The offences are alleged to have taken place between April 15 2005 and May 1 2005, and April 15 2005 and October 31 2005 at the Gorusinghe Army Barracks, Kapilvastu, Nepal.
These time periods fall within the Himalayan's nation's decade-long Maoist insurgency.
The government of Nepal summoned the British ambassador in Kathmandu to protest over the officer's arrest.
Nepal officials said Col Lama is serving as a military observer under the UN Mission in Southern Sudan and was on a holiday in London.
Scotland Yard said the arrest did not take place at the request of Nepali authorities
More top news
Amanda Houston has the latest weather forecast for the west of the ITV Meridian region.
Amanda Houston has the latest weather forecast for the east of the ITV Meridian region.
Former One Direction star Harry Styles and Hollywood actor Tom Hardy have been in Dorset for filming of their new blockbuster Dunkirk.