Regulatory reset and reminder
Government revises its concessional credit framework
Interest subsidy capped at 3%; Loan limits for different concessional loan groups increased
The government has revised its concessional credit framework, reducing the interest subsidy from 5% to 3% and streamlining the number of loan categories from 10 to 8. This revision includes the introduction of new categories, the removal of outdated ones, and stricter regulations, following reports of widespread misuse.
The agricultural loan ceiling has been capped at NRs 50 million, while the other previous five categories, such as women entrepreneurship, educated youth project loans, migrant returnees self-employment, and enterprise development loans for Dalit community now have a higher borrowing limit. Additional categories of loans for replacement of boiler plants in industries, start-up loans and private housing loans have been introduced in the framework.
To curb the Kathmandu valley’s pollution, this year’s federal budget included plans to provide concessional loans to factories to convert their traditional boilers into electric systems.
- Agriculture and livestock loan: Decreased from NRs 100 million limit → NRs 50 million
- Educated Youth Project: Increased from NRs 700,000 → NRs 2 million
- Returnee migrant workers (Self-employment loan): Increased from NRs 1 million → NRs 2 million
- Women entrepreneurship loan: Increased from NRs 1.5 million → NRs 2.5 million
- Dalit community enterprise development (Bhagat Sarbajit loan): Increased from NRs 1 million → NRs 2 million
- Boiler replacement in industries: Loan limit set up to NRs 5 million
- Private housing for disaster victims: Loan limit set up to NRs 500,000
Startups included in the concessional loan group
Startups can now access low-interest loans of up to NRs 2.5 million through the government’s concessional loan scheme. For start-ups, provisions remain the same as the government’s startup enterprise loan
Additional Rules
- Once a loan limit is approved, it cannot be increased later.
- Only one person per household can get a concessional loan.
- Subsidy will be provided for a maximum duration of five years
- The scheme is valid until mid-July 2030 (Asar 2087 BS).
- Loan terms (grace period, repayment, etc.) will be decided by banks based on i) type of loan and loan amount, ii) business goals, iii) operation style, iv) risk level, and v) expected return period
- In the case of women-targeted concessional loans, 100% ownership must be held by women.
- The government will help pay interest for up to five years
- Banks can charge 1.5% premium on its base rate, while the government will cover 3% interest
In the fiscal year 2024/25, the number of borrowers using concessional loans dropped to 94,920, with outstanding loans totaling NRs 78.7 billion. This marked a significant decrease compared to the previous year, when 120,174 borrowers had accessed concessional loans amounting to NRs 126.82 billion.
The current changes in the credit framework also reflect the government and the NRB’s efforts to stimulate credit growth.
NRB reminds foreign currency rules to ensure clarity
Last week, Nepal Rastra Bank (NRB) issued a notice reiterating two key foreign exchange regulations.
It reminded individuals that they may bring up to USD 5,000 (or its equivalent) in cash into Nepal without needing to declare it at customs. This provision primarily applies to incoming tourists and Nepalis returning after an extended stay abroad, but does not extend to those who were traveling on tourist visas.
Additionally, the central bank emphasised that only INR 100 notes are permitted for use or possession in Nepal, in line with the 2019 regulation that bans higher denomination Indian currency notes—INR 200, INR 500, and INR 2,000—within the country.
Macroeconomic and financial updates
Remittance continues to surge → Reaches NRs. 1.7 trillion (+ 19.2%) in 2024/25
In FY 2024/25, Nepal’s remittance reached NRs 1.7 trillion—a massive 19.2% growth from the preceding year. This meant Nepal received remittances of NRs 4.72 billion each day. In dollars, remittance inflows increased 16.3% to NRs. 12.64 billion. Gross foreign exchange reserves stood at $19.50 billion, enough to cover 15.4 months of imports of goods and services.
These remittances have piled up in banks. Although liquidity has strengthened, sluggish economy and weak credit demand, NRB has been absorbing this excess liquidity. Many see this as an opportunity for economic growth and infrastructure investment.
Meanwhile, a total of 839,266 labor approvals were recorded last fiscal year, comprising 505,957 new approvals and 333,309 renewals. This figure excludes over 100,000 students who went abroad during the same period. The total labour approvals were 741,297 the previous year, an increase by 13.2%.
