A draft guideline on the subsidised loans floated by the central bank for discussion on Thursday states those building earthquake-resistant buildings by following the National Building Code will only be eligible to get the loans at 2 percent interest.

Central bank officials say they plan to introduce the guideline by the next week based on the feedback received.

NRB has already announced providing up to Rs 2.5 million to quake victims of the Kathmandu Valley and Rs 1.5 million for those outside the valley under the scheme.

Based on the scheme, NRB will provide refinance to commercial banks, development banks and finance companies at zero percent interest and the latter have to provide the credit to the quake victims at 2 percent.

Currently, commercial banks offer home loans at 7.49-16 percent interest.

The central bank has also made it clear this facility will be available only to those whose houses have been left uninhabitable. NRB officials have confirmed the loans won’t be made available for repairing purposes. The loans will be given against the collateral.

According to the draft guideline, the minimum repayment period of the loan will be of five years and the maximum will be 10 years.

To get the loan, one has to submit the evidence through government agencies concerned, municipalities or their ward offices and village development committees.

The BFIs have been told to give the loans in four instalments. “As bulk extension of the loan might result in misuse, we asked the BFIs to provide the loans on an instalment basis based on the progress in house building,” said NRB spokesperson Min Bahadur Shrestha.

If a bank extends loan in excess of the amount subsidised, the refinance facility won’t be available for the additional amount.

Beside, commercial banks, development banks and finance companies, even the customers of the D class financial institutions, mostly micro-finance institutions (MFIs), can also get up to Rs 200,000 under the scheme.

NRB stated the BFIs could extend loans up to the amount through MFIs based on the recommendation of the micro-finance institutions concerned. In the case of direct lending from the BFIs without recommendation of MFIs, the borrower shouldn’t mandatory follow the National Building Code. The provision is because the borrowers of up to Rs 200,000 usually make huts, not big buildings. BFIs can categorise such lending as deprived sector loans.

The BFIs can get the refinance of up to 80 percent of their core capital and the loan should have insurance coverage. If the loan is insured, BFIs can maintain just 0.25 percent as loan loss provision. The BFIS can get refinance from the central bank for one year at a time.

The NRB Act has provisioned the refinance can be extended for just six months. But Shrestha said the central bank has opened the door for a one-year refinance that can be done at the government’s special request as per the law.

The NRB said it will renew the refinance as per the need if the BFIs have to provide the loan to individuals for a maximum period of 10 years.