Government Provides NPR 3.9 Billion Interest Subsidy in Concessional Loan Program; Outstanding Loans Reach NPR 4 Billion
The government has disbursed NPR 3.927 billion in interest subsidies under the concessional loan program to date. After being suspended for two years due to misuse, the program has been reinstated with a revised operational procedure. Under the new procedure, the interest subsidy rate has been reduced from five percent to three percent.
18 Shrawan, Kathmandu – Through the concessional loan program, the government has provided a total of NPR 3.927 billion in interest subsidies aimed at boosting domestic production, creating self-employment, and promoting women’s and agricultural enterprises. The government has been offering various interest subsidy schemes to encourage entrepreneurship, and this program is part of that initiative.
However, the program had been halted for two years due to misuse. The government decided to refine and relaunch it through the budget of the previous fiscal year. Banks and financial institutions had stopped issuing such loans because companies were not receiving the interest subsidies. The program has now resumed under a new procedure, which lowers the interest rate from five to three percent.
The Ministry of Finance noted that although the previous procedure allowed lending up to the year 2087 BS (Bikram Sambat calendar), the Nepal Rastra Bank had not directed banks and financial institutions to extend loans under this scheme.
Following the misuse of loans, the government amended and implemented the Interest Subsidy Operational Procedures of 2082 BS. At that time, outstanding interest subsidy payments remained. The budget for the last fiscal year included provisions to continue the program, and the government quietly applied the new procedures to sustain it. Due to the absence of interest subsidy payments, banks had informally ceased issuing concessional loans for two years, with Nepal Rastra Bank tacitly supporting the halt by not approving new loans.
Under the concessional loan program, banks and financial institutions have disbursed a total of NPR 140 billion. Of this, around NPR 4.02 billion remains outstanding. The government has paid NPR 3.927 billion in interest subsidies so far. According to the new procedures, banks are allowed to charge a premium of 1.5 percent above the base interest rate, reduced from the previous two percent. The loan tenure is set at five years.
The revised procedures clarify the responsibilities and rights of Nepal Rastra Bank, banks and financial institutions, and borrowers, assigning accountability to all. The program stipulates that agricultural and livestock loans can be up to NPR 50 million, women’s entrepreneurship loans up to NPR 2.5 million, self-employment loans for youth returning from foreign employment up to NPR 2 million, and educated youth project loans up to NPR 2 million.
Additionally, the operational procedures categorize concessional loans as including NPR 2 million for Dalit community enterprise development loans under the Bhagat Sarvajit Enterprise Development scheme, NPR 2.5 million for startup enterprises, up to NPR 5 million for boiler replacement in industries, and up to NPR 0.5 million for private housing reconstruction for natural disaster victims.