Feb. 10, KATHMANDU: Commercial and development banks conducting remittance business can now make remittance payments of up to Rs 100,000 in cash.
Earlier in November, Nepal Rastra Bank (NRB), the central bank, had issued a circular on remittance business management directing commercial and development banks to start making remittance payments to beneficiaries through bank accounts within a year.
Bankers, at that time, had complained that NRB's directive had created uneven playing field for class 'A' and 'B' financial institutions because it was not mandatory for remittance companies to follow that rule.
The bankers had then warned that the 'discriminatory provision' would not only cause banks to lose business but 'encourage Nepalis employed abroad to rely on informal channels to transfer funds home because banking network has not expanded to many rural areas'.
Issuing a directive today, NRB said banks, financial institutions and remittance companies can make remittance payments of up to Rs 100,000 in cash, while payments exceeding that amount have to be made through cheques or deposited in bank accounts.
The latest directive has also loosened rules on fixation of exchange rates for clients here and abroad.
"Banks, financial institutions and remittance companies must follow the exchange rate fixed by the Foreign Exchange Dealers Association of Nepal at 10:00am and 2:00pm and use it as remittance exchange rate," says the directive. "Such rates should also be made available to NRB's Foreign Exchange Management Department."
Earlier, NRB had made it mandatory for commercial and development banks to make use of common exchange rate here and abroad.
Bankers had complained this provision gave undue advantage to remittance companies, because public exposure of such rates would provide leverage to those engaged in illegal money transfer business to mark up exchange rates to rope in clients.
NRB had introduced the provision after detecting inconsistency in fixation of exchange rates for domestic and overseas purpose. In other words, banks were found fixing exchange rate of, say, Rs 98 per dollar for domestic purpose, and inflating that to, say, Rs 101 per dollar in countries like Malaysia and the UAE to attract migrant workers, triggering unhealthy competition.