Private sector wants BNR’s cash withdraw limits reserved

In order to secure enough cash supplies to meet their working capital needs, members of the private sector have called for the removal of central Bank’s condition of withdrawing a maximum of Rwf5 million from commercial banks.
François Kanimba, governor of the Centarl Bank(File photo)
François Kanimba, governor of the Centarl Bank(File photo)

In order to secure enough cash supplies to meet their working capital needs, members of the private sector have called for the removal of central Bank’s condition of withdrawing a maximum of Rwf5 million from commercial banks.

The business community also said that the new arrangement could encourage keeping large sums of cash at home, thus limiting national banking activities.

“Some of us have overhead costs that require above Rwf3 million in two days. We usually withdraw such amount in one transaction but in the new policy, it will be inconveniencing,” a businessman who owns a construction company spoke on conditions of anonymity.

The National Bank of Rwanda (NBR) recently advised commercial banks to limit their daily maximum cash withdrawals by individuals and companies to Rwf5 million.

Central Bank officials said the move was aimed at controlling cash movement in the economy as well as encouraging electronic and cheque transaction.

Some sources also said that it is intended to curb fraud and money laundering. 

“It will definitely in someway support keeping cash at home because there is no freedom of accessing it when it is in banks. Authorities should consider scraping this limit,” a trader said in an interview with Business Times. Most traders who expressed this feeling spoke to Business Times on conditions of anonymity.

However, François Kanimba governor of the National Bank of Rwanda said that the issue is poorly expressed by commercial banks and that Central Bank did not totally cap depositors withdrawals at Rwf5 million.

“We want to modernize the payment system and move away from cash transactions. We advised banks to limit withdraws to depositors to Rwf5 million.

But banks should not be rigid. If someone comes with a good explanation of why they require over five million, it should be disbursed,” Kanimba said.

The governor added that government institutions no longer pay cash to their suppliers and employees, something that he says should be adapted by the private sector after being a success in public institutions.

He advised traders who have foreign suppliers to adapt to letters of credit.

“There are cases I have heard where traders in Ruhengeri are supplied by dealers in Kabale (Uganda). These traders claim that their suppliers have no bank account in Rwanda. Why can’t they use letters of credit?”

Rwanda’s largest banked population is served by cash as the main payment instrument with cheques, credit orders, direct debits and standing orders used by a few bank clients. 

According to Central Bank, the number of paper instruments is limited as compared to cash transactions.

Cheques constitute the largest paper-based payment instruments in Rwanda in terms of volume with credit transfers accommodating the largest value but used for corporate to corporate and government payments.

Statistics show that annually, cheques cleared constituted close to 250, 000 in 2007 as compared to approximately one million for each of the other East African Countries in 2006.

The new policy is also seen as a measure to re-instate liquidity into the banking system and the economy as a whole.

“The more you withdraw cash, the more you drain liquidity and the more you use electronic payment, the more you keep money into the banking system,” Kanimba said.

Central bank says reducing cash transactions will increase the durability of the Rwanda franc banknotes and significantly lower the banknotes printing costs that are currently estimated at between $7m (Rwf3.9 billion) and $10m (Rwf5.7 billion).“We should cut this expense,” the governor said.

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