The much talked about earthquake relief refinancing facility announced by Nepal Rastra Bank (NRB) was expected to be a boon to earthquake survivors, but there are few takers even though one year has passed since the disaster.

NRB unveiled the facility last May with the objective of helping people to rebuild their homes destroyed by the April 25 earthquake. As the first anniversary of the quake approaches, only six loans worth Rs15 million have been issued by banks and financial institutions (BFIs).

Commercial banks have issued half a dozen loans while development banks and finance companies haven’t lent a single penny, said the central bank.

According to the working procedure on refinance introduced by NRB in May 2015, BFIs will receive refinance from the central bank at 0 percent interest while they have to extend loans to quake victims at 2 percent to rebuild their houses.

As per the working procedure, only owners of houses that have been rendered uninhabitable can receive the soft loans. Home owners in the Kathmandu Valley are eligible to get a maximum of Rs2.5 million while those elsewhere in the country can get up to Rs1.5 million.

NRB is not satisfied with the progress made by BFIs on this front, and it believes they have not been serious about the scheme. “Six loans in almost a year is not a satisfactory result. It shows that BFIs are not motivated to offer loans to rebuild ruined homes because they think the 2 percent interest rate is too low,” said Trilochan Pangeni, executive director of NRB. “We have time and again asked BFIs to extend loans to rebuild homes destroyed by the quake and have asked potential borrowers to file a complaint if their banks refuse to lend them money.”

However, NRB has not received any such complaints from customers. “We think BFIs are discouraging people with procedural hassles instead of refusing to provide credit,” added Pangeni.

Till date, Nepal Bangladesh Bank (NBB) has extended two loans of Rs2.5 million each to two of its customers. Nepal Credit and Commerce Bank and Prime Commercial Bank have issued two loans each.

Bankers said their clients were not interested in borrowing money under the facility, and that they had not been making it difficult for them to get loans. According to Gyanendra Dhungana, CEO of NBB, they are eager to extend loans under the facility, but there are no takers.   

“The general public is still expecting government grants to rebuild their homes,” said Dhungana. “A majority of the people believe that if they take loans under the refinancing facility, they will not be eligible for the Rs200,000 government grant. So they have not been applying for such loans.”  

He added delays in the disbursement of the promised Rs200,000 grants to quake victims were one of the major reasons behind the failure of the loan scheme.

NBA President Upendra Poudel said the government’s failure to issue a new building code on time and the fuel crisis and unavailability of raw material due to the Indian blockade were major reasons for the failure. “I also believe that lack of publicity is another reason why the loan scheme has fallen flat.”