The concessional loan facility provided by Nepal Rastra Bank under refinancing facility through commercial banks has not attracted quake victims because borrowers have to repay the principal and interest of the loan within two years.Banks have issued only around Rs 780 million in the one-and-a-half years since this scheme was launched.

The central bank provides funds to the banks at zero interest rate and the banks can issue loans to quake victims at up to two per cent interest rate for two years.

However, the loan needs to be renewed after one year. If the borrower fails to repay the loan after two years, he or she will be charged the prevailing home loan rate of the respective banks.

Banks can float up to Rs 2.5 million in Kathmandu Valley and up to Rs 1.5 million outside the Valley under this scheme.

As the National Reconstruction Authority has set a timeline for distributing the entire grant amount in three tranches within this fiscal, the concessional loan scheme could be instrumental for quake victims wanting to build earthquake-resistant houses. The government has been providing Rs 300,000 grant to quake-affected households of 31 districts and there is also a facility of soft credit from the banks.

NRA CEO Govinda Raj Pokharel says quake-affected families are reluctant to avail the loan from banks to rebuild houses as the payback period is very short. On the other hand, rural people have not been able to access the loan scheme. “To be honest, NRB is not actually serious about facilitating earthquake-affected people. They have launched this scheme just to show they are doing something in this front,” claimed Pokharel.



There have been many rounds of meetings between the NRA and the central bank to simplify loan disbursement and extend repayment period for victims, but with no positive outcome.

Meanwhile, the central bank claimed it had instructed the banks to simplify the loan disbursement process so that applicants could easily avail the facility.

NRB Deputy Governor Chinta Mani Siwakoti said the central bank has also allowed microfinance institutions to issue loans up to Rs 300,000 on group guarantee basis under this scheme, considering that rural people should also be able to avail this facility. “MFIs are also floating loans for quake-hit people who want to rebuild houses,” said Siwakoti.

However, there is no provision of subsidised interest rate for microfinance borrowers as MFIs are not allowed to avail refinancing facility from the central bank.

Nepal Microfinance Bankers’ Association President Ramchandra Joshi said home loan for quake victims of rural areas would be effective if the central bank subsidised the interest rate for MFIs.

source: the himalayan times,30 July 2017