November 20: The Council of Ministers has endorsed the Business Continuity Loan Disbursement Work Procedure to avail Rs 50 billion to the commercial sector affected by coronavirus.
The cabinet recently approved the work procedure upon the recommendation of the Finance Ministry to support cottage, small-scale and medium enterprises as well as tourism entrepreneurs to pay the salary of workers at a time when they are struggling to provide salary due to the pandemic. With the flow of loan, the government expects the sectors hard hit by coronavirus to give continuity to their business.
The government is now preparing to manage the required fund for Nepal Rastra Bank in order to release concessional loan to the aforementioned sectors.
In this regard, the government will be opening an account with Nepal Rastra Bank to collect the amount. The government will deposit a certain amount in the account while the remaining amount will be provided by government-owned or semi government organisations as well as foreign organisations with whom the government has signed agreements to avail such loan.
An official at the finance ministry informed New Business Age that the government is preparing to release concessional funds targeting the small and medium scale enterprises as well as cottage industries and small tourism businesses that are struggling to pay the workers and are o n the verge of closure.
Joint Secretary at the ministry Jhakka Prasad Acharya informed that the government endorsed this work procedure in accordance to the announcement made in the budget speech for the current fiscal year.
The work procedure has categorized the loan into three different types – most affected, medium affected and less affected – and has fixed the timeframe for loan repayment accordingly.
The most affected sectors will be receiving loan equal to the annual salary of the staffers in addition to 50 percent of the amount or a maximum of Rs 100 million. The medium affected sectors will also get loan amount equal to the annual salary of the staffers in addition to 50 percent of the amount or a maximum of Rs 70 million. Likewise, the less affected sectors will get loan equal to the annual salary of the staffers in addition to 50 percent of the amount or a maximum of Rs 50 million.
A total of 50 percent from the fund of Rs 50 billion will be allocated to the most affected sector while 30 percent will be provided to the mildly affected sector and 20 percent to the less affected sector.
According to the work procedure, the interest rate for the concessional loan has been fixed at 5 percent per annum for the first year and 6 percent for the second year. The government will avail loan to the commercial banks and financial institutions for this purpose at an interest rate of 2 percent for the first year and 3 percent for the second year.
The time for repayment of loan is a maximum of two years.