Survivors of the 2015 earthquake cannot avail the concessional loan, with an interest rate of two percent, since the deadline to apply ended last week.
The authority has discontinued the loan following objections from banks and financial institutions and the Nepal Rastra Bank (NRB).
Offering concessional loans at a meagre interest rate, with the uncertainty over timely payback, and putting public money at stake is not fair, the central bank (NRB) reasoned.
Earthquake survivors reconstructing their damaged homes in Kathmandu could avail loans up to Rs2.5 million, and those residing outside Kathmandu Rs 1.5 million, according to the government decision.
The scheme entailed banks and financial institutions (BFIs) taking loans from the central bank at zero interest rate and issuing loans to the quake survivors at two percent interest rate.
Although the loan terms were attractive, only 1,300 quake survivors applied. The National Reconstruction Authority (NRA), resisting central bank’s pressure to stop this loan offer, thought of an alternative loan option since the two percent offer had failed with not many victims applying for it.
NRB records show banks and financial institutions disbursed Rs2.19 billion in housing loan at the concessional interest rate of two percent as of mid-August 2018.
NRA Chief Executive Officer Sushil Gyewali said, “Those who submitted application to avail this loan by mid-October 2018 would be able to process their loans further.”
The authority has an alternative for quake survivors who could not rebuild their homes because lack of funds, he said. In the second week of this month, the government unveiled the Integrated Working Procedure for Subsidised Credit 2018.
This credit plan offers for concessional loans up to Rs300,000 and a repayment term of five years to earthquake survivors who could not start reconstruction of their houses due to lack of funds.
Under this procedure, the government will cover five percent interest rate provided to the earthquake survivors by the BFIs. The financial institutions have been allowed to scale up profits up to two-percent on their base rate.