Nepal Rastra Bank Preparing to Expand List of Convertible Foreign Currencies

Nepal Rastra Bank (NRB) has initiated preparations to expand the list of convertible foreign currencies, a move aimed at facilitating formal exchange for currencies from countries with which Nepal has growing economic ties.

The central bank had announced in its monetary policy for the current fiscal year 2025/26 its intention to gradually include the currencies of Bangladesh, Sri Lanka, and other nations with increasing trade and transaction volumes in the convertible currency list. Once a currency is designated as convertible, commercial banks are permitted to exchange it directly, bypassing the need for conversion through a third currency like the US dollar or Euro.

This decision is driven by the need to streamline foreign exchange for cross-border trade, tourism, and remittances.

According to Rewati Prasad Nepal, Executive Director of NRB's Foreign Exchange Management Department, discussions are underway to add the currencies of Bangladesh, Sri Lanka, and the Maldives.

"Discussions are ongoing regarding the addition of these currencies, in line with the monetary policy announcement. However, a final decision has not yet been made," he stated. He noted that updating the list based on transaction volumes is a routine function of the central bank.

Currently, Nepal Rastra Bank permits exchange facilities for the currencies of 22 countries, including the Indian Rupee. The Omani Rial was the most recent addition to the list in November 2024, following a significant increase in the number of Nepali workers migrating to Oman for employment.

According to the Foreign Exchange (Regulation) Act, 2019, only currencies officially designated as "convertible" by the central bank through a public notice can be exchanged formally. The list is determined based on factors like trade, tourism, and other economic transactions. Officials state that this facility aids in managing foreign exchange reserves and maintaining balance of payments stability, while also facilitating imports, exports, and international transactions.

The push to include the Bangladeshi Taka is largely due to growing bilateral trade. By mid-February of the current fiscal year, Nepal imported goods worth Rs 3.51 billion from Bangladesh and exported goods valued at Rs 255.8 million. As trade increases, so does the inflow of Taka, necessitating a formal exchange mechanism.

The interest in the Maldivian Rufiyaa stems from the increasing number of Nepali professionals, particularly doctors, working in the Maldives. Currently, the Rufiyaa they bring back often goes unused due to the lack of formal exchange facilities.

Similarly, the Sri Lankan Rupee is being considered for inclusion primarily to cater to the significant number of Buddhist pilgrims visiting Nepal. Tourists often bring their own currency for offerings at religious sites like Lumbini. The absence of exchange facilities renders these funds unusable. In February 2025 alone, 7,535 tourists arrived in Nepal from Sri Lanka. Formalizing exchange for the Sri Lankan Rupee is expected to address this issue and further encourage this tourism segment.