Upon the request from the government to the central
bank of Bhutan, Royal Monetary Authority (RMA) to lower the interest rates on
all its loans, all the banks in the country have now reduced the interest rates
with Bank of Bhutan as the first bank to initiate the move. The request from
the government was on the consideration of several proposals from the
individuals and businesses in the country to lower the interest rates on loans
as the rates offered by the banks in Bhutan was relatively higher in the region
with declaration of huge profits and salary bonus as reported by the Bhutan
Broadcasting Service (2016) . The other reason
for request on lowering the interest rates on loan was due to huge difference
in the saving and borrowing where saving could fetch from 5-8 % but the
borrowing rates ranges from 12% onward.
The lowering of interest rate is one form of incentives for the people the government have taken with monetary expansionary tool which will definitely benefit the economy in the short run. This was possible with introduction of Minimum Lending Rate (MLR) at 6.75% from previous rate of 11% by the central bank where banks had no option than to charge higher interest rates earlier. The decrease in the interest rate is targeted to result in increased growth in sector like agriculture and cottage industries, social sectors like homeownerships and creating jobs with import substitutions(Lamzang, 2016) .
At individual level, the decrease in the interest rate should encourage young entrepreneurs and business house to spend the money more productively than spending on importing of goods. The functioning of the whole economy at the end of the day boils down to individual activity and spending habits. It is easier to point the fingers to the government but harder to accept our own actions that actually lead to imbalance of economy. Our human desires and wants should always restrict to the lesser limit of spending on unnecessary things and focus more on what is actually required than what we all want. The decrease in the interest rate should once again be put into best practice enabling more vibrant economy and lesser complications therefrom.
The lowering of interest rate is one form of incentives for the people the government have taken with monetary expansionary tool which will definitely benefit the economy in the short run. This was possible with introduction of Minimum Lending Rate (MLR) at 6.75% from previous rate of 11% by the central bank where banks had no option than to charge higher interest rates earlier. The decrease in the interest rate is targeted to result in increased growth in sector like agriculture and cottage industries, social sectors like homeownerships and creating jobs with import substitutions
At individual level, the decrease in the interest rate should encourage young entrepreneurs and business house to spend the money more productively than spending on importing of goods. The functioning of the whole economy at the end of the day boils down to individual activity and spending habits. It is easier to point the fingers to the government but harder to accept our own actions that actually lead to imbalance of economy. Our human desires and wants should always restrict to the lesser limit of spending on unnecessary things and focus more on what is actually required than what we all want. The decrease in the interest rate should once again be put into best practice enabling more vibrant economy and lesser complications therefrom.
References:
Bhutan Broadcasting Service. (2016, May 17). www.bbs.bt.
Lamzang, T. (2016, September 24). The Bhutanses .
Retrieved from www.thebhutanse.bt.
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