21st September 2025, Kathmandu
The Government of Nepal has released approximately NPR 10 billion in interest subsidies for concessional loans. The funds were disbursed within the first quarter of the current fiscal year to the Nepal Rastra Bank (NRB) to settle pending reimbursements to banks and financial institutions for interest payments on these loans.
Government Releases Concessional Loan
The Government of Nepal has released approximately NPR 10 billion in interest subsidies for concessional loans. The funds were disbursed within the first quarter of the current fiscal year to the Nepal Rastra Bank (NRB) to settle pending reimbursements to banks and financial institutions for interest payments on these loans. This move aims to stimulate lending to priority sectors and alleviate financial burdens on borrowers.
Purpose and Impact of the Disbursement
The Ministry of Finance transferred NPR 9.80 billion to the central bank, a measure that was disbursed earlier than scheduled to clear a backlog of interest payments from the last seven quarters. This proactive step is intended to restore trust and cooperation between the government and the banking sector, which had been facing liquidity issues due to the reimbursement delays. By settling these dues promptly, the government expects banks to be more confident in processing and expanding the flow of subsidized credit.
The government’s concessional loan program is a key tool for financial inclusion and economic development. It provides access to affordable credit for individuals and businesses that might otherwise struggle to secure financing at competitive rates. The recent disbursement is expected to particularly benefit sectors like agriculture and small enterprises, which are crucial for food security and employment. The policy also supports job creation by empowering educated youth and returnee migrant workers to start their own businesses. The NRB has specified that banks can charge a premium of up to 1.5% above the base rate, which is set at around 5-6% for most banks. The new Integrated Procedure for Concessional Loan Interest Subsidy 2082 mandates strict oversight and documentation to prevent misuse of funds, a problem that plagued earlier subsidy schemes.
Target Sectors and Loan Categories
The concessional loan framework, which operates under the Integrated Procedure for Concessional Loan Interest Subsidy 2082, targets specific priority sectors with varying loan ceilings. These include:
Agriculture and Livestock Farming: Farmers and agribusinesses can access loans of up to NPR 50 million to boost production.
Women Entrepreneurship and Startups: Women-led businesses and startup ventures are eligible for loans up to NPR 2.5 million, a significant increase from the previous limit of NPR 1.5 million for women entrepreneurs. The subsidy rate for women entrepreneurs has been reduced to 3% across the board, down from the previous 6%.
Returnee Migrant Workers and Educated Youth: These individuals can apply for loans of up to NPR 2 million to launch new enterprises, with the educated youth project loans having an increase from NPR 0.7 million.
Disaster-Affected Households: Families impacted by natural disasters can receive up to NPR 500,000 to rebuild homes and restore their livelihoods.
These loan amounts have been revised in the new Integrated Procedure for Concessional Loan Interest Subsidy 2082, which also reduced the number of loan categories from ten to eight. The new categories include startup enterprise loans and boiler replacement loans, while loans for higher/technical education and earthquake housing reconstruction were removed. The government provides a direct interest payment to the lending institutions, which lowers the borrowing cost for the applicant.
Policy and Oversight
The government’s decision to release the funds and update the loan procedures signals its commitment to fostering an inclusive and sustainable economy. The new procedure, which has been in place since late August 2025, requires banks to publicly display lists of borrowers who received concessional loans. This new measure aims to enhance transparency and accountability. The new procedures also specify that the interest subsidy is capped at 3% for most loans, with larger agriculture loans over NPR 50 million receiving a 2% subsidy. These changes are intended to streamline the process, ensure the funds are used for their intended purpose, and ultimately promote job creation, rural development, and overall economic resilience in Nepal.
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