Banks and financial institutions (BFIs) have seen a 30 percent drop in transactions by cheque in recent weeks, reflecting a contraction in economic activities due to a long-running Tarai banda and Indian embargo.

According to Nepal Clearing House Limited (NCHL), which clears cheques of A, B and C class BFIs, the number of cheques brought for clearance has come down to 20,000 to 22,000 daily from more than 31,000 a day.

“This is obviously due to a reduction in financial transactions as a result of sluggish economic activities in the country,” said Neelesh Man Singh Pradhan, Chief Executive Officer of NCHL. Despite the smaller volume of cheques, there is not much effect on turnover though,” he added. “Cheques worth Rs10 billion are being cleared daily compared to around Rs13 billion a day previously,” he said.

The highest recorded single-day cheque clearance by NCHL stands at 78,000. Pradhan said the NCHL system has the capacity to clear more than 100,000 cheques a day.

Electronic cheque clearing began four years ago in the country.

According to the government’s white paper on economy that was unveiled recently, industrial production has virtually come to a halt due to shortage of raw materials and petroleum products. Moreover, it has become difficult to ship agricultural and industrial products to market as the transportation system has been crippled, it said.

All the service sectors including hotel, restaurant, tourism, construction, banking, transport and those contributing more than 50 percent to the GDP have been heavily affected by the shortage of petroleum products and other essential materials, according to the white paper. It said that mega infrastructure projects had also been ground to a halt due to lack of fuel, affecting the economy.

According to bankers, number of cheques brought for clearance has fallen in recent days.

Diwakar Poudel, Head of Brand and Marketing and Corporate Affairs at Standard Chartered Bank Nepal (SCN), said that the volume of cheque clearance at Standard Chartered had come down to around 1,400 to 1,500 cheques daily from 1,800 to 1,900 earlier.

“When business transactions don’t happen, cheques aren’t brought for clearance; it’s obvious,” he said.

 “Business transactions are usually done in cheques, while cash is used for other normal transactions,” said Mega Bank CEO Anil Shah. “We have witnessed a massive fall in cheque-based transactions.”

Sanima Bank CEO Bhuvan Dahal said, “Transactions largely started to come down after Dashain as the situation started to worsen. We have witnessed a fall in both cash- and cheque-based transactions. Now, there is low movement of both goods and people in the absence of fuel and transport.”