Nepal Tightens Cash Transaction Limit to Rs. 500,000: A Major Step Toward Financial Transparency and FATF Compliance

Nepal has tightened the ceiling on cash transactions in an effort to curb money laundering and strengthen financial transparency. The government has decided that any transaction of Rs. 500,000 or more must now be conducted through banks, financial institutions or digital payment channels. Announcing the decision after Monday’s Cabinet meeting, government spokesperson and Minister for Information and Communications Jagdish Kharel said the move is aimed at aligning Nepal with international anti–money laundering standards and helping the country avoid being placed on the Financial Action Task Force’s grey list.

Earlier, individuals were allowed to carry out cash transactions of up to Rs. 1 million. With the new rule in place, any payment or receipt exceeding Rs. 500,000 must go through the formal banking system. The government believes that reducing the use of large amounts of cash will promote transparency in financial dealings and discourage the circulation of undeclared money in the economy.

Officials say the Cabinet expects the decision to make economic transactions more accountable and strengthen the formal financial system. The government has argued that high levels of cash-based transactions have made it difficult to track illegal activities, facilitated tax evasion and contributed to the growth of an informal economy. By limiting the use of cash, authorities hope to bring more financial activities under regulatory oversight.

The decision is expected to have a notable impact across several sectors, particularly those that typically involve high-value transactions. Real estate dealings, gold and silver trading, automobile and motorcycle sales and the purchase of construction materials are among the areas where cash payments will now be severely restricted. Traders and consumers in these sectors are likely to experience immediate adjustment pressures as they adapt to new compliance requirements.

According to officials, Nepal’s financial discipline has remained under international scrutiny, with the FATF repeatedly expressing concerns about the country’s vulnerability to money laundering and unregulated cash flows. The government believes that lowering the cash transaction threshold is a necessary step to demonstrate Nepal’s commitment to financial reform and prevent reputational risks that could arise if the country were to be grey-listed.

Economists say the rule could bring long-term benefits by pushing the economy toward greater formality and improving tax compliance. However, they also caution that the transition may create short-term challenges, especially in regions with limited access to banking infrastructure. Ensuring public awareness and expanding digital payment systems will be necessary to make the new rule effective in practice.

The government has stated that the decision is part of a broader plan to improve financial governance, strengthen regulatory enforcement and modernize Nepal’s payment ecosystem. It believes that the reduced cash threshold will not only discourage the use of black money but also help create a cleaner and more transparent business environment.