Banks may now shift more towards concessional loans

The concessional loan program, which had been on hold for more than two years, is back again. It was quietly stopped because the government failed to pay the interest subsidy on time. Now, after strong pressure from entrepreneurs and business groups especially during the Gen Z protests when damages and losses piled up the government has finally decided to restart it.

Government clears pending dues

An interim government has paid nearly 10 billion rupees in overdue interest to revive the scheme. According to Nepal Rastra Bank, about 76.5 billion rupees of concessional loans were pending until mid-July this year. Out of this, almost 9.8 billion has already been cleared, while around 3 billion still remains.

What’s new in the scheme

A new guideline has replaced the older one from 2075. Some loan categories remain the same, but the system has been adjusted. Banks can now charge their base rate plus 1.5 percent, while the subsidy has been reduced from 5 percent to 3 percent. The loan period remains fixed at 5 years. The aim is to reduce misuse while still making loans affordable.

Who can get these loans

The scheme targets different groups:

• Farmers and livestock entrepreneurs: up to 5 crore rupees
• Women entrepreneurs: up to 25 lakh rupees
• Returnee migrant workers: up to 20 lakh rupees
• Educated youth for projects: up to 20 lakh rupees
• Dalit community (Bhagat Sarbajit loan): up to 20 lakh rupees
• Startups: up to 25 lakh rupees
• Boiler replacement in industries: up to 50 lakh rupees
• Disaster-hit families for housing: up to 5 lakh rupees

Concerns about misuse

Banks worry about how the loans will actually be used. In the past, many borrowers diverted money into land and property instead of businesses. Because of such misuse, the program was stopped earlier. Experts say strict monitoring is the only way to make concessional loans meaningful.

If banks and the central bank work together to ensure responsible lending and proper follow-up, this scheme could become a strong support for the economy.