KATHMANDU: Nepal Bankers’ Association (NBA) on Sunday said banks were ready to set aside Rs110 billion (10 percent of their total loans) to finance/refinance reconstruction/rehabilitation of houses and business sectors that were damaged by the April 25 earthquake and subsequent aftershocks.
After a meeting of the executive committee, the NBA came up with the plan to finance the rebuilding process.
The amount allocated could be used for rebuilding houses, factories, manufacturing facilities, hydropower plants, hospitals, medical colleges, teaching and training establishments, small and medium enterprises, office complexes and other businesses and projects.
NBA Acting President Anil Shah said that the amount to be allocated could also be used to cover additional financing for existing businesses that need more working capital financing due to the losses from the delay in payment for raw materials, disruption in distribution, disruption in market access and slowdown in business, among others.
According to the NBA, the money would also aid commercial farming and micro and medium enterprises, operators of which need to supplement their income due to disruption in their regular sources of income or employment.
“In consultation with the Nepal Rastra Bank (NRB), individual banks, however, would hold the discretion of assessing the need for additional financing, restructuring of loans, extension of repayment period or waiver of penal interest,” the NBA said in a statement.
The banks will consider waiver of penal interest of genuine clients with a good track record of repayment and are unable to meet their loan repayment obligations solely due to the impact of the earthquake.
The NRB has also announced to provide soft loans at 2 percent interest to rebuild houses completely destroyed by the quake through the refinancing scheme. The NBA said it could reduce the interest rate by 1 percentage point per annum, if the borrowers repay the instalments on time.
The NBA, however, demanded the loans provided to the earthquake victims be considered deprived sector lending. “The current deprived sector lending provision should be frozen at the current level,” states the NBA.
To facilitate its plan to go into refinancing, the NBA has sought that the NRB adopt flexible policies for the time being. NRB to waive off the existing requirement of loan loss provision on all loans related to earthquake victims.
The NBA has urged the banking regulator to increase the credit-to-deposit ratio to 85 percent from the current 80 percent. It has also asked the regulator not to force the banks to make additional provisioning for restructuring or rescheduling of loans of earthquake victims.
Bankers have proposed financing a portion of the cost for building low-cost, quake-resistant housing with metallic structure for the quake-victims without collateral.
A dismountable nut-bolt system permanent house (400sqft) is estimated to cost Rs 300,000. The model designed by CE Construction has been claimed to be earthquake resistant which will have a life of 25-30 years.
Demanding the government be the guarantor, the bankers said they could finance Rs100,000 per household. The government has already announced providing Rs 200,000 to each household. According to the Home Ministry, a total of 500,223 individuals’ houses have been destroyed.
Presenting a paper on behalf of the Nepal Bankers’ Association (NBA) at a programme here, Lumbini Bank CEO Sovan Dev Pant said the proposal was made as the quake victims who don’t have property to put up as collateral should be given the first priority by the state and other actors supporting the rebuilding cause.
Nepal Rastra Bank (NRB) has announced Rs 2.5 million subsidised loans for the people in Kathmandu and 1.5 million for those outside whose houses were fully destroyed by the quake as long as the victims put enough collateral to cover loan losses. Pant said this won’t solve the problem of housing for the poor households who lost their homes and are without valuable collateral.
As per the proposal, there should be a direct sourcing of raw materials wherever possible by using the letter of credit from banks for transparency.
Manufacturers of construction materials should be asked about their processing cost and the profit they would like to make from raw materials made available. By maintaining transparency in the cost of raw materials, the cost of manufacturing and profits, prices of construction materials can be kept at reasonable levels, according to the proposal.
Then, a mechanism to fix the price and distribute the construction materials should work on delivering them to the beneficiaries. “The state can deploy approximately 50,000 security forces in 14 most affected districts to complete the shelters with the help of volunteers, youths and non-government organisations,” said Pant. He stressed construction materials should be distributed as cash distribution may result in the money being spent in alcohol consumption.
On the occasion, acting president of Nepal Bankers’ Association Anil Shah said building low-cost earthquake-resistant houses should be the foremost priority of the state as people need shelters. With the government announcing to build temporary houses before the monsoon, the bankers insisted building permanent houses is possible as the proposed type of houses could be built at faster pace.
