The National Reconstruction Authority (NRA) has signed a pact with 29 Banks and Financial Institutions (BFIs) to distribute relief funds to earthquake victims in the most-affected districts. The 29 BFIs, who signed the agreement with the NRA on Monday, include 20 commercial banks, eight development banks and a finance company. 

The remaining BFIs are expected to sign a contract with the NRA within the next two days.

To be able to get hold of the relief fund distributed by the government, victims will have to open an account in these BFIs. 

This latest development will introduce more than half a million population to the formal financial sector. According to bankers, distributing relief funds through banking channels will not only make the entire process secure and transparent, but will also bring a larger mass into the formal banking channel.  

“Our agreement with NRA is historic since it is a stepping stone to achieve the government’s plan to bring all households of the economy under the formal financial channel,” said Anil Shah, vice president of Nepal Bankers’ Association. “I believe that those individuals will continue to use the banking channel in future as well.” 

He added that besides the distribution of funds from the government, the beneficiaries will get to use a large array of other financial products and services provided by these BFIs.

Recently, the government in its fiscal policy had declared the campaign—‘Bank Account for Every Nepali’—under which everyone would have a zero balance account and entire payment by the government to the citizens including distribution of social security allowances would be done through such accounts.

Speaking at the agreement signing event, NRA CEO Sushil Gyawali said that the banking channel was used to expedite relief funds to quake victims. 

“We firmly believe that the use of banking channels for this distribution will not only help Nepal build back better but also give an opportunity to the underserved to be brought into the formal financial system,” said Gyawali. 

BFIs have promised to provide free of cost service to certain number of accounts and charge a nominal fee to the remaining. Sakchyam, an access-to-finance initiative funded by UK Aid, will be providing technical as well as a portion of financial support to BFIs. 

“The work that has now begun—access to financial services for earthquake-affected communities - is rooted in our programme’s belief that the reinstatement of delivery channels for financial services is an empowering and crucial intervention,” said Baljit Vohra, team leader at Sakchyam. 

“We are also excited that this initiative comes close on the heels of the recently announced national budget, wherein the government has stated its intention to make social security and other payments through banks.”