Over two and a half years on, quake victims waiting for subsidized loans

Kiran Bhattarai
KATHMANDU, Feb 14: Many victims of the April 2015 earthquake are still crying for rehabilitation and relief, almost two and a half years since the tragedy occurred killing nearly 9,000 people, and destroying thousands of houses and structures.

The government showed prompt rescue and relief-distribution efforts shortly by announcing a grant of Rs 300,000 initially to build a new house, and other housing loan schemes. Likewise, a cabinet meeting on January 24 decided to provide additional Rs 100,000 to a victim family under the housing grant.

Under these schemes, eligible quake victim family can receive a maximum of interest free loan of Rs 300,000 in lump sum each against community collateral or collateral of their under-construction house for house construction, and a quake-hit family can take out a loan of up to Rs 2.5 million in Kathmandu valley and Rs 1.5 million outside from different banks and financial institutions at subsidized interest rate of 2 percent, to be repaid in three to five years.

These plans have however yet to be executed fully either for failure on the part of concerned authority to act accordingly and unawareness of the target people.

As for the interest free-grant, the scheme has not come into operation so far, while available data said only a few of quake victims have taken out the subsidized loan so far, thanks to reluctance of various authorized banks and financial institutions (BFIs) to issue the loans. The BFIs said confusion over the criteria and procedures to issue the subsidized loan have made the matter worse.

The provision of the interest-free loans was also mentioned in the speech of the government’s annual budget 2016\17. The provision got approved from a Cabinet meeting in mid May, 2016. The Finance Ministry has also issued a work procedure in coordination with the Rastra Bank and the NRA for the interest-free loan.

The NRA said the program has been introduced targeting lower income farmers, landless families, and laborers. Banks that are categorized into ‘A’, ‘B’, ‘C’ and ‘D’ class and financial institutions recognized by the Rastra Bank can release the subsidized loan.

The work procedure states some terms and conditions for receiving such loans. The people whose houses were destroyed in the quake and who hold identity card for quake victims would be eligible for the grant.

According to the procedure, community collateral, against which the BFIs would disburse such loans, should be secured by the Credit Information Bureau.

The Financial Sector Management Division under the Finance Ministry, the government will establish a fund at the Rastra Bank, Banking Office, Thapathali to pay interest, insurance and security charges on the disbursed loans. The Rastra Bank is required to pay the BFIs’ interest, insurance and security fee claims on a quarterly basis.

The interest rate alongside the BFIs’ investment will be raised by two percent.
A committee under the deputy governor of the Nepal Rastra Bank, with respective regional representatives, will be formed to coordinate and monitor the execution of such interest-free loans.

Other members of the committee will include joint secretary of the Finance Ministry, joint secretary of the NRA, and president of Nepal Bankers’ and Association.

Executive director for the Banks and Financial institution Regulation department at the Rastra Bank will be member-secretary.

On May 27, 2015, the Central Bank announced to provide refinancing at zero percent interest to the BFIs under the loan scheme, and issued circulars to them to act accordingly. In return, the BFIs will have to issue the loans at two percent interest.

In initials days, the BFIs refused to issue the loans citing confusions over the criteria and procedures.

Confusions over quake victim identity, documentation procedures, the requirement of for collateral and other factors among others are to blame for the delay of nearly six months for the loan scheme to come into full operation.

When asked, acting President of the Nepal Bankers’ Association Gynendra Prasad Dhunga said that eligible quake victims would get the loans hassle-free after going through due processes, while claiming that no such victim has been returned empty-handed on such various pretexts as reported.

The only concern of the BFIs is whether or not the debtors can repay the loans, he said. A long halt in approving house design, elections, apathy of the victims themselves, and suspicions that the two percent interest on the loans may increase are some factors behind the reluctance of the quake victims to take out a grant loan, he said.

For the part of the Central Bank, its Spokesperson Narayan Poudel said the bank was facilitating the BFIs in distributing the loans to the victims. It has also been refinancing the BFIs by issuing loan again as well, he added.