The disadvantaged quake victims can now receive additional Rs 300,000 interest-free loans along with the state grant to rebuild their homes as per the government’s decision to implement working procedure 2017 which allows lendings on ‘community collateral’.

According to the working procedure, passed recently by the Cabinet, the earthquake victims can now receive a maximum of Rs300,000 interest-free loan on the basis of community collateral to rebuild their houses.

The provision of the interest-free loans was mentioned in the speech of the government’s annual budget 2016/17. As there was a working procedure, the provision could not been implemented. 

Providing further insight into the working procedure, Chief Executive of the National Reconstruction Authority Govind Raj Pokharel said: “We introduced community collateral loans as the Rs300,000 grant announced earlier was not enough to rebuild residential houses. The working procedure passed by the Cabinet allows the quake victims to receive an interest-free loan up to Rs300,000.” 

The programme, according to the NRA, has been introduced targeting lower income farmers, labourers and landless families. People falling under the derived class can receive such loan from all the ‘A’, ‘B’, ‘C’ and ‘D’ class banks and financial institutions (BFIs) recognised by the Nepal Rastra Bank.

The working procedure also states some terms and conditions for receiving such loans. People who were rendered homeless by the disaster two years ago and who hold the earthquake victim identity card would be eligible for the loan that can be repaid in 3 to 5 years. 

Community collateral, against which the BFIs would disburse such loans, should be secured by the Credit Information Bureau, according to the working procedure. The BFIs are also required to make the procedure simple, easy and swift. 

According to the Financial Sector Management Division of the Finance Ministry, the government will establish a fund at the Nepal Rastra Bank, Banking Office, Thapathali to pay interest, insurance and security charges on the disbursed loans.

Along with the investment of the BFIs, the rate of interest will be increased by 2 percent. The central bank will pay out BFIs’ interest, insurance and security fee claims on quarterly basis.  

A committee under the deputy governor of the Nepal Rastra Bank, with respective regional representatives, will be formed to coordinate and monitor the execution of such interest-free loans.