Circulation of Banknotes Rises Despite Growth in Electronic Payments

Despite Nepal Rastra Bank’s (NRB) efforts to promote electronic payments, the circulation of physical banknotes in the market has continued to rise.

According to NRB’s annual report, the value of banknotes in circulation increased by 10.33 percent in Fiscal Year 2024/25. As of mid-July 2024, banknotes worth Rs 690.15 billion were in circulation, which rose to Rs 761.41 billion by mid-July 2025.

In FY 2024/25, the central bank issued 192.5 million units of new banknotes of various denominations worth Rs 98.76 billion.

NRB officials attribute the rise in cash circulation to the expanding size of the economy and cultural traditions that rely heavily on cash. “As the economy grows, the use of cash for transactions also increases,” an official at the Currency Management Department of NRB said. “Cash is closely linked with religious, cultural, and traditional practices, so its use is unlikely to decrease anytime soon.”

Nepalis continue to give cash as gifts during family visits, and banknotes are widely used in religious offerings, cultural ceremonies and rituals.

High Circulation of Rs 1,000 Notes

According to NRB, the Rs 1,000 denomination is the most widely circulated note. A total of 533.47 million pieces of Rs 1,000 notes—worth Rs 533.47 billion—are currently in circulation, accounting for 70 percent of the total value of notes in the market.

NRB issues banknotes in denominations of Rs 1, 2, 5, 10, 20, 50 100, 250, 500 and 1,000. The Rs 250 note is the least circulated.

The central bank has shortlisted six international security printing companies for the design, printing and supply of banknotes. As of mid-July 2025, NRB’s stock of new banknotes stood at Rs 51.52 billion, compared to Rs 145.07 billion a year earlier.

NRB stated that it continues to run public awareness campaigns urging people to handle banknotes responsibly as they are national assets. The report also notes that during Dashain, Tihar and Chhath festivals, the bank supplied clean banknotes instead of newly printed ones to promote its “clean note policy.”

By mid-July 2025, NRB had shredded Rs 745.69 billion worth of soiled, torn and unfit banknotes returned by banks, financial institutions and the general public.

Electronic Payments Also Rising

While cash use remains high, electronic transactions have also grown significantly. Currently, payments are made through RTGS, ATMs, electronic cheque clearing, IPS, connectIPS, debit/credit cards, prepaid cards, internet banking, mobile banking, branchless banking, wallets, QR codes, PSOs and e-commerce platforms.

NRB reported that monthly transactions through electronic payment instruments now hover around Rs 20 trillion. In March-April 2020, when the government imposed a lockdown to control COVID-19, electronic transactions totalled Rs 915.07 billion. The surge has continued as NRB and the government adopt policies to promote digital payments, including requiring payments above Rs 1 million to be made mandatorily through cheques. NRB has also increased transaction limits and introduced services such as payment switches, Nepal Pay cards and cross-border payment systems through Nepal Clearing House.

NRB Preparing to Roll Out ‘Digital Currency’

Amid growing interest in electronic payments, NRB is also preparing to introduce its own digital currency. In line with the global trend of central banks issuing electronic currencies, NRB has conducted a feasibility study and developed a Central Bank Digital Currency (CBDC) base prototype version 0.1, which is currently under testing, according to the annual report.