T Bank on cue, PNB gets extension

November 24 - The royal monetary authority (RMA) has given a six-month extension to Druk PNB to fulfill all requirements needed to obtain the license to start commercial banking operations.

“We checked to see if the need was genuine and accordingly gave the extension,” said RMA’s head of the financial institutions supervisory division, Eden Dema. “An extension is normally given for six months at a time.”

Druk PNB, a joint venture between some Bhutanese promoters and the Punjab national bank, was supposed to start operations on December 18, when the 12-month “in principle approval” expires. The “in principle approval” is to give time to fulfill capital, human resource and infrastructure requirements to start commercial banks.

Druk PNB is one of the two ventures that were given the 12-month in principle approval by RMA last December to start up commercial banks in the country. Druk Punjab national bank (Druk-PNB) is a joint venture bank, promoted by PNB (51 percent) from India and domestic Bhutanese promoters Sangay Wangchuk, Kunlay Wangchuk, Sangay Om and Sangay Zam with a 19 percent stake. The remaining 30 percent is to be floated to the public.

“Our main problem is that the office building is still being constructed,” said Druk PNB’s deputy CEO, Samdrup K Thinley. “We trained our staff in July and August and even the construction of the vault has been done.”

T Bank, the other venture that was given in principle approval, is on schedule, according to one of its promoters. “We’re looking at starting operations by December end,” said the vice chairman of the Tashi group, Wangchuk Dorji. “There are a number of requirements to be fulfilled before we can get the license and that takes time.”

Wangchuk Dorji said that the bank would be located in front of the Tashi Taj hotel and about 40 people would have joined the bank by the end of the year.

T Bank does not have an FDI partner and 60 percent of the Nu 200 million bank is owned by the Wangchuk Dorji, Topgyal Dorji and Savitri Dorji. The remaining 40 percent is to be floated to the public within six months of starting operations.

“Banking is a long term strategy investment and it won’t make money immediately,” said Wangchuk Dorji. “But there’s potential for banking in Bhutan.”

Both ventures have three years time to raise the size of the bank from Nu 200m to Nu 300m. The Bhutan national bank and the bank of Bhutan raised their paid up capital to Nu 300m at the start of this year.

The draft financial services act has several clauses, which restrict individual ownership to 10 percent and companies to 20 percent in each bank. But it does allow the royal monetary authority (RMA), in both cases, to increase ownership by another 10 percent, if it can be established that it would not harm public interest or Bhutan’s financial system.

Promoters of one of the banks have argued that promoters will naturally want a controlling stake, given that these ventures required huge amounts of capital investment. But central bank authorities have maintained that banks have to be safe from any vested board director decisions.

The draft act also requires that the bank of Bhutan, 20 percent of which is owned by the state bank of India and 80 percent by Druk holdings and investments, float at least 30 percent of its holdings to the public.

The draft financial services act will be discussed in parliament only by mid next year at the earliest.

source: kuensel