KATHMANDU, Aug 28: The government has revised the ‘Interest Subsidy Procedure for Concessional Loans 2025 in a bid to tighten the noose on the misuse of subsidized loans being provided to various sectors.
Amid growing concerns about the misuse of such loans, the Ministry of Finance on Wednesday approved the new procedures while reducing the interest subsidy and the areas eligible for the subsidy. As per the new rule, the government will provide interest subsidies of up to three percent under eight different headings instead of the existing 5-6 percent in 10 sectors.
As per the report of Nepal Rastra Bank (NRB), a total of 94,920 business entities took subsidized loans in the fiscal year (FY) 2024/25. However, the banks and financial institutions (BFIs) have been unable to recover the dues of Rs 78.66 billion from the borrowers.
A study conducted by the NRB in May 2025 shows that large amounts of subsidized loans disbursed mainly in the primary sector, including agricultural businesses, are being misused. Onsite visits to 31,664 borrowers under the category revealed that a total loan amount of Rs 21.25 billion is suspected to have been misused. As of now, a total of 172,654 borrowers took loans under this heading facilitated by the NRB.
Revised interest rate corridor system introduced
According to the NRB’s study report, many debtors were found to be using the borrowed amounts to settle their past loans rather than utilizing the money under the designated areas. Likewise, many debtors were found to have converted the previous borrowings to the subsidized loans without following guidelines set by the central bank.
The report entitled ‘Current Macroeconomic and Financial Situation of Nepal’ of the NRB shows out of the total amount, Rs 57.55 billion of the subsidized loans issued to 35,861 debtors for agricultural businesses have remained overdue. Likewise, 57,636 debtors who were issued the loans under the heading of women entrepreneurship are yet to clear their dues worth Rs 20.09 billion.
The government has revised the rules on subsidized loans for agriculture and livestock businesses, reducing the maximum loan ceiling.
Previously, entrepreneurs in the agriculture sector could access up to Rs 50 million in subsidized loans directly from banks, with an additional Rs 50 million available upon recommendation from the Central Coordination and Monitoring Committee—bringing the total to Rs 100 million.
Under the new provision, the ceiling has been reduced to Rs 50 million for any type of loan issued for agriculture businesses, eliminating the additional facility based on committee recommendation.
In case of women-run enterprises, the upper threshold of subsidized loan has been increased to Rs 2.5 million from Rs 1.5 million.
The threshold of self-employment loans for educated youth and self-employment loans for returnee migrant workers have also been increased. The ceiling for self-employment loans for educated youth has been increased to Rs 2 million from Rs 700,000. The threshold for the returnee migrant workers has been revised to Rs 2 million from Rs 1 million.
“If any misuse of concessional loans is found, interest subsidy for the remaining period will be discontinued while the entire subsidy amount along with interest will be recovered from the borrower,” reads the newly endorsed procedure. Under the new rule, the concerned BFIs need to make necessary arrangements to monitor whether or not the concessional loans are being utilized properly.
