of the average variable income for the past 12
months
Fixed and
Variable
Income
100% of average past 12 months of income from fixed
sources and up to 70% of average variable income for the
past 12 months
vi.
The LTI limit for all types of CL loan should be 50%.
vii.
The FI shall obtain a written legal statement, with all documentary proofs, from each
borrower regarding his monthly gross disposable income from all sources, all
outstanding amount of credit facilities availed, monthly repayments towards them.
viii.
The FI must ensure that the information given by the borrower is correct. The RMA
shall prescribe various steps to be followed by the FI, including the self-declaration by
the borrower or verification by the FI or both.
5. Credit information report from the Credit Information Bureau and the collateral report
from the Central Registry shall be procured by the FI’s prior to the approval of the loan.
This report should be supplemented by additional enquiries to be made by the FI’s to
ensure accuracy of the borrowers’ credit history and the collateral to be mortgaged. FI’s
and the borrowers, through a legal undertaking shall also ensure that the proposed
collateral for Consumer Loan is free of any debt obligations.
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6.
Internal Risk management and Reporting requirements
i.
FIs shall ensure complete and strict compliance to all the requirements of these
guidelines in approving CL loans which shall be the responsibility of the Board and the
management through effective and efficient MIS and internal controls in place.
ii.
All FIs board shall put in place an appropriate credit risk management policy to ensure
proper implementation of these regulations.
iii.
All FIs shall report to RMA in line with the offsite reporting framework which shall be
supplemented by onsite inspections.
iv.
In case of any non-compliance to the requirements of these regulations, a fine of
Nu.3000 per day shall be levied to the non-complaint FI until such time the act is
rectified.
9. Other requirements
i.
Based on the quantum, each FI shall ensure to have their own internal yearly credit
policy in terms of % of credit growth, NPL, sectoral growth etc.
10. Applicability
These guidelines shall be applicable to all FIs (banks/insurance/pension) engaged in
lending business of consumer loans.
This regulation shall come to force with effect from 31st August 2014.
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