Banking in Bhutan

The authority is responsible for issuing currency, implementing monetary policy, coordinating financial institution activities, and holding the government's foreign exchange earnings.

[2] It has also made it difficult for Bhutan's monetary authorities to deal with economic imbalances caused by hydroelectric power projects.

This in turn allowed consumption to rise and exacerbated the currency imbalances, so that new construction is done primarily in concrete and steel (which must be imported), and which also risks the peg's sustainability.

[5] Government departments were required to deposit all of their accounts with this bank to ensure that it had sufficient funds until 1982, when the Royal Monetary Authority was established.

[2] The government of Bhutan established the Bhutan Development Finance Corporation (BDFCL) on 31 January 1988[4] with assistance from the Asian Development Bank to serve small and medium-sized enterprises,[2] and it took over the administration of rural financial assistance from the Royal Monetary Authority.

[5] International multilateral organizations such as the Asian Development Bank subsidized BDFCL with grants and concessional loans.

[2] Loans were granted for improving farmland, obtaining livestock, and meeting short-term seasonal requirements.

[2] From 1980, individuals could also invest their savings in the newly-established Unit Trust of Bhutan, with its main office in Phuntsholing.

[5] This trust channels invested funds, for which it issues shares called units, into industrial and commercial development projects.

[5] As of 1991, the Government Employees' Provident Fund (established in 1986), the Bhutan Development Finance Corporation, and other non-bank institutions were of low influence, and were constrained by the rudimentary use of money in the economy.