People will not be able to get remittance in cash from commercial and development banks after a year, with the Nepal Rastra Bank (NRB) on Sunday directing these banks to make arrangements for making the payment through bank accounts within the period.

This provision will hit the banks not having branches in rural areas, while money transfer agencies will benefit. Finance companies have not been allowed to do remittance transactions yet. In a new directive, the central bank told the banks involved in the remittance business that they should acquire a separate licence to continue their business. The licence has to be renewed every five years.

The banks have to open a separate account abroad for remittance transactions and should submit statement of the transactions to the central bank every month, according to the directive. The central bank directive has come at a time when the country has been witnessing a decline in remittance for the first time in several years. The inflow declined in the second and third months of fiscal year.

A senior NRB official said the directive would help address problems in remittance transactions and help keep records. “It is necessary to know how much and from the money entered the country,” he added. The central bank has also told the banks to submit details about the remittance and payments, income, expenditure and commission levied on a half yearly basis and receive the payment only in foreign exchange terms.

The banks have also been asked to bring uniformity in the exchange rate. Exchange rate for remittance transaction should be maintained the same as that maintained for other foreign exchange related businesses, according to the directive. The banks have been barred from making pre-payment of remittance. However, this can be done only if the foreign bank gives a guarantee for the same.

Bankers said they were surprised by the NRB directive which was against what was told to them during a discussion held before issuing the directive. “It will create difficulties for the people,” said a chief executive of a bank.

Published on: 1 December 2014 | The Kathmandu Post