11 min read · Published 17 Sept 2026 (01 Aswin 2083)
The arithmetic that traps people is not complicated. It is just faster than most of us expect.
Borrow Rs. 1,00,000 at five percent a month, a common street rate in Nepal, and let it compound. After one year you owe Rs. 1,79,586. After two years, Rs. 3,22,510. After three, Rs. 5,79,182.
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Now the figure almost nobody knows: under Nepali law, the most that can ever be recovered on a Rs. 1,00,000 loan is Rs. 2,00,000. Not after two years. Ever. Interest may not exceed the principal, no matter how long the loan runs.
So the lender demanding Rs. 3,22,510 after two years is claiming more than one and a half times what the law allows: and the arrangement that produced the demand is now a criminal offence.
This article covers what meter byaj costs, what the law actually says, and what a borrower can do. It is general information, not legal advice, and one of the laws below arrived by ordinance, so confirm your own position with a lawyer or the district court before acting.
Meter byaj, meter interest, is informal lending at rates far above what the law permits, where the interest compounds so that the amount owed climbs continuously, like a taxi meter. Hence the name.
It is most common where banks are hardest to reach: the Terai, rural districts, and among people without the collateral or documentation a bank requires. Reported rates run from around 36% to over 120% a year.
The rate is not usually what ruins the borrower. Four practices around it are:
The rate sounds survivable when it is quoted per month. Compounding is what people underestimate, every time.
| Borrowed Rs. 1,00,000 | After 1 year | After 2 years | After 3 years |
|---|---|---|---|
| 3% a month (≈43% a year) | Rs. 1,42,576 | Rs. 2,03,279 | Rs. 2,89,828 |
| 5% a month (≈80% a year) | Rs. 1,79,586 | Rs. 3,22,510 | Rs. 5,79,182 |
| 10% a month (≈214% a year) | Rs. 3,13,843 | Rs. 9,84,973 | Rs. 30,91,268 |
Read the bottom row again. Ten percent a month, which sounds almost reasonable said aloud, turns one lakh into over thirty lakh in three years. That is how a family loses land over a loan taken to pay for a medical emergency.
Set beside that, the legal ceiling:
| Rs. 1,00,000 at the legal maximum | You owe |
|---|---|
| After 1 year | Rs. 1,10,000 |
| After 2 years | Rs. 1,20,000 |
| After 5 years | Rs. 1,50,000 |
| After 10 years | Rs. 2,00,000 |
| After 20 years | Rs. 2,00,000 |
The last row is not a typo. Once accumulated interest reaches the principal, it stops.
Private lending in Nepal is governed by the Muluki Civil Code 2074, and it is far more protective of borrowers than most borrowers realise.
Interest is capped at 10% a year. Where a deed mentions interest but does not state a rate, 10% per annum on the principal is the recognised ceiling.
Total interest may not exceed the principal. Under Section 481, the accumulated interest is capped at the principal amount, so total recovery on any loan is at most twice what was lent. This is the single most useful sentence in this article for anyone currently being pursued for a runaway balance.
If the deed is silent on interest, no interest is recoverable at all. Section 479: where the document does not provide for interest, only the principal can be claimed.
Compound interest is not permitted. Simple interest only. A demand built on monthly compounding is not merely excessive, its method is outside the law.
There is a ten-year limitation. Under Section 484, recovery must be pursued within ten years of the deed. The clock can reset on a partial repayment or a written extension, but after ten years of inaction a suit is time-barred.
A tamasuk has requirements. To be enforceable, the deed should identify both parties properly, state the principal in figures and words, state the interest rate if any, give a repayment date, and be signed by the borrower with at least two witnesses. A document missing these is on much weaker ground than the person waving it wants you to believe.
It is now. This is recent and it changed the position materially.
An ordinance amended the Criminal Code 2074 to add Section 249A, defining meter interest transactions as "improper transactions" and making them criminal for the first time. Before this, usurious lending was a civil matter, you could dispute the amount, but the lender had committed no offence by charging it.
Reported penalties run to imprisonment of several years together with a fine. Because the provision arrived by ordinance, and an ordinance must be enacted by parliament within a limited period or lapse, confirm the current status before relying on it. A lawyer or the district court will tell you in one visit.
