By Dipesh Ghimire
NRB Revises Concessional Loan Rules, Borrower Details to Go Public
Nepal Rastra Bank has rolled out sweeping changes in the concessional loan regime, directing banks and financial institutions to publish the names of beneficiaries every quarter. The central bank’s new instruction, issued through amendments to the Unified Directives, is aimed at increasing transparency and ensuring that concessional loans reach their intended sectors.
Under the new rule, banks must post borrower lists separately for those who received loans under the earlier 2018 (2075 BS) framework and those who fall under the newly revised 2025 (2082 BS) procedure. These lists must be made public on the institutions’ official websites every three months. The central bank also clarified that the government will reimburse interest subsidies, which will be treated as zero risk-weight assets while calculating banks’ capital adequacy ratios.
Subsidy Slashed to 3 Percent
The government has significantly reduced the level of subsidy it provides on concessional loans. Previously, borrowers enjoyed up to a 5 percent subsidy on interest rates, while women entrepreneurs received 6 percent. Under the revised rule, subsidies will be limited to 3 percent, except for large-scale agriculture loans exceeding Rs50 million, which will attract only 2 percent.
The Ministry of Finance says the change was necessary to make the scheme fiscally sustainable. The government has struggled to reimburse banks for interest subsidies over the past two years, leading financial institutions to halt new lending under the scheme. Officials believe that lowering subsidy rates and tightening eligibility will help restore confidence and discipline in the system.
Number of Loan Types Reduced
The concessional loan portfolio has also been narrowed. Earlier, there were ten categories of subsidized loans, but the new procedure has trimmed the number down to eight. Loans for higher education, textile industries, technical training programs, and youth self-employment have been removed from the list.
In their place, two new categories have been introduced: startup enterprise loans and boiler replacement loans for industries. Startups can access up to Rs2.5 million in concessional financing, while industries replacing outdated boilers can also obtain loans of the same size. Both are aimed at promoting innovation and industrial modernization.
Revised Loan Limits Across Sectors
Several concessional loan schemes have seen changes in their credit ceilings:
Women entrepreneurship loans increased from Rs1.5 million to Rs2.5 million.
Foreign-returnee youth self-employment loans doubled from Rs1 million to Rs2 million.
Educated youth project loans rose sharply from Rs0.7 million to Rs2 million.
Dalit community business loans have been renamed “Bhagat Sarvajit Dalit Entrepreneurship Loan” and raised from Rs1 million to Rs2 million.
Housing loans for disaster victims increased from Rs0.3 million to Rs0.5 million.
Agriculture and livestock loans, however, remain unchanged at up to Rs50 million.
Stricter Monitoring After Rampant Misuse
Officials at NRB say the revisions were prompted by widespread misuse of concessional loans. Investigations revealed that borrowers frequently diverted funds away from intended sectors, often investing in real estate, personal consumption, or the share market. In many cases, banks were complicit, approving loans without proper verification.
By mandating public disclosure of borrower details, NRB aims to introduce a level of social accountability. Experts say publishing names online will discourage misuse, as beneficiaries will now be subject to public scrutiny. However, some bankers fear this could raise privacy concerns.
Loan Conditions and Duration
The revised framework also introduces stricter conditions for repayment. Borrowers will now be eligible for subsidies for a maximum of five years only. Banks are required to define the repayment schedule, grace period, and installment terms based on the type of loan, business nature, risk profile, and profitability of the borrower.
Insurance and loan security fees have also been revised. For loans up to Rs1.5 million, borrowers will pay only half the insurance premium, while the remaining 50 percent will be covered by NRB through a subsidy fund. The same arrangement applies to loan security charges. For loans exceeding Rs1.5 million, however, borrowers must bear the full cost.
Government Under Pressure
The reform comes at a time when the government faces fiscal strain. Delayed reimbursements of subsidies had caused friction between banks and the state, effectively stalling concessional loan distribution for nearly two years. Critics argue that the government over-promised in the past, rolling out populist schemes without ensuring the budget to back them up.
The Finance Ministry now insists that the streamlined system, with fewer loan categories and reduced subsidy levels, will be more manageable. Economists agree that fiscal discipline is essential, but warn that scaling back subsidies may limit the scheme’s reach to marginalized groups who need concessional credit the most.
Implications for Borrowers and the Economy
For genuine entrepreneurs, especially women, youth, and disaster victims, the scheme still offers opportunities—though under tighter monitoring and with reduced generosity. The inclusion of startups as a loan category could encourage innovation, while the boiler replacement loan may boost industrial safety and efficiency.
However, the lower subsidy rates mean higher effective borrowing costs. This could discourage new businesses in high-risk sectors such as agriculture and small-scale industries. Experts caution that the reform will succeed only if the government consistently funds the subsidy account and NRB strictly enforces compliance among banks.
