Sanima Bank last week approved a loan of around Rs 10 million for a hotel under the government’s business continuity credit plan. The program allows micro, small and medium-sized businesses and tourism businesses left cashless by Covid-19 to borrow funds to pay their employees. Borrowers must pay 5% interest the first year and 6% the following year.
“We approved the first loan last Thursday,” said Bhuvan Dahal, managing director of Bank Sanima. “More than half a dozen applications are currently being reviewed for approval. In my bank, most of the requests for credit under the government package came from the hotel sector, ”he said.
But demand for loans under the business continuity credit plan fell short of expectations, the bankers said. They attributed the poor response to a provision in the working procedure which prohibits companies that have received subsidized loans under other windows from obtaining loans under this plan.
According to Managing Director Ashoke Rana of Himalayan Bank, his bank has not received any loan applications under the government program, but has extended the refinancing facility to many borrowers.
“Many companies that have benefited from a refinancing facility have not applied for a loan under the government program,” he said.
The central bank said it released funds totaling more than Rs 85 billion under the refinancing facility. Article 10 of the working proceduree declares that borrowers who benefit from subsidized credit facilities from banks and financial institutions, government agencies or donors are not eligible to obtain loans under this program.
Dahal, who is also president of the Nepal Bankers Association, said he has yet to see massive demand for credit under the government’s rehabilitation program.
“Eight to nine other banks have let me know that they have received credit applications from some borrowers,” he said. “But aggregate demand for credit does not appear to be significant so far,” he said.
The government published a working procedure at the end of November, nearly six months after announcing a package of Rs50 billion for the current fiscal year through the budget declaration in May. A few days later, the central bank request banks and financial institutions to provide credit in accordance with the working procedure.
In a recent interview with the Post, Binayak Shah, first vice president of the Nepal Hotel Association, said the government’s relief program was implemented when many hotels and restaurants were closed. “If the credit facility had been made available a few months earlier, many businesses that closed would have survived. “
The central bank said the targeted companies can now obtain loans in accordance with the working procedure, with the banks also completing their duties for granting loans. “Some banks have already started providing credit,” said Dev Kumar Dhakal, executive director of Nepal Rastra Bank.
According to the working procedure of the two-year credit program, a company in the most affected sectors can obtain up to Rs 100 million in credit while companies in the sector facing medium-level impact can obtain up to 70 million rupees. Companies in the partially affected sector can obtain up to Rs50 million.
Half of the loan can be used to pay staff salaries and half can be used as working capital to continue the business. A business cannot terminate any employee while the credit facility is in effect.
The government has so far injected only Rs 1 billion into rehabilitation funds amid declining revenue collection, and concerns are expressed as to how it could generate Rs 50 billion.
In accordance with the budgetary provision, the sources of financing for the rehabilitation program will be foreign aid, public entities and the government’s own resources.
Dhakal said various government agencies have already pledged Rs 18 billion in rehabilitation funds. In addition to the government’s 1 billion rupees, the central bank has deposited 1.5 billion rupees, according to Dhakal. The Nepal Rastra Bank has pledged to inject 3 billion rupees.
“The Nepal Oil Corporation has pledged to provide 5 billion rupees while the employee contingency fund will soon provide 4 billion rupees,” Jhakka Acharya, co-secretary at the Ministry of Finance, said in a recent statement. interview.
According to him, the Citizen Investment Trust promised to inject 2 billion rupees while the Nepal Reinsurance Company, Rastriya Beema Sansthan and the deposit and loan guarantee company pledged 1 billion rupees each immediately.