NRB: No reporting from BFIs about credit to quake-hit

  • central bank refinance facility
Home owners in the valley are eligible to get a maximum of Rs2.5 million, while those from outside can get up to Rs1.5 million

Jan 24, 2016-Nepal Rastra Bank (NRB) has said it has not received any reporting from banks and financial institutions (BFIs) about loans extended to those whose houses were damaged by earthquakes of April 25 and May 12.

According to a working procedure on refinance introduced by the NRB in May 2015, BFIs will receive refinance from the central bank at zero percent interest while they have to extend loans to the quake-hit at 2 percent rate to rebuild their houses.

As per the working procedure, only owners of houses that were rendered uninhabitable can receive the loans. Home owners in the Kathmandu valley are eligible to get a maximum of Rs2.5 million, while those from outside can get up to Rs1.5 million.

“There has been no reporting from BFIs about such loans so far,” said Nara Bahadur Thapa, chief of NRB’s Research Department. “There had been one such reporting a 

few months ago, but it was for retrofitting damaged houses, not for rebuilding.”

NRB had reported that Rs1.74 million had been extended under this scheme as of mid-Sept.

Let alone private banks, even state-run banks like Nepal Bank Limited (NBL) and Agriculture Development Bank Limited (NIBL) have not started extending the loans.

NBL CEO Devendra Pratap Shah said it had been just 3-4 days since the country’s oldest bank decided to extend the loans for the reconstruction of damaged houses under a specific product. “No loan has been provided from our bank so far under this scheme. We hope the loans will be extended after the latest decision,” he said.

Shah said the decision was delayed due to concerns about disparity between the refinance period (a maximum one year, but room for extension) and maturity period of the loan (more than 10 years), as well as low level of spread rate while extending loans under this scheme.

ADBL said it was preparing to extend the loans under a new product line. ADBL CEO Lila Prakash Sitaula said after the central bank issued the latest directive allowing banks to categorise loans provided for rebuilding quake-damaged houses up to Rs300,000 as deprived sector lending, the bank instructed all its branches to act faster to sanction the loans. “We have sent the NRB circular to our branches,” he said.

Requests for such loans have also remained very low. For example, ADBL has received just two requests from Kathmandu. Sitaula said confusion about whether the government would provide the grant to fully rebuild the houses and delay in preparing designs of the houses to be rebuilt resulted in low demand.

After finding no lending from BFIs under the refinance scheme, central bank officials had verbally asked government-run banks, including ADBL, NBL and Rastriya Banijya Bank, to extend the loans at the earliest. 

Shiva Nath Pandey, executive director at NRB’s Banking Regulation Department, said he had asked the CEOs to extend the loans by developing a product. 

With the government delaying the disbursement of the promised Rs200,000 to quake survivors due to delay in setting up the reconstruction authority, rebuilding of the damaged houses were delayed. And as the authority has now taken shape, the central bank expects the demand for such loans will rise.

Published: 24-01-2016 09:11

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