Conflict, stir victims to get loan waiver
KATHMANDU, FEB 22 -
The government has reintroduced the policy of waiving off loans of the victims of the decade-long conflict, people’s movement and Madhesh movement. This policy will be applicable to such loanees of nine government-owned banks and financial institutions.
A Cabinet meeting on Thursday decided to waive off loans worth up to Rs 30,000 and interest of loans up to Rs 100,000 taken from Agriculture Development Bank Limited (ADBL), Rastriya Banijya Bank (RBB), Sana Kishan Bikas Bank (SKBB), Nepal Bank Limited and five Grameen Bikas banks.
The then Maoists-led government had also introduced a similar policy through the budget for the fiscal year 2008-09, waiving off loans up to the same amount of conflict victims, small farmers and victims of natural disasters.
“As we have been receiving complaints that a few victims failed to get benefits of the government’s programme four years ago, the new policy has been adopted to enable them to get the benefits,” said Joint Secretary Mahesh Dahal, who was recently appointed as the consul general for Hong Kong.
Those who were killed and injured during the ‘people’s war, peoples’ movement’ and Madhesh movement could claim the benefit until mid-April 2013, according to the government decision.
The government has also decided it will compensate the banks for the principle amount, while the banks themselves should bear the cost interest and penalty waiver.
This provision, however, is expected to hit the government-owned banks’ profitability. A senior ADBL official said he could say nothing about the possible effects of the government’s decision on his bank before receiving the details of the decision.
He, however, said the bank would face losses if they were forced to waive interest and penalty of performing loans and the ones that were taken later. Suspecting that even non-victims could be the possible beneficiaries under political pressure at the local level, he said the criteria should strongly be implemented.
Four years ago, the government had compensated the banks with the amount of the loans waived along with 10 percent interest, which had been beneficial for government BFIs. According to a Finance Ministry source, the government had reimbursed a total of Rs 6.4 billion under the programme for years ago. ADBL had received more than Rs 4 billion, while Nepal Bank Limited received Rs 250 million, according to bank officials.
Although the government has claimed the programme is aimed at offering relief to the victims, it will have far reaching consequences for banking institutions, according to experts. “The biggest impact of such a programme four years ago was people developed a tendency of not repaying loans with hope that the government would waive off such loans later,” said a central bank official. “On the other hand, tax collected from the people, which could have been spent for development activities, were spent in the name of benefiting victims.”
The central bank official also said Prime Minister Baburam Bhattarai’s promise duting his tenure as finance minister in 2008 that the government would also waive off loans of the loanees of Grammen Bikas banks encouraged many borrowers not to repay loans timely. “As a result, Sudur Pashchimanchal Grameen Bikas Bank and Purbanchal Grammen Bikas Bank went into red,” he said.
Economist Keshav Acharya said waiving off loans is like injecting marijuana (ganja) into loanees, which provokes them not to repay loans. “We had completely reversed this programme in 2009 by giving certain benefits to the people who repaid loans timely,” said Acharya, who was the chief economic advisor at the Finance Ministry during the Madhav Kumar Nepal-led government.
Besides affecting the BFIs’ profitability, the provision could also lead to the misuse of government resources given the fact that families of more than 18,000 people received relief from the government four years ago. But only 13,000 were actually killed during the conflict.
Source: The Kathmandu Post
