Nepal Rastra Bank will launch the real time gross settlement system in mid-September which is expected to ease settlement of online payment.

The real time gross settlement system is a funds transfer system in which money is moved from one bank to another in real time and on a transaction by transaction basis, which means there is no waiting period.

Real time gross settlement transactions can also be carried out between individuals via a legal framework. It is typically used for high-value transactions or urgent transactions that require and receive immediate clearing.

According to the central bank, real time gross settlement helps prevent risk by integrating digital payment settlement in its account before payment is passed to the collecting bank.

Chintamani Shiwakoti, deputy governor of Nepal Rastra Bank, said the central bank planned to launch the real time gross settlement system on September 15. “Once the system is activated, digital payment service providers will be incorporated in the system and they will be issued a separate licence to operate in the country,” said Shiwakoti.

Several digital payment service providers have been operating without being linked to the country’s payment system in the absence of a real time gross settlement system. This has led to revenue leakage and misappropriation of foreign currency.

Last April, Nepal Rastra Bank imposed a ban on accepting payment via AliPay and WeChat Pay, China’s most popular mobile payment platforms.

“The central bank has termed the payments illegal as they were not incorporated in the country’s tax system, and the country was losing foreign income due to illegal use of these payment applications by Chinese tourists,” said Shiwakoti.

Following the move, the central bank has been working jointly with the Nepal Telecommunications Authority to introduce regulatory policies for digital financial service providers. “All payment systems will be monitored, and all payments of value added tax, income tax and excise duty can be made digitally, once the real time gross settlement system comes into operation,” said Shiwakoti.

The payment system was under full control of banks and financial institutions until the rise of eSewa in 2009. After its operation as a digital wallet in 2009, customers could pay, send and receive money from their mobile phones and over the internet even without a bank account.

The proliferation of digital payment service providers globally prompted the central bank to devise a mechanism to track payment settlements. Five years ago, it drew up the Nepal Payment System Development Strategy with the aim of launching the real time gross settlement system.

Nepal Clearing House was established as a public limited company in December 2008 in order to digitise cheque clearing services. The organisation now looks after multiple payments, clearing and settlement systems in Nepal. Apart from facilitating electronic cheque clearing services, it provides automated clearing house services in the form of the Interbank Payment System.

Shiwakoti said that following the implementation of the real time gross settlement system, the clearing house will serve as an intermediary to enable banks to initiate and process transactions between the real time gross settlement system and its internal system. According to him, the real time gross settlement system will help to minimise systemic settlement risk in particular.