Nepal Rastra Bank Prepares to Bring International Payment in Nepal: System Drafted

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The Nepali tech community has been asking to ease the rules regarding international payment for a long time. This has been a leading issue for many people in IT, freelancing, entrepreneurship, and business. This topic was recently discussed in the Fonepay Digital Economy Conclave. The governor of Nepal Rastra Bank, Maha Prasad Adhikari, said they are working to bring international payment in Nepal. According to Mr. Adhikari, this is the demand of time, and NRB is studying this. The final modality and implementation will happen soon in the future because it is inevitable. NRB has also drafted a framework for exchange service.

Currently, in Nepal, people can’t easily make international payments. This means it is hard to pay for international services like software, cloud services, hosting, domain registration, CDN, subscription services, and shopping sites. Banks don’t easily issue international credit or debit cards to people. So people ask third party service provides, relatives, and friends abroad. There is another problem of receiving as well. Many payment service providers don’t work in Nepal. Therefore people also can’t receive their incomes from work like freelancing. The biggest issue is that PayPal doesn’t allow to receive money in Nepal. However, international cards issued by Nepali banks do work with PayPal for making payments. We have more details on PayPal in Nepal and its operation.

Foreign Currency Exchange for Purchasing Services Online

Nepal Rastra Bank has published a document for consultation regarding foreign currency exchange service for purchasing international services online. The document has the framework for this long awaited process. Latest consultation document discusses the current status. It says that if easier online payment for small payments is not eased, it will push for Digital Hundi. This means people using PayPal, Payoneer, and international cards of relatives and friends in abroad to make payment for themselves. The consultation document also discusses on the need for international payment for Facebook, Google, and Twitter digital advertisement.

Most importantly, NRB focuses on the need for new international online payment for purchasing software, apps, domain, hosting, training, subscription, and boosting the digital economy. However, a point in the document also focuses on the pressure on our forex reserve. The rampant use of the service can also cause depletion in reserve. Therefore banks and financial institutions are advised to provide service with conditions. NRB wants to legally open the new channel to tackle the possible “Shadow Economy” in Nepal.

Proposed System

Nepal Rastra Bank has proposed a new system for providing international payment to Nepalese users. But there are limitations and conditions. Banks and financial institutions can issue prepaid cards with a maximum of $500 or equivalent foreign currency by accepting some conditions. The conditions and requirements for getting an international prepaid card are as follows.

  1. Banks can exchange currency from requesting persons or company NPR account to give USD prepaid card. The person or company should have updated KYC and PAN card.
  2. Commercial banks should issue prepaid cards of $500 at maximum by taking the same day’s exchange rate. They should also deduct any tax that may incur while purchasing international services online.
  3. A person can take the $500 maximum amount service in the card at once or in installment. It means you can load all amount at once or do at different times as necessary.
  4. Users can purchase legal services and goods online. But they are not allowed to buy services and goods illegal according to the law of Nepal.
  5. If users earn at least double the loaded amount of foreign currency and show the proof, banks can load more money than limit by assessing need and importance. This is like a credit score. If you earn more your limit is increased.
  6. Card requesting person should declare that he/she has not taken such service anywhere else.
  7. A person can’t load money in the card in name of another person except his/her own.
  8. If you take such a prepaid card from more than one bank, you will be prosecuted according to the Foreign Exchange (Regulation) Act.
  9. Users should follow all rules regarding money laundering.
  10. Banks should submit information about issued cards and payments made from such cards to NRB Foreign Exchange Management Department.

NRB To Bring International Payment in Nepal For All

In the Conclave, the Governor of Nepal Rastra Bank said that they are working on easing international payment in Nepal. This is to help people in the IT field, freelancers, creators, entrepreneurs, students, and people, to pay for necessary services and subscriptions. This will allow productive people to pay for their necessities and basic services. For example, people can pay for hosting, cloud computing, AWS, CDN, domain registration, and other services. This is an investment because the business and people will also bring money back. This has been a demand for people in the IT field for a long time. Easy PayPal operation and the option to receive through it is one of the biggest demands. People also want ease to receive international payment through banks and pay from debit cards.

In the program, the governor of NRB also said that they have an internal discussion of providing $500 account to interested people who demand such service. People can get an account with a limit that can be used to pay for the service and subscription they need. This will allow people to grow their business and service. NRB currently allows travelers to get $1500 exchange service after showing visa and air ticket. This is similar, and it is more beneficial because it helps the students and interested people for their business and freelance work.

International Payment in Nepal is actually available through special USD cards. They are hard to get because it needs to show a regular USD income and employer contract or visa and air ticket. Many people and organizations in Nepal have such cards. They mostly get through NRB currency exchange permits and income documents of INGO. However, the new upcoming payment procedure will make it easy for all people to make an account and pay.

Benefits to Nepalese Service and IT Sector

There are many people and organizations in the service sector, such as software, programming, editing, and content creation. In this business, people need to pay for some necessary services, software, and subscription. For example, hosting and expert services. But in turn, the Nepali freelancers, IT related workers, programmers, designers, app developers, editors, and content creators can earn. This means money will come inside Nepal as well. Mr. Adhikari also discussed this and said that there is benefit because revenue will be generated by people in this field. When we enable people to do productive work, it will turn into a good result. But this requires ease in payment and receiving mechanism.

After initiating an easy international payment system, small businesses could also pay for international shopping sites such as Amazon, eBay, AliExpress, Alibaba, etc. This can enable people to do some business like dropshipping. People can get good products, and in turn, some people will also earn money. People will also be able to pay for entertainment services such as Netflix, Prime Videos, Hulu, Disney+, and Google Play Store. The governor of Nepal Rastra Bank said that this is a common international practice and it can’t be stopped therefore it will eventually come. But the main thing is the process, and everything is in the pipeline, including the study.

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Foreign Currency Reserve and Fraud

Forex reserve is very important for any country to pay for imports. All imports are done by paying in USD. This is the main reason NRB restricts the outflow of USD. A country gets foreign currency mostly through exports and remittance. And in the case of Nepal, we have less export, and we depend more on remittance. However, in the conclave, the governor of NRB said that Nepal is in a good foreign currency reserve position. Nepal can currently sustain its 14 months worth of imports with the FX reserve. Therefore they can allow international payment in Nepal and $500 account program. Also, as told before, payments made for such business will also bring revenue and remittance from inward payments.

Mr. Adhikari also shed some light on the concern of misuse. People might misuse the payment system and $500 account or exchange service. Big misuse of the payment can be bad for the economy, society, and Nepal. Therefore he said that there must be awareness programs on this topic. People should use the payment service wisely. Many people might pay for unnecessary luxury services and cause a heavy outflow of USD or our forex reserve. Then there is another concern of money laundering and people sending money for illegal activities.

So currently we are in a waiting situation. NRB is in the process and conducting a detailed study. Soon the new monetary policy might bring this. Then we will see banks and payment service providers (PSP) to involve in the process. Many of us want easy access to international USD card and full PayPal service. These things will remove many hurdles currently prevalent in the industry. Now we will find details in the future when this service is implemented.

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About the Author: Prabin Koirala

Chartered Accountancy pursuant, economic science and taxation aficionado with a knack of technology

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