KATHMANDU, Dec 3: The government has halved the ceiling on cash transactions for the purchase of goods and services to Rs 500,000 per transaction in a bid to promote the formal banking system, encourage digital payments, and curb revenue leakage and financial crimes.
A recent Cabinet meeting decided that any transaction exceeding the new limit must be carried out through banks or other financial institutions. Government Spokesperson and Minister for Communications and Information Technology Jagdish Kharel said the provision will come into force from mid-January.
Kharel said the measure aims to expand the use of banking tools and ensure that more economic activities take place through formal and digital channels.
Revised interest rate corridor system introduced
Previously, a government notice published in the Nepal Gazette on March 23, 2017 had made it mandatory for transactions above Rs 1 million to go through banks and financial institutions, effective from July 16, 2017. The revised ceiling will become effective after it is officially published in the Nepal Gazette.
Spokesperson for Nepal Rastra Bank (NRB) Guru Prasad Paudel said the step is intended to channelise cash-based transactions into the formal banking system and is expected to further expand electronic payments across the country.
According to the NRB, transactions beyond the prescribed limit can be carried out using checks, mobile banking, internet banking, RTGS, IPS, and ConnectIPS.
However, the limit will not apply to cash deposits made at banks and financial institutions. It will also not be applicable to payments of loan including principal amount, interest or installments, or transactions between financial institutions.
Likewise, individuals will be allowed to keep large amounts of cash at home for specific purposes after disclosing the source. For family and social functions such as weddings and parties, the limit will not apply provided the source and purpose of the money are disclosed.
The provision is also aligned with the Asset Laundering Prevention Act, which requires firms and individuals to use non-cash payment instruments—such as checks, bank transfers and digital payment platforms—for transactions above the threshold specified by the government in the Nepal Gazette.
NRB officials said fixing a lower cash transaction ceiling will help reduce tax evasion, revenue leakage, financial crimes and illicit financial flows. The wider use of digital payment instruments is also expected to reduce government costs related to printing, issuing, transporting, handling, managing, destroying and securing bank notes.
