Kathmandu, April 29

The Rs 100-billion Economic Revival Fund (ERF) created by the government to facilitate borrowers who had suffered losses during earthquakes and border blockade is likely to remain defunct as the private sector has termed conditions for tapping the Fund ‘impractical’.

Nepal Rastra Bank (NRB), the central bank, on behalf of the government, introduced the ERF on January 24 to extend interest subsidy and refinancing facility to borrowers of the productive sector, who were hit hard by the devastating quakes of April and May, and supply disruptions along Nepal-India border points.

The ERF was established by the Ministry of Finance (MoF) based on demand made by the private sector for stimulus package.

“It’s been four months since we made that announcement. But, so far, we have not received any demand for interest subsidy or refinancing facility,” NRB Deputy Governor Shiba Raj Shrestha told The Himalayan Times on Tuesday.

Around two months ago, Nepal Bankers’ Association, the umbrella body of commercial banks, also issued a public notice, calling on borrowers seeking interest subsidy to file applications. But bankers that THT talked to said it failed to receive applications within the deadline of one month.

“The private sector has not shown interest in the Fund, because some of the conditions laid in the ERF guideline are not practical,” a senior official of Federation of Nepalese Chambers of Commerce and Industry told THT on condition of anonymity.

For instance, to be eligible for interest subsidy, borrowers should provide evidence to prove their production or transaction volume fell by over 50 per cent in the first six months of the current fiscal year as against the same period in the last fiscal year, the official said, adding, “Businesses such as hotels cannot meet this condition because they reduce room tariffs once occupancy goes down. So, in spite of seeing drop in their revenue, they cannot apply for subsidy because they do not meet the condition.”

The official further said this was the result of the government’s decision not to hold a thorough dialogue with the private sector before launching the guideline.

The guideline allows good borrowers to acquire two-year refinancing facility at an interest rate of up to five per cent. Borrowers can apply for 100-per-cent refinancing facility on credit of up to Rs 50 million. If the loan amount exceeds this level, 20 per cent of the credit amount in excess of Rs 50 million will be extended as refinancing facility.

Also, good borrowers can apply for interest subsidy of four percentage points on loans of up to Rs 100 million and two percentage points on credit amount exceeding Rs-100-million mark.

NRB has, however, said it is not thinking of making amendments to the provisions of the guideline. Concerned MoF officials could not be contacted.