There is bad news for earthquake victims whose houses have been damaged and are expecting easy credit to repair them to make them inhabitable again. Nepal Rastra Bank (NRB) has declared that they don’t qualify to get subsidized loans from banks and financial institutions (BFIs) to restore their homes.
A senior central bank official said that the loans at 2 percent interest announced earlier would be provided only to those whose houses have been fully or partially damaged and cannot be made tenantable without being rebuilt.
“House owners won’t get subsidized credit for repair work only,” said Maha Prasad Adhikari, deputy governor of NRB. “We are currently designing a working procedure for the scheme which will have details about how the loans will be extended to house owners whose property was damaged by the recent earthquakes.”
The central bank has planned to introduce the working procedure within this week. On May 6, it had announced a refinance facility under which it would provide credit to BFIs at 0 percent interest and they would use the money to provide loans to quake victims at a maximum interest rate of 2 percent.
Under the scheme, house owners in Kathmandu valley are eligible to get a maximum of Rs2.5 million while residents from other regions are eligible to get a maximum of Rs1.5 million.
According to the central bank, if anyone wants to borrow more than that, they will have to comply with the terms and conditions of the concerned financial institution.
This facility will be available through commercial banks, development banks and finance companies, according to NRB. The loan, however, is not collateral free. According to Adhikari, BFIs will have the right to accept or reject loan applications from earthquake victims.
“BFIs will give the loans under the scheme to those they feel are capable of repaying them and have adequate collateral,” said the deputy governor.
As per the NRB Act, the refinance facility is valid for just six months which means BFIs getting refinance from the central bank are required to return the money within that period.
However, a senior central bank official said that NRB would renew the refinance facility every six months. The facility is expected to benefit many house owners as they would have to pay a higher rate of interest without it. Currently, commercial banks offer home loans at a rate of interest ranging from 7.49 to 16 percent.
According to the Home Ministry, the recent earthquakes and aftershocks have destroyed 490,692 houses completely and 266,561 houses partially as of Wednesday.