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    Nepal Breaking NewsBusinessThere are few takers for a credit program designed to save firms...

    There are few takers for a credit program designed to save firms that have been damaged by the pandemic.

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    Because of the government’s Business Continuity Credit Plan for Covid-19-affected enterprises, the state-owned Rastriya Banijya Bank has not issued a single credit to a single business since the beginning of the 2021-22 in mid-July.

     

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    The Nepal Rastra Bank reports that despite the fact that the credit program was a highly prioritized plan revealed in last year’s budget to assist the pandemic-affected micro, small, and medium-sized businesses (MSEs) and tourism industry, demand for loans under the scheme has remained sluggish.

    The two-year scheme enables MSEs and tourism enterprises who have been rendered cashless as a result of Covid-19 to borrow monies in order to pay their staff. Borrowers must pay interest a rate of 5 percent in the first year and 6 percent in the second year on their loans.

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    “As of the beginning of the current fiscal year, no loan under the scheme has been approved,” said Kiran Kumar Shrestha, chief executive officer of the Rastriya Banijya Bank (RBB).

    According to central bank figures, other banks have, on the other hand, made loans of approximately Rs93 million under the programs during the first quarter of the current fiscal year. According to central bank figures, a total of Rs956.7 million was lent during the previous fiscal year, with a total of slightly more than Rs1.05 billion lent as of the middle of October.

    Only one company, Global Education Service Pvt Ltd, had received a loan under the plan as of the beginning of the current fiscal year, in the first month of the current fiscal year. According to from the central bank, 12 enterprises got loans under the scheme during the most recent fiscal year 2020-21.

    Given that banks and financial institutions extended loans totaling Rs287 billion under various other schemes during the first quarter of the current fiscal year, the size of the business continuity loan [93 million] is insignificant when compared to the total amount of loans extended during the same period last year.

     

    Businesses that have received subsidised credit under other programs are barred from applying for loans under the Business Continuity Credit Plan, according to and central bank officials, who blamed the lackluster response on onerous borrowing criteria.

    The Business Continuity Loan Disbursement Procedures, 2020, specify that borrowers who get subsidised loans from banks and financial institutions, government agencies, or donor organizations are ineligible for loans under this plan, according to Clause 10 of the procedures.

    “Firms that are currently benefiting from refinance loans are barred from participating in the scheme,” said Dev Kumar Dhakal, a representative for the central bank. Additionally, the bulk of businesses affected by the epidemic had already secured refinancing loans the new plan was revealed, resulting in a lack of interest in business continuation loans.

    As part of the refinance program, the central bank subsidizes interest on loans by transferring cash to commercial banks interest rates ranging from 1 to 3 percent.

    The loan processes were provided by the government in November of last year, about six months after the government announced a Rs50 billion loan plan in the budget statement released in May of last year.

    After receiving the business continuity loan during the previous fiscal year, Summit Air had two options: a refinance loan or a business continuity loan.

    Manoj Karki, managing director of Summit Air, explains that the company first desired to refinance its US-dollar loan, but that was not permitted. “As a result, we chose a business continuity loan,” he says.

     

    Previously, Summit Air, which relied primarily on the income from international tourists who traveled to Nepal to take mountain flights, had borrowed money in US dollars from Nepali banks to fund its operations. Following the pandemic’s devastating on the aviation industry, the company was granted a business continuity loan of approximately Rs85 million, which was used to pay its employees, pay insurance premiums, and cover other administrative expenditures.

    Loan procedures for the two-year credit program provide that businesses in the most-affected sectors can receive up to Rs100 million in credit, while businesses in the moderately affected category can receive up to Rs70 million in credit, and businesses in the partially affected category can receive up to Rs50 million in credit.

    Half of the loan can be used to pay employee salaries, and the other half can be used as working capital to enable the company to continue operations. During the loan period, businesses that participate in the credit scheme are not permitted to fire employees.

    Karki also believes that the requirement to meet a number of conditions in order to for the loan may have deterred many businesses from applying for the business continuity loan in the first place. Shrestha, the Chief Executive Officer of Rastriya Banijya Bank, also emphasized the importance of relaxing the existing provisions of the business continuity loan in order to encourage more businesses to apply for the financing. In light of the poor response to the scheme, the central bank has also requested that the government relax some of the loan’s terms and conditions.

    In addition, Dhakal requested that the finance ministry relax some provisions, including the one that prohibits borrowers who are using other subsidised loan products from seeking business continuity loans. “We have asked the finance ministry to relax some provisions,” Dhakal said.


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    There are few takers for a credit program designed to save firms that have been damaged by the pandemic.

    Because of the government's Business Continuity Credit Plan for Covid-19-affected enterprises, the state-owned Rastriya Banijya Bank has not issued...

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