Nepal has run an interest-subsidy programme for priority borrowers since 2075 under the Unified Procedure on Interest Subsidy for Concessional Loans. When it is funded, it is the cheapest formal credit in the country: a farmer or a woman entrepreneur can borrow at an effective 4 to 6% while the same bank charges 11% on a normal business loan. The catch is that the scheme is budget-dependent, has been paused and restarted more than once, and branches do not always advertise it. This guide explains the mechanics so you can ask for it by name.
How the subsidy works
The structure is the same across categories:
- The bank lends at its base rate plus a premium capped at 2%. If the base rate is 8%, the loan is priced at 10%.
- The government pays the bank 5 percentage points of that interest (6 points for women entrepreneurs), settled quarterly through Nepal Rastra Bank.
- You pay the remainder: 5% in this example, or 4% for a woman-owned business.
Because the subsidy is a fixed number of points, your effective rate moves with the base rate. If the base rate falls to 6%, you pay 3%. The bank still earns its full rate, which is why banks are willing to lend; NRB also sets a minimum number of such loans each commercial bank must hold.
On agriculture and livestock loans, the government additionally pays 75% of the crop or livestock insurance premium.
The main categories and limits
| Category | Maximum loan | Who qualifies |
|---|---|---|
| Commercial agriculture and livestock | Rs 5 crore | Registered farms, cooperatives, agri-businesses |
| Educated youth self-employment | Rs 7 lakh | Under 45 with at least a bachelor's degree, using the certificate as security |
| Foreign-employment returnee project | Rs 10 lakh | Returned within a set period with a labour permit record and a business plan |
| Women entrepreneurship | Rs 15 lakh | Business registered in a woman's name; collateral-free with the project as security |
| Dalit community business | Rs 10 lakh | Dalit entrepreneurs with a registered enterprise |
| Higher and technical education | Rs 5 lakh | Students in technical or vocational programmes inside Nepal |
| Earthquake-affected housing | Rs 3 lakh | Households on the affected list rebuilding a home |
| Textile industry operation | Rs 5 crore | Registered textile producers |
| Youth self-employment training loan | Rs 1 lakh | Youth attending approved skills training |
Amounts and categories have been revised several times. Treat the table as a map, then confirm the live limits with the bank.
Alongside this scheme, two others are worth knowing. The Youth and Small Entrepreneur Self-Employment Fund lends small amounts through cooperatives at subsidised rates. And the Startup Enterprise Loan from the Department of Industry offers up to Rs 25 lakh at around 3% to selected new ventures, disbursed through a state bank after a competitive review.
Who is eligible, in practice
Across categories the bank will require that you:
- Are a Nepali citizen with the project located in Nepal.
- Have the enterprise registered with the ward, municipality, cottage industry office or company registrar, and hold a PAN.
- Have no other concessional loan running and are not blacklisted at CIB.
- Present a business plan showing how the loan is used and repaid. For agriculture, land ownership or a lease on the farmland; for livestock, the shed and the insurance policy.
- Complete training where the category requires it, such as the returnee and youth loans.
- Offer security: for women's loans up to Rs 15 lakh, the project itself; for larger agriculture loans, land or the project assets.
Banks are not allowed to charge extra service fees on these loans beyond the normal processing charge, and the loan must be used for the stated purpose. Diversion is grounds for cancelling the subsidy retroactively, which converts your 5% loan into a 10% one overnight.
What to ask the branch
- "Is the concessional loan scheme open for my category this quarter?" Branches get quotas and budgets; a no from one branch is not a no from the bank.
- "What is the premium?" It is capped at 2 points, so a quote of base rate plus 3 is not a subsidised loan.
- "How is the subsidy credited?" You should pay the net rate from day one, not pay the full rate and claim a refund later.
- "What happens if the subsidy budget runs out mid-loan?" Get the answer in the sanction letter.
- "Is insurance premium support included?" For agriculture and livestock it should be.
Where it goes wrong
- The budget is exhausted. In several years the government stopped approving new subsidised loans partway through the fiscal year while continuing existing ones. Apply early in the fiscal year, from Shrawan.
- Registration is missing. An unregistered tea shop or a farm without a firm registration is not eligible, however profitable.
- The loan is used for something else. Land purchase, a personal vehicle or paying off another loan are all outside the scheme.
- The bank reclassifies at renewal. Working-capital lines under the scheme must be renewed; check the subsidy survives renewal.
If the scheme is closed for your category, compare ordinary business loan rates instead; the gap between the cheapest and dearest bank is often 3 points, which recovers much of the subsidy on its own. Then run the eligibility check with your registered business income to see who is most likely to lend.