Housing loan scheme for quake-hit households fails to take off

Published On: October 6, 2017 03:50 AM NPT By: Bishnu Tamang

KATHMANDU, Sept 6: Interest-free loan on group guarantee for earthquake survivors to rebuild their houses has become uncertain.
Nepal Rastra Bank (NRB) has refused to bring into implementation a guideline for disbursement of such loans, stating that some provisions in the guideline need to be amended first. Because of the central bank's stance, the government's plan of providing interest-free loans of up to Rs 300,000 on top of housing grant of Rs 300,000 for earthquake survivors has remained unimplemented. 
The central bank has been maintaining that the Guidelines on Providing Interest-Free Loan on Group Guarantee 2017 should be amended to redefine some unclear provisions. The guideline was prepared under the leadership of the National Reconstruction Authority (NRA). The government endorsed the guideline in June
The NRB has said that the guideline lacks clarity on issues like loan security and collateral, among others. 
“A committee led by a deputy governor of the NRB has concluded that the guideline is not clear on issues like collateral and loan security,” Narayan Prasad Paudel, the spokesperson for the NRB, said. He added that the central bank has sent the guideline to the Ministry of Finance for amendment. Paudel further added that existing law does not allow issuance of collateral-free loan on group guarantee. “We arrived at this conclusion after holding discussions with representatives of different banks and financial institutions,” he added.
The government has expected that the interest-free loans will help the earthquake survivors meet the funding gap for rebuilding their houses. The scheme prioritizes poor, marginalized, differently able, women and Dalit families.
NRB has argued that it would be difficult to implement the scheme without bringing BFIs on board as the operating cost and interest rate of banks vary with each other. 
The government has said that it would provide operating cost and 2 percent interest rate on such loans to the BFIs from the fund of the finance ministry.
NRA Spokesperson Yam Lal Bhusal said that the plan of providing interest-free loans to earthquake survivors for rebuilding their houses has been affected because of the central bank's reluctance to implement the guidelines. “Now, the process of amending the guideline as per the suggestion of the central bank has started,” he said.
The guideline says that BFIs have to provide interest-free loans of up to Rs 300,000 to earthquake-hit households having maturity of three to five years. It, however, says that BFIs cannot levy any interest and operating cost on the quake-hit households. 
The delay in implementation of interest-free loan scheme is likely to hamper the NRA's plan of completing rebuilding of the private houses by mid-July next year.

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