Making Remittance Transfer Safer


Remittance plays a vital role in Nepal’s economy. Remittance has had a positive impact on poverty alleviation and socio-economic development. It has also supported to achieve the Sustainable Development Goals (SDGs). As a main source of foreign exchange earnings as well as liquidity in the banking sector, remittance has also contributed to achieving the balance of payment. 

The trend of Nepalis entering into the global labour market has increased as a result of Nepal’s adoption of free market economy. The earliest record shows that 3,605 Nepalis left for foreign countries for employment in Fiscal Year 1993/94. As of mid-June of FY 2021/22, a total of 5, 67,840 labour permits have been issued. During the past two decades, the inflow of remittance has increased significantly due to a rapid rise in labour migration rates. Even in the time of COVID-19, remittance inflow has increased. The total remittance inflow into the country in Fiscal Year 2020/21 stood at Rs. 961 billion. This accounts for about 22.5 per cent of the Gross Domestic Product (GDP). 

Remittance inflow

The remittance inflow in the tenth month of current FY 2021/22 remained Rs. 812 billion. As per the Nepal Living Standards Survey, 56 per cent of the households receive remittance.                                  In Nepal, around 60 per cent remittance was received through remittance companies and 40 per cent through banks. The informal remittance data is not available but is expected to be significant. Remittance transfer costs are relatively lower in Nepal as compared to global averages (above 5 per cent). The average transaction cost of remittance stands at 4.6 per cent in Nepal. The target to limit remittance transfer cost to 3 per cent as set in SDG and Global Compact for Migration (GCM) has yet to be achieved. 

The Government of Nepal has taken the initiative to encourage cheaper, faster and safer transfer of remittance, boosting its productive use. The Constitution of Nepal has adopted a policy to encourage the use of capital, skills, technology and experience gained from foreign employment in the productive sector of the country. Foreign Employment Policy, 2012 emphasises the use of remittances in productive sector. Nepal Rastra Bank Remittance Regulation, 2010 makes it mandatory for all remittance companies to get their licenses from the central bank prior to beginning the transactions. 

The 15th Periodic Development Plan recognises remittance as an important means of capital formation and employment creation. Budget statement for 2022/23 announces to reserve 10 per cent of Initial Public Offerings (IPOs) to Nepali migrant workers. It also seeks to allow Non-Resident Nepalis to invest in the secondary market.

Banks provide one per cent higher interest rate in remittance deposited in fixed accounts by Nepali migrant workers. Nepal Rastra Bank issues Foreign Employment Savings Bonds to increase the inflow of remittances through formal channels and to mobilise it for national development priorities. Direct transfer of remittance to receiver through e-wallet, e-banking, mobile banking is possible now.

There is mandatory provision to open bank account before applying for labour permit. Banks, financial and remittance companies have to mandatorily make payments of over Rs. one million through bank account or cheque. Remit Hydro Limited, which is subsidiary of Hydroelectricity Investment and Development Company Limited, aims to promote collective remittance for hydropower projects.

The government has introduced a scheme to encourage recent returnee migrant entrepreneurs by subsidising interest rates for loans up to Rs. 1 million. Financial literacy has been prioritised by different stakeholders. Financial literacy has been conducted in pre-departure orientation training to ensure that departing migrants get started on financial planning from the beginning of the migration cycle.

Out of 753 local levels nationwide, commercial banks have extended their branches at 750 local levels. There is provision of tax waiver and discounts to open branches in remote areas. Banking and financial institutions conducted financial literacy awareness programmes to control informal and illegal modes of transfer like Hundi. Cross-remitting is free of extra fees. There is provision of start-up challenge fund, subsidy in technology installation for Small and Medium Enterprises (SMEs) run by returnees or migrant workers’ families. The budget statement 2022/23 has announced to cover Nepali migrant workers in social security scheme as a domestic labour. Foreign employment board supports in health and education of migrant families.


There are some concerns about the remittance. Use of informal channels for remitting is significant. The trade deficit is increasing due to increase in imports associated with remittance. So, all remittances should be received through formal channels. The persons who are involved in the illegal activities relating to remittance transfer should be punished. Zero tolerance policy should be implemented for sending remittance through informal channels. 

The government needs to reduce the transaction cost of sending remittance by providing incentives. Significant proportion of remittance income should be saved through discouraging luxuries and unproductive consumption patterns and it needs to be invested in productive sector. The volume of remittance should be increased by enhancing the capacity, capability and skills of aspiring migrant workers. The country of destinations needs to play active role in decreasing cost of sending remittances to achieve the SDG target.

(Aryal is Joint Secretary at Foreign Employment Office. 

How did you feel after reading this news?

More from Author

Bolstering Sovereignty Of Public Goods

Aadikabi’s house awaiting reconstruction

Making Artificially Ripened Fruits Safe To Eat

Fear Of Change

Gunyo Cholo to be released on October 25

SAFF U-20 fixture revised