𝐁𝐡𝐮𝐭𝐚𝐧 𝐌𝐨𝐯𝐞𝐬 𝐭𝐨 𝐌𝐚𝐤𝐞 𝐂𝐫𝐞𝐝𝐢𝐭 𝐌𝐨𝐫𝐞 𝐀𝐜𝐜𝐞𝐬𝐬𝐢𝐛𝐥𝐞 𝐟𝐨𝐫 𝐀𝐥𝐥 𝐂𝐢𝐭𝐢𝐳𝐞𝐧𝐬

…𝒕𝒉𝒆 𝑪𝒐𝒎𝒎𝒊𝒕𝒕𝒆𝒆 𝒆𝒎𝒑𝒉𝒂𝒔𝒊𝒛𝒆𝒔 𝒄𝒐𝒐𝒓𝒅𝒊𝒏𝒂𝒕𝒆𝒅 𝒇𝒊𝒏𝒂𝒏𝒄𝒊𝒂𝒍 𝒓𝒆𝒇𝒐𝒓𝒎 𝒂𝒏𝒅 𝒓𝒖𝒓𝒂𝒍 𝒊𝒏𝒄𝒍𝒖𝒔𝒊𝒐𝒏

By Sonam Choden

The country’s financial sector is undergoing a pivotal reform as the National Assembly’s Economic and Finance Committee (EFC) released its review report on bank interest rates and land valuation practices affecting public access to credit. The report presents a clear picture of progress alongside continuing gaps, highlighting the need to make financial systems fairer and more inclusive.

The review, mandated by the National Assembly’s Preliminary Meeting, examined two key issues shaping public access to credit: variations in commercial bank lending rates and discrepancies between government and bank land valuation systems. Together, these factors determine how easily citizens- especially those in rural areas- can secure affordable loans.

According to the report, reforms such as the revised Minimum Lending Rate (MLR) and the introduction of the Common Land Base Rate (CLBR 2025) mark important milestones. These measures aim to standardize lending practices and improve transparency across financial institutions. However, the Committee stated that more work is needed to harmonize these frameworks with the realities faced by rural borrowers.

To carry out the review, the Committee consulted major institutions, including the Royal Monetary Authority (RMA), Bank of Bhutan, Bhutan Development Bank, Bhutan National Bank, the Ministry of Finance, and the Property Assessment and Valuation Agency (PAVA). These consultations revealed that while recent regulatory changes have improved transparency, systemic differences in valuation and lending practices continue to limit equitable access to credit.

On interest rate variations, the report stated that differences among banks stem largely from their operational costs, risk assessments, and focus on distinct borrower segments. The RMA’s revised MLR has provided a uniform baseline and greater clarity in how lending rates are determined. Yet, the report observed that risk differences between urban commercial loans and rural agricultural loans will continue to influence rates.

“Ensuring that these variations remain transparent and fair remains a key challenge,” the Committee noted, emphasizing the importance of balancing standardization with sector-specific risk management.

On land valuation, the report emphasized a fundamental difference between administrative and financial purposes. PAVA valuations are primarily designed for taxation and transaction fees, while banks base their valuations on collateral liquidity and marketability. This divergence, the Committee found, results in a valuation gap that limits borrowing capacity for rural landowners.

The introduction of the CLBR 2025 has created a unified framework for urban and semi-urban land valuation, which the Committee recognized as a major achievement. However, the report stated that rural valuation remains outdated. The Bhutan Development Bank still relies on its 2017 valuation model because of weak rural land markets and the prevalence of unsold pledged collateral.

“This conservative approach, while risk-conscious, restricts credit access for rural communities,” the Committee said, highlighting the tension between managing financial risk and promoting inclusion.

In its analysis, the Committee identified two major contradictions: the gap between policy intent and market reality, and the balance between standardization and risk management. While national policy aims to promote land as productive collateral, the lack of liquidity in rural land markets compels banks to undervalue it. Similarly, while standardization supports fairness, banks must retain flexibility to manage different risk profiles across sectors.

To address these challenges, the Committee called on the RMA, Ministry of Finance, PAVA, and the Bhutan Development Bank to develop a joint action plan by July 2026. The plan is expected to outline coordinated steps to harmonize valuation practices and improve transparency in lending. The EFC will review implementation progress during the Winter Session and report to the National Assembly.

The Committee emphasized that effective coordination and sustained oversight are essential to ensure that financial reforms benefit citizens equitably. It highlighted that the modernization of the country’s credit systems must not only promote transparency and efficiency but also strengthen inclusion- ensuring that both urban and rural economies grow together under a fair and balanced financial framework.