KATHMANDU: The government has issued ‘Business Continuity Credit Flow Procedure 2077’ to provide loans to the business of cottage, small and medium enterprises and tourism affected by COVID-19.
According to the Procedure, the government will arrange the necessary amount in the Nepal Rastra Bank (NRB) to continue business by providing concessional loan. The Procedure was approved by the Cabinet.
The government will open a business operation continuity loan flow account of Rs. 50 billion in the banking office of NRB to be operated by NRB, according to a press statement of the Ministry of Finance.
The amount will be provided by the government, the amount deposited by the government in full or partial ownership in coordination with the Ministry, agreement with foreign associations. The amount received accordingly will be credited, it said.
Arrangement has been made for the Ministry to deposit the amount in the same account again and again on the basis of need.
As per the procedure, concessional loans will be provided to cottage, small and medium enterprises and tourism businesses which are affected by COVID-19 and have difficulty in running their businesses due to non-payment of wages of the workers.
Loans are classified into three categories — highly affected areas, moderately affected areas and less affected areas.
According to Secretary to Ministry of Finance Sishir Dhungana, the affected business enterprises can take loans in a subsidized rate for the payment of salary, utilities and industrial raw materials, among others.
In which the annual wage of the workers and employees in the most affected areas and additional 50 per cent of it for the business continuity is total amount or maximum of Rs. 100 million will be provided.
Similarly, in the moderately affected areas, the annual wage of the workers and employees and 50 per cent more of it (for business continuity) is the total amount or up to a maximum of Rs. 70 million.
In the least affected areas, the annual wage of workers and employees and 50 per cent more (for business continuity) is the total amount or up to a maximum of Rs. 50 million.
Fifty per cent of the total loan will be disbursed to the worst affected areas, thirty per cent to the moderately affected areas and twenty percent to the least affected areas.
As per the procedure, the interest rate on such loans has been fixed at five per cent for the first year and six per cent for the second year.
Similarly, the banks and financial institutions will be provided money from the account at a rate of 2 per cent in the first year and 3 per cent in the second year.
A maximum of five per cent interest will be provided to such institution for the amount to be taken from the institution which is fully or partially owned by the government.
The payment period to be provided from such account will be maximum of two years.
As per the working procedure, the business need to be affected by COVID-19, has registered with any government body and obtained certificate and has been renewed regularly.
And according to the prevailing law, provision has been made to disburse loan to those who have filed after deducting advance income tax.
By evaluating the impact of COVID-19 on industry or business, banks and financial priorities will have to be determined on the basis of business needs of troubled borrowers and lack of capital, continuity of employment of workers or employees, future operating potential, business plan to repay loans.
The provisions including entrepreneur’s application for loan, remuneration amount, verified audited financial statement of the last fiscal year and income statement submitted to the Inland Revenue Office, tax payment or tax filing certificate of the last fiscal year, self-declaration that the borrower has not availed such facility from other licensed institutions have also been made for the institution to provide loan to the entrepreneurs.
The licensed institution must evaluate the application and disburse the loan within fifteen days from the date of receiving the application.
If the loan is rejected, the reason should be disclosed and the applicant should be informed in writing within the same period.
The concerned entrepreneur should not remove his/her employees from employment during the loan period, the entrepreneur willing to take loan should apply for the loan within the stipulated time, pay bonus, incentive, leave and other loan interest for the purpose of paying salary and allowance of the employee or worker.
To operate the account for the flow of business continuity loan, to provide reimbursement amount from the account if there is demand for remittance of business continuity loan from the licensed institution, to provide the details of remittance amount of business continuity loan to the ministry on monthly basis, necessary monitoring of licensed institution for effective implementation of procedure, Regulation, Inspection and Supervision shall be the work, duties and powers of NRB.
Similarly, if the loan is not found to be utilised well, action will be taken as per the Nepal Rastra Bank Act, 2058 BS, it said.