Nepal Rastra Bank (NRB) announced on Thursday that it would ensure that banks and financial institutions (BFIs) provide loans of up to Rs1 million against farmland without motorable road access as collateral.
The credit scheme aimed at promoting income generating activities in the earthquake-affected areas got off to a slow start as BFIs were reluctant to lend money against land not connected by motorable roads.
The provision in Monetary Policy 2015-16, released on Thursday, is expected to encourage commercial farming and small and medium enterprises mainly in the quake-hit areas.
The central bank said the provision of issuing credit against rural land as security could help to promote income generating activities.
NRB’s monetary policy has unveiled multiple measures to provide relief to earthquake victims. According to the policy, BFIs will be helped to implement the Contingency Management Framework.
NRB will also begin operating the Economic Rehabilitation Fund as envisioned by the government budget to provide refinancing facilities and interest subsidies for the reconstruction of earthquake affected residential homes and the agriculture, business and tourism sectors.
According to Finance Secretary Suman Sharma, the government will inject money into the fund, but the amount has not been decided.
The central bank has made arrangements for earthquake victims to get loans from BFIs at 2 percent interest to rebuild their damaged houses which are inhabitable.
As per the scheme, victims in the Kathmandu Valley can get credit of up to Rs2.5 million while borrowers elsewhere can get up to Rs1.5 million. The central bank has also made a provision allowing earthquake-hit borrowers to get their loans rescheduled by one year.
Presenting the monetary policy, NRB Governor Chiranjeevi Nepal said that the central bank would give priority to implementing these provisions effectively.
Considering the risks natural disasters pose to the financial system, the central bank announced that it would instruct BFIs to prepare a contingency management framework and implement it.
The central bank is also planning to allow BFIs to open branches in the earthquake affected areas and 10 districts identified as having a high incidence of poverty without obtaining a permit. This provision will apply to 114 VDCs and four municipalities in Parsa, Bara, Rautahat, Sarlahi, Mahottari, Dhanusha, Siraha and Saptari districts that have high incidence of poverty. It will also apply to the 10 major earthquake affected districts excluding the Kathmandu Valley.