KATHMANDU, Jan 13: The monetary value of electronic transactions in Nepal decreased by over Rs 2.4 trillion in a one-month period between mid-November to mid-December as compared to the previous month although the number of transactions increased.
According to the monthly report published by Nepal Rastra Bank, electronic transactions in Mangsir (mid-November to mid-December) dropped to Rs 7.057 trillion from Rs 9.486 trillion in Kartik (mid-October to mid-November).
The central bank, however, reported an increase in the number of transactions during this period. The number of electronic transactions in the review month increased by 11.963 million units compared to the previous month. Electronic payments in mid-October to mid-November totaled 129.7 million, while in mid-November to mid-December, they rose to over 141.7 million.
Although banks have excess liquidity at present, they have failed to increase credit disbursement into the market, directly affecting the transaction value. The central bank has reported a decline in the amount of electronic payments since the start of the current fiscal year. According to an official from the central bank, the decline in payments by the general public and the government is due to the lack of money flowing in the market.
"The general public only has access to funds when money flows in the market," the source said. "When the public has money, it leads to increased spending, which directly impacts payments."
Number of electronic transaction increases, while transaction a...
Large government payments have been made especially through the Real-Time Gross Settlement (RTGS) system. Payments for large contracts, intergovernmental payments, and other revenue payments are processed through this system.
However, from mid-October to mid-December in the current fiscal year, payments made through this system have decreased by Rs 2.525 trillion. According to the central bank, the largest share of electronic payments comes from the RTGS system. However, there has been a significant decline in payments through this system in the review month (mid-November to mid-December). Despite this, the number of transactions has increased by around 4,000 compared to the previous month (mid-October to mid-November) when 59,304 transactions were processed through the RTGS system. In mid-November to mid-December, this number increased to 63,509 transactions.
During this period, the general public made fewer transactions through ATM withdrawals, debit cards, and credit cards. However, payments through electronic check clearing, IPS payments, mobile banking, wallets, and QR-based payments have seen a slight increase.
In terms of payment numbers, payments made through IPS, credit cards, and branchless banking services have declined.
Thus, the significant drop in electronic payments in Nepal is not solely due to economic contraction. The government-imposed value-added tax (VAT) on electronic payments is also a key factor.
Data shows that consumers have been discouraged from using electronic methods due to the Rs 11 charge on even small transactions.
In Shrawan (mid-July to mid-August) of the current fiscal year, mobile banking payments totaled Rs 377 billion, but in Bhadra (mid-August to mid-September), they dropped to Rs 364 billion. Similarly, payments, which had increased to Rs 400 billion in Ashoj (mid-September to mid-October) due to festivals like Dashain, have started to decline. QR-based payments have followed a similar trend. Payments, which exceeded Rs 6 billion in mid-July to mid-August, decreased to Rs 5 billion by mid-November to mid-December. Other payment methods used by the general public, such as ATM, internet banking, IPS, connect IPS, e-commerce payments, and wallets, also show a similar pattern.
Five years have passed since the government prioritized reducing cash transactions and promoting digital methods, but data shows that the lack of effective implementation of existing policies has caused problems. In the budget for the fiscal year 2019/20, the government introduced a VAT refund policy to encourage digital transactions. Under this policy, consumers received a 10 percent VAT refund in their bank accounts for transactions ranging from Rs 1,000 to Rs 100,000 when payments were made through mobile banking, internet banking, wallets, or debit cards.
However, the government removed this program from popular platforms such as Esewa, NCHL, and PhonePay starting from the current fiscal year. As a result, consumers now have to pay more than Rs 11 in charges on each transaction.
This decline in electronic payments has impacted various sectors of the economy. On one hand, as digital payments decrease, the likelihood of increased cash flow rises, which could create liquidity management issues for banks. On the other hand, the government's efforts to promote digital payments have clearly not been effective.
