The Nepal Rastra Bank (NRB) has announced its monetary policy, which places a strong emphasis on digital banking. It has sparked interest in cryptocurrencies and the rise of digital finance. If the policy is effectively implemented, the current fiscal year will represent a watershed moment in the banking sector’s digital transition.
According to the monetary policy, the current fiscal year 2021/22 will be designated as the ‘Digital Payment Promotion Year,’ with the goal of reducing cash payments.
The government’s revenue and all forms of payments, such as social security allowances, pensions, and so on, will be paid using bank’s digital payment methods. Infrastructures will be monitored and awareness programs will be held in order to implement it.
Following that, payment service providers and payment system operators will be encouraged to extend their operations to include electronic payment services for customers of microfinance institutions (MFIs) and cooperatives. This will make digital financing much more accessible.
In the policy, it is also stated that the limit on digital payment transactions would be reviewed. Due to the pandemic, people are transitioning from physical to digital payment methods, therefore this feature will undoubtedly help a huge number of customers.
For the first time, the policy mentions digital currency. As previously mentioned, the Central Bank will conduct a feasibility study for digital currency in light of the growing use of the currency worldwide.
This will not only pave the way for the introduction of Central Bank Digital Currency (CBDC), but it will also pave the way for a formal discussion about cryptocurrencies, its potential, and its future in Nepal.
More than 83 countries throughout the world, accounting for 90% of global GDP, are now studying the usage of digital currencies, according to the Think Tank Atlantic Council.
Five countries’ central banks had used cryptocurrencies in an official capacity. Cryptocurrency is based on blockchain technology, which is a decentralized network that organizes and records transactions across numerous computers.
The security of this technology is part of its attractiveness. The most popular cryptocurrencies now are Bitcoin, Ethereum, Tether, Binance Coin, Cardano, and others.
According to the policy, a national payment switch for Nepal’s own payment card will be established this year. It specifies the installation of a national payment switch for the settlement and recording of payment transactions within Nepal, as well as the usage of Nepal’s own payment card and the interconnection of electronic payment devices.
NRB will carry out this task through its subsidiary Nepal Clearing House Limited (NCHL). This will end the current reliance on payment switches in foreign countries.
People can now apply for loans without having to physically visit banks or financial organizations (BFIs). As stated in the monetary policy, the NRB will develop digital loan guidance for BFIs to disburse digital loans.
Following its implementation, the service receiver can apply for a loan from the comfort of their own home, and the loan will be disbursed by banks and financial institutions when the application has been approved online. The amount of time it takes to process a loan will eventually decrease.
The Nepal Rastra Bank (NRB) will deploy digital KYC, which would eliminate the need for consumers to visit the bank to submit and update their personal information. The e-KYC system will be deployed based on technology, simplifying the customer identification method, as specified in the policy. It would not only make life easier for consumers and BFIs, but it will also save money for both parties.
Aside from the foregoing, the monetary policy 2021/22 stipulated that Internet Service Providers (ISPs) operating in rural regions would be eligible for a special refinancing facility. This will aid in the expansion of the internet in rural sections of the country, hence increasing access to digital services in those areas.
Looking closely at the monetary policy, it appears that positive steps have been achieved in the banking sector’s digitalization. However, there are a number of obstacles to overcome.
If properly implemented, it will allow the digital ecosystem to thrive, assisting in the realization of the ‘Digital Nepal’ vision. The NRB, banks and financial institutions (BFIs), service providers, and stakeholders should all work together and share equal responsibility for the policy’s implementation.
source: rising nepal