The beautiful Rara lake in Mugu disrict was once a valley. One day a hermit came to the village and begged the villagers for food but a foolish woman gave him instead a handful of ash.
The hermit turned back at once, going the way he had come, telling all the good people who had given him alms to go up the mountain. He went up the mountain himself and then with a blow of his hand, he broke his tumbler and the water in it ran down the slope. There was an unending flow of water untill the village was submerged and the whole valley became a lake.
Trapped in the mountains, the water continued to rise until the newly-formed lake itself wondered whether it should seek an outlet to the east and sweep away all the salt of Mugu or flood the rice paddies of Achham in the south.
Now, a holy man who lived in a mountain to the east of the lake knew what was going on. He said to himself that if the water came to the east, his own importance would be lost. So, he kicked at the hills in the south and made a passage for the water to flow down towards Achham. And that was how the lake came to be formed.