NRB mulling over limiting cash-based transactionsIn a bid to make economic transaction transparent and curb the informal economic activities, the Nepal Rastra Bank (NRB) is planning to decrease the limit of cash-based transaction.
In a bid to make economic transaction transparent and curb the informal economic activities, the Nepal Rastra Bank (NRB) is planning to decrease the limit of cash-based transaction.
The new monetary policy, according to central bank sources, will come up with provisions to encourage payment through banking system.
NRB Governor Chiranjivi Nepal hinted at such a new policy during an interaction on Thursday.
Although cash-based transaction is the most common mode of payment in Nepal, the central bank, according to Governor Nepal, is now working to promote payment through banking system. “It is also important to curb illegal economic activities and money laundering,” he added.
Bankers say the NRB should form a policy to discourage cash-based transaction when it comes up with new monetary policy.
Nepal Bankers’ Association (NBA) has also suggested that the central bank gradually phase out cash-based transaction. “Currently, there is a provision of using cheque while carrying out transaction worth more than Rs5 million. Ultimately, this limit should be brought down to Rs500,000,” said Anil Shah, vice president of NBA. “If transactions are done through banking channel by using banking instruments like cheque, one has to provide source of income and should clear the applicable tax. So, this could be instrumental in squeezing the size of informal economy which is very large in our country.”
Bankers also say phasing out the cash-based transaction will curb the illegal economic activities. “Illegal economic activities have increased because of the cash-based transaction and failure to control illegal activities. This exposed the country to the risk of being black-listed for money laundering,” said a CEO of a commercial bank. “So, the central bank should discourage cash-based transaction.”
According to bankers, discouraging cash-based transaction will minimise the cost of currency management also.
“NRB’s huge resource is involved in printing and handling the currency notes. Discouraging cash-based transaction will save that cost as well,” said Bhuvan Dahal, CEO of Sanima Bank. “So, for those areas having strong presence of bank network, the NRB should bring a policy whereby almost all the transactions are done using various instruments of banks.”
The NRB is positive about the suggestion given by the various stakeholders to discourage cash-based transaction. “Discouraging cash-based transaction is our priority,” said Chinta Mani Siwakoti, deputy-governor of NRB.
“However, we can’t ban cash-based transaction at once; it needs to be done gradually,” he said. According to him, the central bank plans to address this issue through the next monetary policy.