10th October 2025, Kathmandu
A fascinating development from the Nepal Rastra Bank (NRB) highlights a critical intersection between modern financial technology and the management of public funds.
RTGS System to Remain Operational
The decision to keep the Real Time Gross Settlement (RTGS) system operational on a typical holiday, such as Saturday, Ashwin 25 (October 11, 2025), specifically for government revenue collection, underscores the central bank’s commitment to maximizing fiscal efficiency and streamlining the revenue cycle. This action is rooted in the fundamental structure and benefits of the RTGS system and serves as a powerful example of an advanced payment infrastructure being adapted to meet the strategic needs of public financial management.
This detailed analysis will explore the nature of the RTGS system, its specific role in Nepalese public finance, the rationale behind its special Saturday operations, and the broad impact this digital initiative has on the efficiency of government revenue collection.
Understanding Nepal’s Real Time Gross Settlement (RTGS) System
The RTGS system is a cornerstone of any modern, robust financial infrastructure, and the one implemented by the Nepal Rastra Bank (NRB) is a key component of the country’s national payment system. It is specifically designed to handle high-value and urgent transactions, ensuring they are settled securely and instantly.
Core Principles of RTGS:
- Real-Time Settlement: This means that a payment transaction is not subject to any waiting period. Transactions are processed and settled as soon as they are entered into the system, provided sufficient funds are available in the sending bank’s settlement account with the central bank.
- Gross Settlement: Each transaction is settled individually on a one-to-one basis, without being bundled or netted with any other transaction. This is the crucial feature that eliminates systemic settlement risk, which is the possibility that the failure of one bank to settle its net position at the end of the day could cascade and cause a failure in the entire banking system.
- Final and Irrevocable: Once a payment is processed through the RTGS system, the settlement is final and irrevocable, providing high certainty and security to the receiving party—in this context, the government.
The NRB, as the operator of the system, established the RTGS to address the settlement risk inherent in large-value transfers and to modernize the payment landscape in Nepal, supplementing existing systems like the Automated Clearing House (ACH) which handles bulk and lower-value payments.
RTGS’s Role in Government Revenue Collection
The primary goal of operating the RTGS system on a holiday for government transactions is to ensure no disruption in the collection of government revenue. This move directly impacts the efficiency of public fund management in several profound ways:
1. Expedited Fund Realization and Availability
For the government, every day counts, particularly during peak collection periods like the end of a fiscal quarter or the final days for tax filing. The immediate and final nature of RTGS ensures that payments made by taxpayers (individuals or corporations) are instantaneously credited to the Government’s Treasury Single Account (TSA) maintained at the NRB.
Traditional Method vs. RTGS: Without RTGS, a high-value tax payment made on a Friday afternoon might not be fully cleared and available in the state’s account until Monday or Tuesday under a net settlement system. RTGS eliminates this settlement lag, ensuring the government has immediate access to the funds.
2. Enhanced Cash Management and Liquidity
Operating RTGS allows the Ministry of Finance and the Financial Comptroller General Office (FCGO) to maintain a more accurate, real-time picture of the state’s cash position.
Public Fund Management: Instant realization of large revenue amounts enables the government to better manage its day-to-day liquidity, plan for urgent expenditures, and optimize its use of public funds without waiting for the next business day. This real-time cash flow management is vital for meeting financial commitments efficiently, reducing the need for costly short-term borrowing.
3. Risk Mitigation
The use of RTGS for government revenue minimizes credit and settlement risks associated with handling large-value transactions. Since the transfer is final and settled across the central bank’s books immediately, the risk of a financial institution failing to meet its obligation before the settlement is eliminated. This secure transfer mechanism increases the overall reliability of the national revenue collection system.
The Rationale for Saturday Operations
The periodic decision by the NRB to activate the RTGS system on Saturdays, which are typically public holidays in Nepal, is a strategic regulatory intervention driven by practical fiscal necessities.
Strategic Rationale:
Reason Explanation in the Context of Revenue Collection
End-of-Month/Quarter Rush Revenue collection often peaks on the last few days of a fiscal deadline. If a deadline falls near or on a weekend, keeping the RTGS open ensures businesses and individuals can meet their tax obligations without interruption, thereby preventing artificial delays in revenue booking.
Maintaining Cash Flow. Continuous fund flow is essential for a large economy. The government may need to execute urgent, high-value payments (e.g., debt servicing, critical public work releases) even on a holiday. Revenue collected via Saturday RTGS helps maintain the necessary balance.
Enhancing Public Service By offering a mechanism for instant payment on a weekend, the NRB improves the “Doing Business” environment by providing convenience to taxpayers, making the payment of taxes (especially large corporate taxes) more flexible and taxpayer-friendly.
Promoting Digital Payments This specialized operation encourages the use of secure, high-value electronic payment systems over traditional paper-based methods (like cheques), which ultimately modernizes the overall financial ecosystem.
The central bank’s clarification that the RTGS system remains open exclusively for government revenue payments while other banking services are closed confirms that this is a targeted, high-priority fiscal management measure rather than a general extension of banking hours. It is an operational necessity to ensure that the holiday calendar does not impede the national treasury’s functioning.
Broader Impact on Financial Modernization
The intermittent, targeted use of the RTGS on non-business days is not an isolated event; it is part of Nepal’s broader Public Financial Management (PFM) reform and the drive toward a digital economy.
- Alignment with PFM Reforms: The Financial Comptroller General Office (FCGO) and the Ministry of Finance are continually working to improve the country’s financial reporting and accounting systems, which includes the adoption of the Treasury Single Account (TSA) system. The immediate settlement provided by RTGS on any day directly supports the core objective of TSA: to consolidate government funds and provide a holistic view of the state’s cash position.
- Digital Ecosystem Growth: As noted in various reports, the growth of digital payments for revenue collection is a significant trend in Nepal. Integrating high-value tax payments via an always-on or selectively-on RTGS system solidifies the trust and reliance on digital infrastructure for critical financial flows.
- Future-Proofing the System: By occasionally extending operational hours, the central bank demonstrates the flexibility and resilience of its core payment infrastructure, paving the way for potential future expansion of service hours to match the 24/7 nature of the digital global economy.
In conclusion, the NRB’s decision to operate the RTGS system on Saturday, October 11, 2025 (Ashwin 25), is a strategic fiscal move that leverages advanced payment technology to ensure the continuous flow, instant realization, and secure management of the nation’s revenue, thereby significantly enhancing the efficiency and health of public fund management.
For More: RTGS System to Remain Operational