Nepal’s New Cash Transaction Limit: Complete Guide to the Rs 5 Lakh Restriction Starting January 1
The Government of Nepal has introduced one of the most significant financial reforms in recent years; a strict limitation on high-value cash transactions. According to the latest decision made during the Council of Ministers meeting at Singha Durbar, no individual or business will be allowed to carry out cash transactions of Rs 5 lakh or above at a time.
This policy is part of Nepal’s broader financial modernization plan, aiming to promote transparency, reduce illegal cash flow, and strengthen digital payment practices throughout the country.
The decision will officially be implemented from January 1, and the limit will be enforceable from January 15, giving citizens and businesses a short adjustment period.
In this detailed guide, we break down everything you need to know: what the rule means, who it impacts, how to comply, penalties, benefits, and why this reform matters for Nepal’s economic future.
What the Rs 5 Lakh Cash Transaction Ban Means
The new provision states that any transaction involving Rs 5 lakh or more must be done through a financial institution or banking instrument. This means:
You cannot pay Rs 5 lakh or more in cash.
You cannot receive Rs 5 lakh or more in cash.
You must use official channels such as bank transfers, cheques, RTGS, IPS, mobile banking, or digital wallets (where applicable).
What Counts as “Cash Transaction”?
A cash transaction includes:
Direct hand-to-hand cash payment
Cash settlement of large purchases
Business payments made in physical currency
Cash given for property or high-value assets
Covered Under the Rule
This restriction applies to:
Purchase or sale of goods
Purchase or sale of services
Other financial transactions
Business dealings between individuals or firms
Payments for assets, land, and high-value items
In simple terms: Any transaction at or above Rs 5 lakh must now go through the banking system.
Why the Government Introduced This Rule
The government has implemented this new cap with several long-term objectives.
1. To Control Illegal Transactions
Large cash payments are often linked to:
Money laundering
Tax evasion
Undocumented business activities
Smuggling operations
By channeling high-value transactions into the banking system, the government strengthens financial transparency.
2. To Promote Digital and Cashless Economy
This step encourages:
Greater use of banking services
Adoption of cashless payment systems
Expansion of digital wallets and QR-based payments
It moves Nepal closer to becoming a modern, traceable, secure economic system.
3. To Strengthen Revenue Tracking
When big payments go through banks, it becomes easier for authorities to:
Monitor income
Assess taxes
Track suspicious activities
Verify financial statements
This improves Nepal’s economic governance.
Key Decisions Made by the Cabinet
During the Cabinet meeting held at Singha Durbar, the following determinations were finalized:
1. No Cash Transaction Above Rs 5 Lakh
This applies to all sectors; individual, business, and institutional.
2. The Rule Comes Into Effect on January 1
Starting January 1, citizens and businesses must prepare for the transition.
3. Enforced Strictly From January 15
From this date onward, anyone violating the rule may face penalties or legal action.
How the Rule Will Be Implemented
Nepal Rastra Bank (NRB) and the Ministry of Finance will coordinate with:
Banks and financial institutions
Business associations
Digital payment service providers
Provincial and local bodies
Awareness campaigns will be rolled out to ensure that people understand:
What the rule means
What they can and cannot do
Which banking channels are acceptable
Who Will Be Most Affected by the Rs 5 Lakh Limit?
1. Individuals Buying or Selling Property
Most land deals exceed Rs 5 lakh. From now on, these must be:
Transfer via bank
Settled through cheque
Approved through banking records
This brings transparency to Nepal’s real estate market.
2. Traders and Small-to-Medium Businesses
Businesses dealing with large orders must switch to formal payment channels.
Manufacturers, wholesalers, gold traders, hardware suppliers, and importers will need to adapt quickly.
3. Service Providers
High-value service payments such as:
Construction
Design and architecture
Consultancy
Legal and medical services
must now be bank-based.
4. Vehicle and Electronics Buyers
Large purchases like bikes, cars, and electronics now fall under mandatory banking transactions.
5. General Public
For normal citizens, daily transactions are not affected. Only high-value transactions fall under the new rule.
How to Conduct Transactions Above Rs 5 Lakh Legally
To comply with the law, individuals and businesses can use:
1. Bank Transfer (Preferred Method)
Mobile banking
Online banking
RTGS / IPS
Account-to-account transfer
2. Cheque Payments
A valid cheque issued from a registered bank.
3. Digital Payment Platforms
QR, digital wallets, and fintech-based large payments (depending on limits set by NRB).
4. Letter of Credit or Bank Guarantee (for businesses)
Penalties for Violating the Rs 5 Lakh Cash Limit
The government has made it clear that violations will be taken seriously. Possible consequences include:
1. Monetary Fines
Businesses or individuals may have to pay financial penalties.
2. Audits and Investigations
Violations may trigger:
Tax scrutiny
Financial audits
Anti-money laundering investigations
3. Legal Action
Repeated or intentional violations can lead to legal consequences under financial laws.
4. Business Impact
Non-compliant businesses may face:
Account freezing
Suspension of license
Loss of credibility
Impact on Businesses and the Overall Economy
1. Increased Digital Payment Usage
Businesses will shift toward QR payments, eSewa, Khalti, FonePay, mobile banking, etc.
2. Improved Financial Transparency
Invoices, receipts, and statements will become more systematic.
3. Reduced Corruption and Underground Economy
Traceability discourages illegal practices.
4. Initial Operational Pressure
Businesses may experience challenges such as:
Adjusting billing systems
Training staff
Updating processes
But long-term benefits will outweigh short-term hurdles.
Benefits of the New Cash Transaction Rule
1. A Safer Economy
Reduced cash movement means fewer risks of:
Theft
Fraud
Misuse
2. Stronger Financial Records
Businesses will maintain better documentation, which helps in:
Loan applications
Audits
Valuations
3. Better Revenue Collection
With transactions recorded, tax leakage reduces significantly.
4. More Trust in Financial Systems
A regulated economy boosts investor confidence—both domestic and international.
Public and Market Reaction
The policy has received mixed reactions:
Positive Responses
Good for transparency
Encourages digital payment growth
Helps fight tax evasion
Concerns
Traders worry about paperwork
Rural areas with limited banking access may face challenges
Senior citizens may struggle with digital systems
The government is expected to introduce awareness and support programs to ease the transition.
Conclusion: A New Chapter in Nepal’s Financial Reform
The restriction on cash transactions above Rs 5 lakh marks a bold step toward a digital, transparent, and modern financial system. Although the shift may require adjustments, it will ultimately help Nepal:
Reduce illegal activities
Strengthen governance
Boost formal economy
Expand digital payment culture
As the rule comes into enforcement on January 15, businesses and individuals should prepare by adopting banking-based systems and minimizing large cash dealings. This reform signals the beginning of a more structured, safer, and accountable financial future for Nepal.
Frequently Asked Questions
When does the Rs 5 lakh cash transaction ban start?
The decision takes effect on January 1, and enforcement begins January 15.
Can I pay Rs 4,99,999 in cash?
Yes, amounts below Rs 5 lakh are allowed in cash.
Does this rule apply to land purchases?
Yes, all property transactions above Rs 5 lakh must be done through banking channels.
Can businesses split payments to avoid the rule?
No. Splitting payments to bypass the limit is considered evasion and may result in penalties.
Does this affect normal daily transactions?
No, only high-value transactions of Rs 5 lakh or more are affected.