Bhutan – Banking
A) Monetary Developments :-
Broad money supply (M2) recorded an annual growth of 15.8 percent as of June end 2016 compared to 7.8 percent in the same period last year. M2 has been growing at the annual average of 14.5 percent over the last decade. The growth was contributed by higher growth in the transferable deposits, which comprises of current deposits and savings deposits of the commercial banks. While on the other hand, among the counterparts of M2, domestic credit has also contributed to the growth in broad money. Saving deposits and time deposits recorded a growth of 12.5 percent and 28.3 percent, respectively. Although currency in circulation outside the banks and current deposits also recorded positive growth but the growth were not as high as compared to the other components such as time deposits and foreign currency deposits which grew by 28.3 percent and 30.0 percent, respectively.
Among the two major components of M2 which comprises of M1 (narrow money) and other deposits, both the components grew at a higher rate. The annual growth in M1 grew by 7.8 percent in June 2016 as compared to 5 percent during the period last year. Growth in M1 was mainly contributed by higher growth in both current deposits and saving deposits, which grew by 4.4 percent and 12.5 percent respectively. Currency in circulation outside the banks also recorded a growth of 2.6 percent increasing from Nu.5.9 billion to Nu.6.1 billion as of June 2016, while savings deposits increased from Nu.18.9 billion to Nu.21.3 billion. Similarly, current deposits marginally increased from Nu.16.8 billion to Nu.17.6 billion as of June 2016. The other major component of M2 i.e. the other deposits, which constitutes of time deposits and foreign currency deposits increased from 12.6 percent in June 2015 to 28.3 percent in June 2016. The growth in other deposits was on account of higher growth in time deposits as well as in foreign currency deposits, which grew by 28.3 percent and 30.0 percent respectively.
On the counterpart side, the (y-o-y growth) net foreign assets (NFA) (which includes both net convertible currency and net Rupee positions) recorded a growth of 16.4 percent as of June 2016, compared to 8.1 percent for the same period last year. The net Rupee assets witnessed a significant improvement as compared to the previous year. Rupee increased to 7.3 billion from 4 billion while net convertible currency assets increased to an equivalent of Nu.60.5 billion in June 2016 from Nu.54.2 billion in June 2015, recording a growth of 11.6 percent. Domestic credit (comprising of net credit to the government, other public and the private sectors) recorded a growth of 16.8 percent in 2016 as compared to 7.6 percent a year ago. This higher growth is attributed to growth in net claims on government and claims on the private sector. The net claims on government and private sector grew by 28 percent and 14.7 percent respectively.