NRB to probe foreign exchange accounts

NRB to probe foreign exchange accounts

Mar 5, 2015-

Nepal Rastra Bank (NRB) is all set to inquire foreign exchange accounts of individuals/institutions to ascertain whether there has been smooth flow of foreign exchange in the accounts and how the funds have been utilised.

The gross foreign exchange reserves increased by just 2.4 percent to $7.11 billion in the first six months this fiscal year, against a rise of 13.4 percent in the same period a year ago, due to a slowdown in remittance growth. And, this trend has concerned the central bank.

“We will see whether there has been smooth flow of foreign exchange in the accounts and how the money is being used,” said an NRB official. “It will also help us find out whether the foreign exchange earned by a particular person/firm was transferred into the country through Hundi.”

Individuals involved in international trade and those making foreign exchange earnings can open foreign exchange account in commercial banks and development banks.

The central bank has suspected the steep decline in remittance growth could be a result of the use of Hundi to transfer remittance or to divert remittance for gold smuggling.

As of the first half, remittance grew by just 3.9 percent to Rs 275.95 billion against a growth of 34.4 percent during the same period a year ago.

Legally imported gold has remained unsold with banks, but the market has not seen any shortage of the precious metal, suggesting the market has been flooded with smuggled gold.

The central bank suspects the remittance is being diverted to smuggle gold. Under this practice, foreign exchange does not reach Nepal, but migrant workers’ families at home are paid the equivalent amount in Nepali rupee terms.

Suspecting even money transfer agencies’ involvement in Hundi transactions, the central bank has warned them to avoid such practices. A senior NRB official said they were holding talks with the Home Ministry and the Department of Revenue Investigation to take stringent measures against Hundi operators.

The DRI is responsible for taking action against those misusing foreign exchange.

There is no specific data of Hundi transactions, but according to the Nepal Living Standard Survey (NLSS) 2010-11, Hundi accounted for 2.5 percent (on an average) of both domestic and international remittance transfers.

The survey showed 11.6 percent of remittance inflow from Qatar took place through Hundi, while it is 3.8 percent in the case of Saudi Arabia, 7.4 percent for Malaysia, 1.8 percent for India, and 5.4 percent for the United Kingdom.

Published: 06-03-2015 09:25

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