Financial Crime World

The Royal Monetary Authority of Bhutan: A Journey from Government Banker to Autonomous Central Bank

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The Royal Monetary Authority (RMA) of Bhutan has undergone a significant transformation since its establishment in 1982. From being a government banker to becoming an autonomous central bank, the RMA’s journey is marked by key milestones that have shaped its role and responsibilities.

Early Years: Establishment and Expansion

The RMA was established on April 1, 1983, following the enactment of the RMA Act in 1982. Initially, the Authority took charge of issuing Bhutan’s national currency, managing external reserves, and overseeing foreign exchange operations. In 1988, the RMA expanded its role by becoming the government banker, holding a significant portion of government deposits and providing necessary financing through ways and means advances.

Regulatory Powers: A New Era

A pivotal moment in the RMA’s history arrived in 1992 with the passage of the Financial Institution Act of Bhutan. This legislation paved the way for an amendment to the RMA Act, bestowing the authority with licensing, regulating, and supervising Bhutan’s financial institutions.

Autonomy and Constitutional Changes

Bhutan’s transition to a democratic constitutional monarchy in 2008 led to the enactment of the RMA Act 2010 by the Parliament in June of that year. This legislation elevated the status of the RMA to that of a fully autonomous central bank, granting it increased autonomy and decision-making power.

Key Milestones

  • 1982: Establishment of RMA
    • The RMA was established with the enactment of the RMA Act.
  • 1988: RMA becomes Government Banker
    • The RMA assumed the role of government banker, taking charge of bulk government deposits and handling financing through ways and means advances.
  • 1992: RMA acquires financial institution regulatory powers
    • With the passage of the Financial Institution Act of Bhutan 1992, the RMA Act was amended, allowing the RMA to regulate, license, and supervise Bhutan’s financial institutions.
  • 2010: RMA gains full autonomy as a Central Bank
    • The enactment of the Royal Monetary Authority Act of Bhutan 2010 granted the RMA full autonomy and expanded its powers as a central bank.

Current Role and Responsibilities

The RMA plays a crucial role in supporting Bhutan’s aspirations for becoming a dynamic, prosperous, inclusive, and sustainable economy. Its functions include:

  • Issuing currency
  • Acting as banker, advisor, and financial agent to the Royal Government
  • Setting regulations for payment and settlement systems
  • Managing international reserves
  • Making foreign exchange regulations
  • Issuing licenses to financial institutions
  • Creating regulations to better implement the provisions of its Act

The RMA’s journey from a government banker to an autonomous central bank is a testament to its commitment to serving Bhutan’s economy and financial system. Its continued role in promoting financial stability, economic growth, and development will be crucial in achieving the country’s aspirations for a prosperous future.