Though the cabinet meeting issued the Economic Rehabilitation Fund (Establishment and Operation Working Procedure) on February 24, the fund has not come into operation due to lack of resources."The government announced the fund, but not the amount that it is contributing. How can the fund provide relief to businesses when it doesn't have even a penny?" an official of Nepal Rastra Bank, which operates the fund, wondered. "It is not clear how much the fund will get from the government. Also development partner has not made any financial commitment," the official added.
According to the working procedure of the fund, the government, bank and financial institutions (BFIs), international development partners, and interest from refinancing are the sources of the fund. The fund aims to pool a total of Rs 100 billion to provide interest subsidy and refinancing facility to industries and businesses hit by recent 'unfavorable circumstances'.
Industries and business firms affected by recent devastating earthquakes and disruption in the southern border and supply system will be able to get interest subsidies on loans they have borrowed from BFIs and also the refinancing facility.
According to the central bank, BFIs have already made commitment to contribute a total of Rs 30 billion in the fund. BFIs will get 1.5 percent annual interest on the money that they contribute to the fund.
Officials of NRB told Republica that the Ministry of Finance (MoF) was yet to respond to the central bank's letter, which was sent three weeks ago, seeking commitment for the fund.
The fund will provide refinancing of 1.5 percent to loans of up to Rs 50 million that the BFIs float to affected borrowers under this scheme at a maximum of 5 percent interest. Similarly, borrowers will get interest subsidy of four percent for loans of up to Rs 100 million used within mid-July to mid-December while the subsidy for loans used more than that will be only 2 percent.
Borrowers from agricultural sector, tourism industry, small and micro enterprises, and manufacturing industries, who have been affected by the earthquake and Indian blockade, are expected to be benefitted from the subsidy scheme. Similarly, industries, tourism sector, including hotels and restaurants, hydropower projects, agricultural sector, and real estate companies can also get refinance facility under the scheme.
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