New housing loans dip; Real estate lending plummets
In FY 2024/25, banks and financial institutions (BFIs) disbursed NRs 30.5 billion in loans to first-time homebuyers under the Residential Personal Home Loan category (eligible for loans up to NRs 15 million), down from NRs 38.9 billion in the previous year. Yet, total outstanding credit under personal housing loans reached NRs 417.6 billion, marking a 7.9% year-on-year increase.
Similarly, BFIs issued NRs 7.8 billion in real estate loans during the fiscal year, a sharp decline of 58.1% from NRs 18.7 billion the year before. Despite the drop in new lending, total outstanding real estate credit rose modestly by 2.9%, reaching NRs 276 billion, up from NRs 268.1 billion the previous year. Within this category, lending specifically to residential real estate declined by 5.4%.
Earlier, the latest monetary policy raised the borrowing limit for private residential housing to NRs 30 million from the previous 20 million rupees, with a maximum loan-to-value of 80% for first-time home construction and 70% for other cases, signaling regulatory support to the housing sector and demand. The NRB also pledged to introduce necessary measures to facilitate the restructuring and rescheduling of credit extended to operational real estate firms registered with government-approved agencies. Meanwhile,
Investments & Private Equity
Record FDI received, but a big gap between commitment and realisation
Nepal received a record volume of FDI pledges last fiscal year. Investors pledged an investment of NRs 64.96 billion. Data shows that the country struggled to capitalise even one-fifth of it, receiving only 18.5% of the pledge—12.1 billion rupees.
There were pledges for 840 projects last fiscal year, mostly in the ICT (45.5%), tourism (36.2%), service (10%), and manufacturing sectors (6.5%).
Of these, NRs 46.12 million were through the automatic route, while NRs 60.35 billion arrived through the approval process.
Automatic Route → Investors can invest directly without prior government approval.
Approval Route → Investors require prior approval from the Government of Nepal and the Investment Board of Nepal (IBN), usually for restricted sectors and higher investment amounts.
Similarly, in the previous fiscal year, only 13.57% of the committed NRs 61.90 billion was realised, with actual foreign investment totaling just NRs 8.40 billion.
A recently released international report, World Investment Report 2025 by UNCTAD, however, highlights a concerning trend in Nepal’s FDI—that it fell from $185 million in 2019 to $57 million in 2024—falling nearly by 70% over five years.
Apparently, there is a strong start to the ongoing fiscal year. In its first month of the ongoing fiscal year 2025/26, the country approved FDI commitment for 127 new projects amounting to NRs 24.10 billion.
Agriculture attracted the highest investment, led by a major Chinese commitment of NRs 20 billion for a buffalo meat processing plant. This alone significantly boosted the FDI total. If implemented, it is considered to position Nepal as a major buffalo meat exporter.
Other sectors receiving FDI commitments included ICT (71), tourism (41), and manufacturing (3) among others.
FYI: The country repatriated 10.19 billion rupees in royalty in 2024/25.
Nepal and South Korea on a path to collaborate for clean energy development
Investment Board Nepal (IBN) and G-Philos, a South Korean company specialising in hydrogen, have signed an MoU for the preparation of a detailed feasibility study report on developing a Green Hydrogen Plant and Fuel Cell Plant in Nepal. These plants will produce hydrogen from renewable resources and convert it into clean energy or fuel via fuel cell plants.
This collaboration is expected to pave the way for investment approval for establishing, developing, and operating the two plants, with an estimated cost of NRs 6.82 billion under the Public-Private Partnership (PPP) model. IBN expects to receive the feasibility report within 10 months after the survey permit is issued.
Major moves in Nepal’s private equity (PE) scene
NIBL Equity Partners, a PE firm managed by NIMB Ace Capital, with Nepal Investment Mega Bank as the anchor investor, has acquired a 28.8% stake in Himalayan Java Coffee, Nepal’s first specialty coffee store. The investment will be mobilised in Java’s expansion in Nepal and South Asia. The investment is considered one of the largest PE investments in the country’s consumer sector.
On the other hand, Team Ventures, another PE firm, has announced its plan to go public through an Initial Public Offering, the first one so far to announce such a plan in private equity domain. The company will discuss this proposal at its second AGM.
