Nepal is going through a digital transformation, and the central bank is also playing a key role in facilitating this process. We can see this in the Monetary Policy of Nepal for the current fiscal year 2080/81 as well. The policy contains several exciting initiatives that aim to promote the technology sector (fintech in particular) and the digitization of the country’s economy.
In this article, we are highlighting five of the most interesting aspects of the monetary policy for 2080/81 that will have an impact on the tech industry and the consumers:
1. Encouraging digital payments
The monetary policy seeks to enhance the physical, legal and regulatory infrastructure for payments and settlements, making electronic transactions easier, safer and more efficient. The policy also emphasizes the use of advanced equipment and technology for international gateways to facilitate cross-border payments. This will help Nepal connect with the global economy and increase its competitiveness. We have already witnessed a significant growth in electronic payments in Nepal due to NRB’s initiatives and monetary policies in previous years.
2. Integrating National ID for centralized KYC
KYC stands for Know Your Customer, which is a process of verifying the identity of customers who use financial services. The monetary policy plans to coordinate with relevant bodies to develop and implement a centralized KYC system that will use the National ID issued by the Government of Nepal. This will simplify the exchange of customer information between banks, financial institutions and other licensed payment service providers, and improve the centralized KYC system.
3. Studying the possibility of Central Bank Digital Currency (CBDC)
The policy mentions further study of the feasibility and implications of issuing a Central Bank Digital Currency (CBDC) by NRB. NRB will take further steps based on findings from the study.
CBDC is digital currency issued by central banks as legal tender money, and a likely substitute for physical cash. You can read the concept report about CBDC planned by NRB here.
4. Enabling electronic payments at government offices
The monetary policy plans to enable electronic payment systems at government organizations to facilitate revenue collection. This will not just make revenue collection faster and smoother for the government, the citizens too won’t have to sit in long queues to pay taxes, fees, and fines.
5. Simplifying foreign currency transactions for service exports
The policy aims to make the system of receiving foreign currency through electronic means easier and more effective for export of information technology and other services.
Furthermore, the policy also mentions that IT companies exporting their services abroad will be provided with foreign exchange facility up to a certain percentage of the foreign currency earning, through commercial banks, to set up an office in another country, pay foreign entities, transfer money to their own overseas account, and purchase and install software or equipment. Nepali IT companies would definitely find this facility quite helpful.
The monetary policy of Nepal for 2080/81 reflects the vision of NRB to foster a digital economy that is inclusive, resilient and sustainable. The policy contains several measures that will benefit the technology sector. The central bank has previously introduced a policy to enable dollar payments from Nepal through prepaid cards issued by banks. It has also encouraged mergers among payment companies to create economies of scale and scope. The latest monetary policy further strengthens the role of the central bank in facilitating international payments and fostering innovation in the fintech sector.
You can read the full document of the Monetary Policy of Nepal 2080/81 on NRB’s website here.