KATHMANDU: Nepal Rastra Bank (NRB), the central monetary authority, has introduced a relief package for borrowers whose revenue sources have dried due to earthquakes of April and May. The package, among others, incorporates debt restructuring facility, deferment in credit payback period and prolonged grace period for loan repayment.
This package is applicable on loans classified as ‘performing’ as of mid-April. In other words, only those identified as good borrowers as of mid-April can make use of this relief package.
Issuing a directive today, NRB said banks and financial institutions (BFIs) can restructure debt for a period of one year if borrowers prove their revenue source was affected by quakes and submit future repayment plan.
“No additional loan-loss provision needs to be made while restructuring such loans,” Min Bahadur Shrestha, head of Research Department at NRB told The Himalayan Times.
Also, NRB has directed BFIs to defer the loan repayment period by three months if income source of borrowers has been hit.
This facility allows borrowers, who were supposed to make principal and interest payments by July 16, to prolong the repayment period to October 17.
Under this facility, interest income generated between the quarter of July 17 and October 17 can be enrolled as interest income of quarter up to July 16.
“But no fine should be imposed while extending the repayment period. And there is no need to allocate funds for loan-loss provisioning as well,” Shrestha said.
Among others, BFIs can extend the grace period for disaster-hit projects by a year.
Grace periods are generally extended to projects like hydroelectric, which cannot generate revenue until completion of projects.
With the latest facility, such projects can get a grace a period of another year — meaning installment payment process can be deferred by a year’s period.
Also, NRB has pledged to provide zero-interest loans of up to Rs five million to BFIs whose head office was destroyed or damaged by quakes. This lending facility will be extended to BFIs headquartered outside Kathmandu Valley, says the directive.
The directive also says penalty on BFIs, which cannot meet cash reserve ratio or deprived sector lending requirement, will be waived off till mid-July, 2016.