Kathmandu, May 5 (IANS) Following the April 25 temblor, Nepalese banks and financial institutions (BFIs) have raised concerns about recovery of loans which were extended against collaterals of land and houses, media reported on Tuesday.
Data from Nepal Rastra Bank (NRB) shows that 59 percent of all BFI loans disbursed in the first eight months of the current fiscal year were given against collaterals of lands and buildings, Kantipur News reported.
Lands and houses worth Nepalese rupees 769 billion (about $7 billion) have been put as collaterals.
Bankers say the devastating earthquake has severely handicapped people’s ability to repay loans as it has put strain on incomes from properties they own.
“There were many households which were generating cash flow by renting out flats,” said Sovan Dev Pant, chief executive officer of Lumbini Bank.
“With their source of cash taking a hit, the big question now is how they would repay the loans,” he added.
According to the home ministry, a total of 191,058 houses have been completely destroyed in the earthquake and 175,162 partially damaged. A total of 10,744 government buildings have been flattened, and 14,741 damaged partially.
The bankers said it would be difficult to recover loans from the property developers and those who purchased apartments, due to the damages caused by the earthquake.
“This will reduce the borrowers’ ability to repay loans,” said Himalayan Bank CEO Ashoke Rana.
The BFIs are also seeking details from the borrowers about the damages to the collaterals.
Pant said that as cash flow of many enterprises, including hotels, has been hit by sudden cancellations of bookings following the quake, loan recovery is likely to remain poor.