Enforcement remains the weak point. Thousands of complaints have been filed and large numbers remain unresolved; victims' groups have marched to Kathmandu more than once to press the point. A law that exists and a law that is applied are different things, and it would be dishonest to pretend otherwise.
But the law existing changes your position anyway. It means that what was done to you is an offence, not a bad bargain, and that is a different conversation with a police officer, a lawyer, or the lender.
In this order. The order matters.
Before anything else, record: the date, the amount you actually received in hand, what you signed, who witnessed it, every repayment you have made with dates and amounts, and every threat or demand since.
The gap between the amount received and the amount written on the deed is the heart of most meter byaj cases. It is also the thing that fades from memory first. Write it while you remember it.
Do not accept the lender's figure. Work out what is owed at 10% simple interest, capped so total interest does not exceed the principal.
On Rs. 1,00,000 borrowed three years ago, the legal maximum is Rs. 1,30,000. If you have already repaid Rs. 1,50,000, you may have overpaid, and that changes the conversation entirely.
Do this arithmetic before you meet anyone. Walking into a negotiation with a number and its basis is different from walking in with a fear.
Refinancing a meter byaj loan with the same lender, a fresh deed for the accumulated amount, converts an unlawful balance into a document that looks lawful. It resets the limitation clock and legitimises interest that could otherwise have been challenged.
If a settlement is genuinely on offer, have someone read it first.
Where the transaction fits meter byaj, this is now a criminal matter, not only a civil one. Complaints go to the police and the District Administration Office; some districts have run dedicated desks for these cases.
Take everything from step 1. Take a copy, keep a copy, and get a receipt for what you file.
Meter byaj lenders rarely have one borrower. Victims' groups exist in most affected districts, and they matter for the same reasons as anywhere else: shared legal costs, a pattern of behaviour rather than one person's word, and a complaint that is much harder for any office to leave in a drawer.
An hour is often enough to establish whether the deed is enforceable, whether the ten-year limitation has passed, and whether you have already paid more than the ceiling. District bar associations and legal aid committees provide free or low-cost help, and NGOs work specifically on usurious lending in the Terai.
Meter byaj is not chosen. It is what remains when everything else has been refused. So the prevention is really about building the cushion earlier.
Under the Muluki Civil Code 2074, interest on a private loan is capped at 10% a year on the principal, and total accumulated interest may not exceed the principal itself. That means recovery on any loan is limited to twice the amount lent, however long it runs. Compound interest is not permitted, and where a deed mentions no interest at all, only the principal is recoverable.
Yes. An ordinance added Section 249A to the Criminal Code 2074, defining meter interest transactions as improper transactions and making them a criminal offence for the first time, with penalties including imprisonment and a fine. Charging above the statutory ceiling was already unlawful under the Civil Code; what changed is that it is now a crime rather than only a civil dispute. Because the provision came by ordinance, check its current status before relying on it.
Complaints go to the police and the District Administration Office in your district, and some districts have operated dedicated desks for meter interest cases. Take the loan document, a written record of what you actually received in hand, all repayment receipts, and details of any threats. File jointly with other borrowers of the same lender where possible, and keep a stamped copy of everything you submit.
Not automatically, and not for an amount the law does not recognise. Any transfer arising from a loan whose interest exceeds the statutory ceiling, or from a deed you signed blank, can be challenged. Because land transfers are hard to reverse once registered, this is the situation where getting a lawyer immediately matters most, do not wait to see what happens.
Then you may have overpaid, and the lender may have no further claim. On Rs. 1,00,000 borrowed, the ceiling on total recovery is Rs. 2,00,000 including all interest. Add up every repayment you can document, compare it to that ceiling, and take the calculation to a lawyer. Continuing to pay a demand that exceeds the ceiling is not a legal obligation.
A deed completed after signing, for an amount you never received, is challengeable, but challenging it requires evidence, which is why what you can prove about the money actually handed over matters so much. Bank transfer records, witnesses, and your own contemporaneous notes all help. Never sign blank paper, and if you already have, gather that evidence now rather than after a demand arrives.
The debt that feels unpayable is often not the debt the law recognises. Working out the difference is free, and it is the first thing worth doing.
The cheapest protection against this is never needing it. Aafno Hisab tracks what you owe and to whom, with interest-only loans and informal lending handled properly, in Nepali rupees on the Bikram Sambat calendar. See what it does.
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