KATHMANDU, May 15 — A government audit has raised alarms over widespread inefficiencies and misuse in Nepal’s concessional loan scheme, with an estimated 36 percent of subsidized loans either misused or poorly implemented, according to the 62nd Annual Report of the Office of the Auditor General (OAG).
The findings are based on a comprehensive study commissioned by Nepal Rastra Bank and corroborated by the OAG report. The audit reviewed 31,664 borrowers and inspected 1,838 projects—approximately 18.34 percent of the total 172,654 borrowers under the scheme. The results revealed troubling patterns of fund misuse, improper borrower identification, and regulatory lapses.
Key findings from the audit include:
7% of borrowers (Rs 6.35 billion) did not utilize the loans as intended.
12% (Rs 18.74 billion) lacked proper target group verification.
6% (Rs 10.49 billion) had accessed multiple concessional loans.
11% (Rs 21.25 billion) raised suspicions of fund misuse.
The Commercial Agriculture and Livestock Loan sub-program alone involved 10,981 borrowers, receiving a total of Rs 5.34 billion, yet showed minimal oversight regarding actual investment or productivity outcomes.
Structural Weaknesses and Sustainability Concerns
The concessional loan program was launched under the Integrated Procedure for Interest Subsidy (2075) to improve credit access for priority sectors such as agriculture, youth entrepreneurship, and small businesses. By mid-Ashad 2081, banks had disbursed a cumulative Rs 187.7 billion under the scheme, supported by Rs 28.49 billion in government interest subsidies.
However, the OAG report criticizes the frequent procedural amendments and poor planning that have undermined the program’s stability and impact. “There is a need for better identification of target groups and more efficient distribution of subsidies,” the report states, further noting that financial institutions have not been adequately incentivized to invest in priority areas.
Worryingly, the outstanding loan amount has dropped from Rs 126.82 billion to Rs 91.32 billion within a year, raising concerns about loan recovery, repayment discipline, and the long-term viability of the scheme.
Sharp Rise in Subsidy Expenditures
The program has seen exponential growth in subsidy spending:
As of Ashad 2078: Rs 6.79 billion
Ashad 2079: Rs 16.96 billion
Ashad 2080: Rs 22.39 billion
Ashad 2081: Rs 24.89 billion
While this growth reflects wider access, the Auditor General warns that without comprehensive evaluations and stricter compliance mechanisms, the scheme risks becoming fiscally unsustainable.
The report calls for urgent reforms, including:
Detailed tracking of concessional loan disbursements and recoveries
Strict beneficiary verification
Stronger financial record-keeping by banks
Evaluation of return on investment in sectors like commercial agriculture and livestock
With over Rs 111.25 billion already approved for 46,356 borrowers in commercial agriculture alone, the government now faces mounting pressure to reassess the program’s framework and ensure that public funds are producing tangible economic value.
