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Nepal Caps Cash Deals at NPR 500k to Curb Money Laundering

The Nepali government has imposed a limit of NPR 500,000 on cash transactions for goods and services, effective January 15. The move is designed to curb illegal financial activities like money laundering and terrorist financing. The decision aligns with the Asset (Money) Laundering Prevention Act and comes as Nepal is re-listed on the FATF's monitoring "grey list." Exceptions to the rule include depositing cash at financial institutions and repaying loans.

Key Points: Nepal Limits Cash Transactions to NPR 500,000 from Jan 15

  • New NPR 500k cash transaction cap
  • Aimed at preventing money laundering
  • Exceptions for bank deposits and loan repayments
  • Follows Nepal's FATF grey-listing
2 min read

Nepal restricts cash transactions above NPR 500,000 at a time

Nepal restricts cash transactions above NPR 500,000 to combat money laundering and terrorist financing, following FATF grey-listing.

"Any individual, firm, company, or institution must carry out... any other transaction amounting to NPR 500,000 or more... through a financial institution - Nepal Government"

Kathmandu, Jan 10

The Nepali government has imposed a limit of NPR 500,000 on cash transactions for the purchase or sale of goods and services in a single transaction, effective from January 15.

"Any individual, firm, company, or institution must carry out the purchase or sale of any service or goods, or any other transaction amounting to NPR 500,000 or more in a single transaction through a financial institution or banking instrument, given the capping of cash transactions," the government said in a notice published in the Nepal Gazette on Thursday.

The government said the decision was taken in line with the Asset (Money) Laundering Prevention Act, 2008, which authorises it to impose restrictions on cash transactions.

Considering that cash transactions facilitate illegal financial activities, including money laundering and terrorist financing, the government has introduced the limit on cash transactions. The decision comes at a time when Nepal has been re-listed on the "grey list" of the Financial Action Task Force (FATF), the global anti-money laundering body.

The cash transaction limit has been set with certain exceptions. The restriction does not apply to depositing cash at a financial institution, repaying loans taken from financial institutions-including repayment of principal and interest-or conducting cash transactions between financial institutions.

Provided that the source and purpose of the cash are clearly disclosed, the new restriction also does not apply to the possession or transportation of cash within the country. Financial institutions are also not barred from providing cash beyond the limit to depositors, provided the depositor submits an application citing special circumstances.

Meanwhile, Nepal's central bank on Friday directed licensed banks and financial institutions to make payments of NPR 500,000 or more mandatorily through an account-payee cheque or by depositing the amount directly into the concerned person's account. Earlier, such a limit was NPR 1 million.

As per the directive issued by Nepal Rastra Bank, payments of cheques drawn in the name of a firm, company, institution, or office must also be made only as account-payee cheques.

"If a depositor submits an application requesting cash payment by stating a specific reason, and the details and reasons stated in the application are found to be reasonable, cash payments exceeding the specified limit may be made to such depositors," the central bank said in its directive.

- IANS

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Reader Comments

P
Priya S
Good step for transparency, but I worry for small businesses and in rural areas where banking penetration is low. Digital payments are not always reliable. Hope they have a smooth transition.
A
Arjun K
FATF grey listing is a serious issue for any country's economy. This is a necessary corrective measure. Nepal's economy is closely linked to ours, so stability there is good for the region.
S
Sarah B
Interesting. The limit is about 3.15 lakh INR. In India, we already have restrictions on cash transactions above 2 lakh rupees for certain things. Seems like a global trend now to move towards digital trails.
V
Vikram M
They have kept reasonable exceptions for loan repayment and deposits. The key is implementation without harassment. Our experience with demonetisation showed how painful sudden cash curbs can be for the common person.
K
Karthik V
This will definitely impact the real estate and gold markets where large cash transactions are common. It's a step in the right direction to bring more transactions into the formal economy. Jai Nepal!

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