KATHMANDU, Feb 19: Nepal Rastra Bank (NRB) has shelved a plan to set threshold for cash transaction.
The central bank was preparing to fix the threshold of Rs 100,000 for cash transactions, restricting individuals and firms to make payments above Rs 100,000 in cash. However, the central bank has stepped back from its plan as a large section of Nepal still prefers cash over checks.
"Since people are yet to embrace cashless society, we have decided to put the proposal to lower the threshold for cash transactions on hold for now," an executive director of NRB told Republica. Currently, cash transaction is limited to Rs 5 million. However, transactions above the limit, which the central bank issued through a circular, is largely limited to the bank and financial institutions (BFIs) as it does not invoke the breach of any laws. NRB's preparation to lower minimum limit for cash transaction significantly had come amid growing concern about money laundering. By lowering the threshold, the central bank had intended to encourage the use of other negotiable instruments like checks, drafts, credit cards, debit cards, Internet banking, mobile banking and branchless banking, among others. Though the Asset Laundering Prevention Act (ALAP), 2008 requires any firm or individual to make transactions only through negotiable instruments while purchasing any products or services to a certain amount or more than the specific amount that the government publishes in the Nepal Gazette, the delay in setting threshold for cash transaction has affected implementation of the provision. Article 41 of ALAP states that the government shall make an arrangement for such threshold in consultation with the central bank. According to stakeholders, fixation of minimum threshold for cash transaction also helps to reduce tax evasion, revenue leakage, financial crimes and illicit flow of finance. Use of other negotiable instruments over cash also reduces the cost of the government in terms of publishing, issuing, circulating, handling and management, destruction, and securities of bank notes. "It would have been better if the central bank had introduced the new threshold. It is high time we promoted use of other negotiable instruments," Bhuvan Dahal, CEO of Sanima Bank Ltd, said.