Cash transaction to be limited to Rs. 500,000

Kathmandu, July 16: Acting Governor of Nepal Rastra Bank,Chinta Mani Siwakoti Sunday said the ceiling on cash transaction might go down to as low as Rs. 500,000 per deal.

Through the Monetary Policy 2017/18, the central bank had brought down the ceiling of payment in cash to Rs. 1 million from Rs. 3 million.

The new provision of Rs. 1 million in cash payment has been effective from the first day of the new fiscal year,July 16, following the publication of the notice in the Gazette for the same.

Any payment above Rs. 1 million must be paid through an account payee cheque.

“The ceiling of payment in cash has been brought down in order to reduce the risks associated with cash. The central bank has implemented it with the aim of reducing money laundering activities,” said Siwakoti, while speaking at an interaction on ‘Monetary Policy of 2017/18’, organised by IBN Media and Research.

According to him, the NRB has set the limit of cash payment to Rs. 1 million although the government had suggested bringing it down to Rs. 500,000, and informed that the limit would reach half-a-million rupees soon.

The Acting Governor said that about 550 local units would have at least a branch account within this fiscal year.

“The central bank has received great support from the commercial banks in expanding banking services to the rural areas. In the case of the remaining local units, the NRB has urged the government to allow the development banks to conduct government transactions,” he said.

He also said that Indian currency notes of Rs. 500 and Rs. 2000 denominationswere not allowed for financial transaction and bank exchange in the country since the southern neighbour had not communicated with the NRB regarding the use of higher denomination Indian currency in Nepal.

The Indian government had demonetised currency notes of Rs. 500 and Rs. 1000 last year, which forced hundreds of thousands of Nepalisto lose the value of the Indian currency they held in cash.

Executive director of the NRB Narayan Prasad Paudel said that the central bank was preparing to reduce the spread rate to 4.5 per cent from the current 5 to 5.5 per cent, as per the Financial Sector Development Strategy.

He also said that the NRB was not yet prepared for capital account convertibility – which is necessary to allow Nepalese citizens to take money to a foreign country for investment and other purposes.

President of the Nepal Bankers’ Association (NBA) Anil Keshari Shah urged the government to work for the economic progress of the country.

“The financial sector is ready to follow the government leadership to support and contribute to the economic growth of the country,” he said.

According to Shah, as the interest rates are shooting up, people are motivated to deposit their money in the banks.

Presenting a paper on the monetary policy, coordinator of the Banking Committee at the Confederation of Nepalese Industries (CNI) Anal Raj Bhattarai said that although the budget of the current fiscal year was announced to allow capital account convertibility, the monetary policy was silent on the issue.