KATHMANDU, Aug 15: Nepal Rastra Bank (NRB) has increased the ceiling of payment that importers can make through draft or telegraphic transfer (TT) system to US$ 50,000, up from $40,000.
The move is a part of the central bank's attempt to offer foreign exchange flexibility to international traders. Traders in Nepal use TT system for import of goods and services mostly from China, Hong Kong and Singapore.
TT is an electronic way to transfer money to an overseas party, while draft payment method is made on behalf of a payer that is guaranteed by the issuing bank.
“We have raised the ceiling as traders had long been complaining that the existing limit is too little for payment through TT which they easier and convenient,” Bhisma Raj Dhungana, executive director at NRB, added.
Importers can make payment as per the ceiling only once a week, says Dhungna. “However, an importer can make another payment before seven days if s/he can submit document that proves that the goods have already been shipped,” he added.
A circular issued by the NRB on Sunday says that such payments can be made only to the supplier, and on the basis of invoice that shows the amount of the purchased service or goods.
The limit on transfer of payment was fixed as the payment method also carries high risk, according to officials of the NRB. "Though this is a convenient mode of payment, there are also risks like supplier conning the importer after receiving payment,” Dhungana said, adding: “Payments higher the prescribed ceiling can be made by opening letter of credit (LC) which is more reliable," Dhungana, who heads the Foreign Exchange Department of NRB, said.
Traders have welcomed the decision, stating that it will make it easier for them to make payments.
"TT and draft are the easiest and relatively cheaper methods of payment transfer because opening LC is a bit costlier as we have to negotiate the charge for it. Even if we import by opening LC, we will have to suffer loss if the import is less than the prescribed quantity or of inferior quality. At times, we have to mistakes committed by other," Dinesh Shrestha, vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said. "The decision to raise the ceiling will make it easier and cheaper for us to import goods."