Cash withdrawal above Rs 500,000 via cheque prohibited, Account payee made mandatory

KATHMANDU: Nepal Rastra Bank (NRB) has introduced a new restriction prohibiting cash withdrawals of more than Rs 500,000 per transaction through cheques, tightening controls on cash-based transactions to curb money laundering and improve financial transparency.

Under the new provision, cheques issued for amounts exceeding Rs 500,000 must be account payee, meaning the funds can only be deposited into the beneficiary’s bank account and cannot be encashed. The central bank has formally reduced the cash transaction threshold from the earlier limit of Rs 1 million to Rs 500,000.

The move follows the government’s decision to lower the permissible cash transaction ceiling as part of its broader strategy to minimize asset laundering and informal cash dealings. Although the decision had already been published in the Nepal Gazette, NRB has now enforced the provision through binding directives to banks and financial institutions.

According to NRB, any amount exceeding Rs 500,000 must be credited directly to the concerned individual’s bank account. Individuals or institutions conducting transactions in cash are now limited to a maximum of Rs 500,000 per transaction. Transactions above this threshold must be executed strictly through account payee cheques or direct account transfers.

The central bank has directed all banks and financial institutions to comply with the rule without exception. Payments of Rs 500,000 or more must not be made in cash and should be settled only via account payee cheques or deposits into the beneficiary’s account. Cheques issued in the name of firms, companies, institutions, or offices must also be account payee, eliminating the possibility of third-party cash encashment.

NRB Spokesperson Guru Prasad Paudel stated that the new rule is designed to discourage illegal cash circulation while ensuring that legitimate social and business activities are not disrupted. He clarified that families collecting funds for social purposes or businesses engaged in lawful cash-based trade would not be adversely affected by the provision, provided transactions remain transparent and compliant with regulations.

However, the directive allows limited flexibility in exceptional cases. If a depositor or saver submits a written application citing valid and reasonable grounds for requiring cash payment above the prescribed limit, banks and financial institutions may approve such requests. In such cases, institutions must maintain proper justification and update detailed monthly records of these transactions.

The central bank has also extended the same requirement to microfinance institutions. In line with the objectives of the Anti-Money Laundering Act, 2064 (2008), microfinance institutions are now required to make payments of Rs 500,000 or more strictly through account payee cheques.

NRB officials say the revised threshold is expected to strengthen transaction traceability, reduce the misuse of cash in illicit activities, and encourage greater use of formal banking channels. Banks have already begun adjusting their internal compliance systems and informing customers about the revised cash withdrawal limits.

The directive takes immediate effect and applies uniformly across the banking and financial sector, reinforcing the central bank’s push toward a more transparent, accountable, and digitally traceable financial system.