Friday, July 12, 2024

NBE sets new directive for successful demonetization


Under the demonization process, the National Bank of Ethiopia (NBE) has emplaced some revisions on the process. The revision is inclusive of the reduction of the amount permissible to depositors account from 10,000 birr to 5000 birr and cross transactions from 100,000 birr to 50,000 birr.
NBE which has been in a tuff position since the currency change which was introduced last week has conducted several discussions with banks for effective implementation and harmonious demonization.
The latest directive ‘Legal Tender Currency Notes Redemption Directive No.CMD/2/2020’ added that any redemption of old notes exceeding 5,000 birr shall be effected only through an account opened in the name of the depositor.
Prior to this directive, the government had disclosed that currency up to 10,000 birr could be deposited to a depositors account. However, during the launch of the demonetization event held at the Office of the Prime Minister two weeks ago, Abie Sano, President of Bankers Association and Commercial Bank of Ethiopia emphasized for the slashing of this threshold to a half to meet the target of the currency change. The latest directive has since then taken this to account.
The directive also stipulates that those that have savings and have regular business but change more than 100,000 to be disclosed to the Central Bank on a weekly basis.
“Banks shall report every week on the currency changes of more than 100,000 birr to those who do not have regular trade or business,” the directive states in the Amharic part, while the English version does not disclose this law.
The Amharic version directive article 6.9 states, “Any transaction of a car, house, precious minerals and others that have more 50,000 birr in value shall be formally done through banks,”
In light of this directive, the Document Authentication and Registration Agency (DACA) had recently also disclosed that any transaction or credit is supposed to be backed up with the statement from the bank. Furthermore, customers are supposed to come with the transaction slip that they secured from banks in order to receive services from the agency.
According to NBE, money held by any person in excess of 1.5 million birr is subject to confiscation, whereas money under the stated amount is legally allowed. At the start of the currency change however confusion arose from several incidents of money confiscation below the 1.5 million mark by the security forces. This was later quickly addressed by government as they gave clarification on what amount is illegal. As a result the government issued a directive that limits the money that anyone can hold on hand, which is 1.5 million birr.
On the latest briefing given to banks by the NBE, allowance for provision of service to individuals who received authenticity of power of Attorney has been approved. This however applies to those that received such before the 14th of September. Initially however the Central Bank had disclosed that this was not possible.

Read more