Money lending has always been part of Nepal’s economic culture, but unregulated lending especially meter byaj(excessive interest rates) has pushed thousands of people into financial exploitation. Because of this, the Government of Nepal has introduced strict laws to regulate interest rates, protect borrowers, and punish illegal lenders.

This guide explains how money lending works legally in Nepal, the maximum interest rates allowed, and what the law says about meter byaj. If you lend money, borrow money, or deal with microfinance-type transactions, understanding these rules is a must.

What Is Money Lending Law in Nepal?

Money lending in Nepal is regulated under:

• Money Lenders Act 2025 (1978)

• National Civil Code 2017

• Banking and Financial Institutions Act (BAFIA)

• Recent amendments against meter byaj practices

Anyone who provides loans for profit must be registered as a money lender with the local government (ward or municipality).
Unregistered lending + charging high interest = illegal money lending (meter byaj).

Meter Byaj Law in Nepal (2025 Update)

Meter byaj refers to excessively high or unrecorded interest charged by informal lenders.
The government has announced strict measures to eliminate this practice:

1. Charging excessive interest is a criminal offense
2. All lending must be recorded in writing
3. Borrowers can file complaints at ward office, police, or district administration
4. Courts can cancel the entire loan if interest is proven illegal
5. Lenders may face fines + imprisonment

The aim is simple protect citizens from financial exploitation.

How Is Interest Rate Determined in the Banking System of Nepal?

Bank interest rates are determined by:

1. Monetary Policy issued by Nepal Rastra Bank (NRB)

NRB sets base conditions such as:

• Base rate policy

• Credit-to-deposit ratio (CD ratio)

• Inflation control measures

• Repo and reverse repo rates

2. Individual Bank Policies

Banks adjust their loan rates based on:

• Operational cost

• Risk factor

• Market competition

• Internal lending strategy

3. Type of Loan

Interest differs for:

• Personal loans

• Business loans

• Home loans

• Agriculture loans

• SME loans

In general, loan interest rates in Nepal typically range from 11% to 17%, depending on the bank and borrower profile.

Maximum Interest Rate for Money Lending in Nepal (Legal Limit)

For NON-BANK lenders, interest rates are regulated through local government guidelines.

1. Unregistered lenders cannot charge ANY interest legally
2. Registered lenders must follow local cap rates

Some municipalities enforce ceilings such as:

• 10%–15% per year for normal loans

• Up to 18% for unsecured high-risk lending

Anything more than this is considered meter byaj and punishable by law.

Rules for Lending Money Legally in Nepal (Must-Follow)

To lend legally, you must:

1. Register as a money lender

• At the ward/municipality office.

2. Maintain written agreements

Including:

• Borrower details

• Loan amount

• Interest rate

• Repayment schedule

3. Provide receipts for every payment

• Borrowers must receive written proof.

4. Follow the legal interest rate cap

• No excessive charges.

5. Keep transparent financial records

• For legal verification.
• Failure to follow these rules can result in penalties, cancellation of the loan, and even imprisonment.

Common Illegal Practices (Meter Byaj Triggers)

The following activities automatically fall under illegal lending:

• Charging 3%, 5%, or 10% interest per month

• Confiscating land or property documents

• Not providing written loan agreements

• Threatening borrowers for repayment

• Adding interest on top of interest (compound meter byaj)

These are punishable under Nepali law.

Penalties for Illegal Money Lending (Meter Byaj)

Depending on the severity:

• Loan cancellation

• Up to 3 years imprisonment

• Fines up to Rs. 30,000 – Rs. 300,000

• Compensation to the borrower

• Blacklisting and business ban

Courts often rule in favor of borrowers if the lender cannot show valid documents.

Advantages of Borrowing Through Banks Instead of Informal Lenders

• Legal protection

• Transparent interest rates

• Structured repayment

• No personal exploitation

• Option to refinance

• Lower long-term cost

Banks follow NRB guidelines, making them safer and more reliable.

Conclusion

Money lending in Nepal is becoming increasingly regulated as the government cracks down on illegal meter byaj practices. If you’re lending, keep everything documented and within legal interest limits. If you’re borrowing, always choose registered lenders or banks for safety and legal protection. Understanding the law helps both lenders and borrowers avoid exploitation, financial disputes, and criminal charges.