The government has introduced the Interest Subsidy Procedure for Concessional Loans 2025, tightening regulations to prevent misuse of subsidized loans across different sectors.
Amid concerns that concessional loans were being diverted from their intended purposes, the Ministry of Finance on Wednesday approved new procedures that reduce both subsidy rates and eligible sectors. The revised system now provides interest subsidies of up to 3 percent under eight categories, compared to the previous 5–6 percent across 10 categories.
According to Nepal Rastra Bank (NRB), a total of 94,920 businesses accessed subsidized loans in FY 2024/25, but banks and financial institutions (BFIs) are still struggling to recover Rs 78.66 billion from borrowers.
An NRB study conducted in May 2025 revealed widespread misuse, particularly in the agriculture sector. Inspections of 31,664 borrowers found that loans worth Rs 21.25 billion were likely misused. Many debtors reportedly used subsidized loans to repay old debts or converted existing loans into subsidized ones without following central bank guidelines.
The NRB’s report, Current Macroeconomic and Financial Situation of Nepal, further shows that:
- Rs 57.55 billion in loans issued to 35,861 agricultural borrowers remain overdue.
- 57,636 borrowers under women entrepreneurship loans have yet to repay Rs 20.09 billion.
Key Changes in the New Rules
- Agriculture & Livestock Loans: The maximum loan ceiling has been reduced to Rs 50 million. Previously, entrepreneurs could access up to Rs 100 million (Rs 50 million directly + Rs 50 million with committee recommendation).
- Women-Run Enterprises: The ceiling has been raised to Rs 2.5 million from Rs 1.5 million.
- Self-Employment Loans for Educated Youth: Increased to Rs 2 million from Rs 700,000.
- Self-Employment Loans for Returnee Migrant Workers: Increased to Rs 2 million from Rs 1 million.
The revised procedure also imposes stricter penalties. If any misuse of concessional loans is detected, the interest subsidy will be immediately discontinued, and borrowers must return the entire subsidy amount along with accrued interest. BFIs are now required to strengthen monitoring to ensure that concessional loans are being properly utilized.
