Such transactions to be treated as foreign currency fraud
KATHMANDU, Feb 1: Nepal Rastra Bank (NRB) has announced that it will take action against those making or receiving international payments for advertisements on the internet and in social media like Facebook, Twitter and YouTube as well as online portals.
Issuing a notice on Friday, the NRB has warned that making payments abroad for such advertisements in social media including Facebook and Twitter, as well as receiving such payments, is illegal. The central bank also made it clear that it will take action under foreign currency-related offences against those who carry out such transactions.
“Those who want to advertise free of cost or after taking permission from the central bank could do so. However, making or receiving foreign currency payments through informal channels like hundi is illegal,” Bam Bahadur Mishra, an executive director at NRB, told Republica.
“NRB will treat illegal transactions as instances of foreign currency embezzlement,” added Mishra, who heads the Payment Systems Department of NRB.
The central bank notice comes in the wake of the growing volume of advertising in social media and other online sites. As a marketing or advertising tactic, many private companies and business groups, as well as individuals, have been boosting their posts in social media like Facebook and Twitter.
The move will not only affect those who want to advertise in social media, but it also means that those who earn foreign currency from social media like YoutTube will have to do so through formal banking channels, according to NRB officials.
Officials say that the repatriation of payments for advertising in social media as well as other online platforms abroad is illegal and such transactions also deprive the government of tax.
Though any transaction in foreign currency without the central bank’s permission is illegal, advertisers were reportedly circumventing this by transferring payments for advertising through informal channels like hundi.
NRB officials claim that one of the reasons behind slow growth in remittances is hundi, which has flourished.
The move to regulate foreign currency transfers for advertising in social media and online sites comes in contrast to a provision in the monetary policy for the current fiscal. The authorities had announced that they would bring in policy to manage such transactions. However, the new notice is aimed at tightening the flow of advertising to social media and online sites with payment in foreign currency.
Advertising agencies say that the move will squeeze the digital advertising business. “With the central bank crackdown, digital advertising is going to be badly affected,” said Santosh Shrestha, former president of the Advertising Association of Nepal.
The central bank’s limit on payments for advertising agencies is very low. And social media don’t have offices in Nepal to deal directly in local currency,” he added.
Guru Prasad Poudel, head at the Foreign Exchange Management Department at NRB, told Republica that the move is not aimed at controlling digital advertising. “Such transactions have largely been made through informal channels. We just want them to come into the formal channel,” added Poudel.