Remittance companies can now operate payment service provider (PSP) companies and payment system operator (PSO) companies. Issuing the Remittance Bylaws 2023, Nepal Rastra Bank (NRB) has allowed domestic remittance companies to get into the digital payment business.
As per the new arrangements, remittance companies with minimum paid-up capital of Rs 250 million can run digital payment business through subsidiary companies.
According to NRB Executive Director and Spokesperson Gunakar Bhatta, the main aim of allowing remit companies to operate digital payment business is to digitize remittance transactions that are largely cash-based currently. “The new policy will be convenient for the customers while the remittance companies will have an additional business,” he said.
Through the Bylaws, NRB has also increased the paid-up capital of remittance companies. Now, the firms are required to have minimum paid-up capital of Rs 100 million which is currently Rs 20 million. The central bank has provided a period of six years for the companies to gradually increase their paid-up capital. Remit companies will have to meet the new paid-up capital requirement of Rs 100 million by mid-July 2028.
As per Bylaws, their paid-up capital should reach Rs 30 million by mid-July 2024, Rs 40 million by mid-July 2025, Rs 60 million by mid-July 2026, Rs 80 million by mid-July 2027, and Rs 100 million by mid-July 2028.
With the issuance of the Remittance Bylaws 2023, the deck has been cleared for the remittance companies to go for mergers and acquisitions. According to NRB officials, as the central bank has directed remittance companies to increase their paid-up capital, they could go for mergers to increase their capital base. “If remittance companies do not increase the paid-up capital within the specified period, the central bank could also opt to force mergers,” said an NRB official.
The remit companies have also been allowed to convert into public limited companies. As of now, the firms are operating as private companies. Now, remittance companies can be converted into public companies and also can issue initial public offerings (IPO).
There are around five dozen remittance companies operating in Nepal at present. Remittance inflow to Nepal has increased by 4.8 percent in the fiscal year 2021/22. According to the central bank, Nepal received remittances worth Rs 1007.31 billion in the last fiscal year which was Rs 961 billion in FY 2020/21.