Bank of Bhutan Ltd. was incorporated by Royal Charter, 1968 and is now incorporated under the Companies Act of Kingdom of Bhutan 2000 and the Financial Institution Act of Kingdom of Bhutan, 1992.

Bank of Bhutan was established as the public sector commercial bank and until the establishment of the Royal Monetary Authority of Bhutan; it rendered the function of the central bank in Bhutan. The Royal Monetary Authority of Bhutan is the Central Bank of Bhutan, which was established in 1982 and is responsible for the regulating the financial sector and formulating the monetary policies in Bhutan. Bank of Bhutan started with only 20 account holders and currently has about 150,000 accounts. The bank was established with a paid-up capital of Nu 2.5 million.

Though the bank was established in May 1968, due to non-convertibility of the local currency the desired pace of growth could not be achieved. Consequently, in 1971, a team of banking experts from India and the representatives from Royal Government of Bhutan recommended for collaboration with the State Bank of India (SBI). SBI was identified as partner in management and share holding. Accordingly, BOB was reconstituted under the Royal Charter of bank of Bhutan (1972) inducting State bank of India as partner in capital (in the ratio of 60:40) and the management of Bank of Bhutan. The SBI share in Bank of Bhutan was reduced to 25 percent in 1982 and then further to 20 percent in 1987.

Today, Bank of Bhutan has a network of 26 branches and 3 extension counters with a paid up capital of Nu. 400 million (80:20). From 2004 until 2007, the market share of Bank of Bhutan was about 35 percent and it is expected to increase further.

Until 2007, the Board of Directors and the Chairman of the Board were appointed by the Royal Government of Bhutan and the State Bank of India. From the time the SBI invested in Bank of Bhutan in 1972 until 1997, the Managing Directors of the Bank of Bhutan were being sent by the SBI. In 1997, the management of the Bank of Bhutan was handed over to the Royal Government of Bhutan and a Bhutanese Managing Director was appointed. Since then the core banking portfolios related to investment, planning, HRD and credit was manned by the Bhutanese officers. With the establishment of the Druk Holding Investments Limited (DHI) in 2007, the control over the public sectors company including Bank of Bhutan was taken over by DHI.

Mr. Pema Nadik is current CEO of the Bank of Bhutan. He was appointed in April 2013 .