BFIs told not to liquidate collateral of quake victims
KATHMANDU: Nepal Rastra Bank (NRB) has instructed banks and financial institutions (BFIs) not to compel quake victims to pay back the principal amount obtained as home loans for the reconstruction of their houses.
NRB has said that it has received grievances from quake victims that BFIs have started liquidating the collateral within two years since they obtained the loans.
BFIs have been charging high interest rate on the housing reconstruction loan, which was supposed to be concessional as the central bank has offered concessional financing through its refinancing window. As per the ‘Guidelines on concessional loan facility for housing reconstruction to quake victims', quake victims can avail loans for five years to a maximum 10 years.
However, BFIs have been threatening the borrowers to recover the loan by liquidating the collateral within just two years of the loans being issued.
Contrary to the central bank's instruction to the bankers, the Nepal Rastra Bank Act has a provision that credit under refinancing facility can be extended for one year and can be renewed for another one year only.
However, NRB has asked the BFIs not to liquidate the collateral of quake victims till it comes up with another decision.