KATHMANDU, Jan 6: Nepal Rastra Bank (NRB) has increased the amount of subsidized loans that a 'D' class financial institution can extend to earthquake survivors who have lost their homes.
Issuing a circular, the central bank said that it has amended the 'Refinance Procedure to Earthquake Affected Households to Rebuild Homes' to raise the amount that the 'D' class microfinance institution can float to the earthquake survivors who have been rendered homeless.
With the new provision, quake-hit families will be able to get more money to rebuild their homes. Quake survivors won't have to pledge collateral while borrowing from microfinance institutions. These institutions extend collateral-free credit on group guarantee basis.
Similarly, NRB has been allowing refinance facility to loans that 'A', 'B' and 'C' class BFIs float to the quake-affected people to rebuild their homes on the recommendation of 'D' class financial institutions.
'A', 'B' and 'C' class BFIs can also count the loan amounts that they float to earthquake survivors under deprived sector lending.
Meanwhile, NRB Governor Chiranjibi Nepal has said that BFIs cannot approach earthquake survivors themselves to request them for borrowing subsidized loans. The governor's remark has come in the wake of growing complaints that BFIs were reluctant to provide subsidized loans to the earthquake survivors.“
"The central bank has already introduced refinance procedure. Quake-hit families should approach the BFIs according to the requirement of the procedure to get the loans. If the BFIs deny loans, they can register their complaints at the central bank. We will take needful acti”n," Nepal said.
The central bank has announced that quake-hit families can borrow up to Rs 2.5 million in the Kathmandu Valley and Rs 1.5 million in other quake-hit districts from different BFIs at subsidized interest rate of 2 percent. Such loans will be refinanced by the central bank at zero percent.
However, the scheme has failed to lure the quake-hit families. Many observers say such families are not attracted toward the subsidized loan due to conditions like collateral and income source requirement. Bankers, however, say requirement was a must to float loans.
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